<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 20, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
AMERICAN AXLE & MANUFACTURING AMERICAN AXLE &
HOLDINGS, INC. MANUFACTURING, INC.
(EXACT NAME OF REGISTRANT (EXACT NAME OF
GUARANTOR AS SPECIFIED IN ITS REGISTRANT ISSUER AS
CHARTER) SPECIFIED IN ITS CHARTER)
DELAWARE DELAWARE
(STATE OR OTHER JURISDICTION (STATE OR OTHER JURISDICTION
OF OF
INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION)
3714 3714
(PRIMARY STANDARD INDUSTRIAL (PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER) CLASSIFICATION CODE NUMBER)
38-3161171 38-3138388
(I.R.S. EMPLOYER (I.R.S. EMPLOYER
IDENTIFICATION NUMBER) IDENTIFICATION NUMBER)
------------------------
1840 HOLBROOK AVENUE
DETROIT, MICHIGAN 48212
(313) 974-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
------------------------
PATRICK S. LANCASTER
1840 HOLBROOK AVENUE
DETROIT, MICHIGAN 48212
(313) 974-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
WITH A COPY TO:
EDWARD P. TOLLEY III, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 455-2000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If 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 Statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the
Securities Registration Statement number of the earlier effective Registration
Statement for the same offering. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
9 3/4% Senior Subordinated Notes due 2009.............. $300,000,000 100% $300,000,000 $83,400.00
Guarantee of 9 3/4% Senior Subordinated Notes due 2009
by American Axle & Manufacturing Holdings, Inc......... $300,000,000 100% 300,000,000 (2)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Pursuant to Rule 457(n) under the Securities Act of 1933, as amended, no
separate fee for the Guarantee is payable.
------------------------
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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
The information in this prospectus is not complete and may be changed. 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 it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, dated April 20, 1999
[LOGO]
Prospectus
$300,000,000
AMERICAN AXLE & MANUFACTURING, INC.
OFFER TO EXCHANGE ALL OUTSTANDING 9 3/4% SENIOR SUBORDINATED NOTES DUE
2009 FOR 9 3/4% SENIOR SUBORDINATED NOTES DUE 2009, WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933
UNCONDITIONALLY GUARANTEED ON A SENIOR SUBORDINATED BASIS BY
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
THE EXCHANGE OFFER
o We will exchange all outstanding Notes that are validly tendered and not
validly withdrawn for an equal principal amount of exchange Notes that are
freely tradeable.
o You may withdraw tenders of outstanding Notes at any time prior to the
expiration of the exchange offer.
o The exchange offer expires at 5:00 p.m., New York City time, on
, 1999, unless extended. We do not currently intend to extend
the expiration date.
o The exchange of outstanding Notes for exchange Notes in the exchange offer
will not be a taxable event for U.S. federal income tax purposes.
o We will not receive any proceeds from the exchange offer.
THE EXCHANGE NOTES
o The exchange Notes are being offered in order to satisfy certain of our
obligations under the exchange and registration rights agreement entered
into in connection with the placement of the outstanding Notes.
o The terms of the exchange Notes to be issued in the exchange offer are
substantially identical to the outstanding Notes, except that the exchange
Notes will be freely tradeable.
RESALES OF EXCHANGE NOTES
o The exchange Notes may be sold in the over-the-counter market, in negotiated
transactions or through a combination of such methods.
---------------------------------------------------------------------------
If you are a broker-dealer and you receive exchange Notes for your own
account, you must acknowledge that you will deliver a prospectus in connection
with any resale of such exchange Notes. By making such acknowledgment, you will
not be deemed to admit that you are an "underwriter" under the Securities Act of
1933 (the "Securities Act").
Broker-dealers may use this prospectus in connection with any resale of
exchange Notes received in exchange for outstanding Notes where such outstanding
Notes were acquired by the broker-dealer as a result of market-making activities
or trading activities.
We will make this prospectus available to any broker-dealer for use in any
such resale for a period of up to 90 days after the date of this prospectus.
A broker-dealer may not participate in the exchange offer with respect to
outstanding Notes acquired other than as a result of market-making activities or
trading activities.
If you are an affiliate of American Axle & Manufacturing, Inc. or are
engaged in, or intend to engage in, or have an agreement or understanding to
participate in, a distribution of the exchange Notes, you cannot rely on the
applicable interpretations of the Securities and Exchange Commission and you
must comply with the registration requirements of the Securities Act of 1933 in
connection with any resale transaction.
---------------------------------------------------------------------------
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 13 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
---------------------------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------------------------------------------------------------
The date of this prospectus is , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary....................................... 1
Risk Factors.................................. 13
The Recapitalization.......................... 22
Use of Proceeds............................... 23
Capitalization................................ 24
Selected Consolidated Financial
and Other Data.............................. 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................. 27
Business...................................... 34
Management.................................... 45
Principal Stockholders........................ 55
Related Party Transactions.................... 55
<CAPTION>
PAGE
----
<S> <C>
Description of Certain Indebtedness........... 58
The Exchange Offer............................ 62
Description of Notes.......................... 71
Registration Rights Agreement................. 112
Book-Entry; Delivery and Form................. 114
Certain United States Federal Income Tax
Consequences of the Exchange Offer.......... 118
Other Tax Considerations...................... 118
Plan of Distribution.......................... 120
Legal Matters................................. 121
Experts....................................... 121
Available Information......................... 121
Index to Consolidated Financial Statements.... F-1
</TABLE>
----------------------------------------------
FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). These forward-looking statements are
subject to a number of risks and uncertainties, many of which are beyond our
control. All statements other than statements of historical facts included in
this prospectus, including the statements under the headings "Summary,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and "Business," and located elsewhere herein regarding our
financial position, plans to increase revenues, reduce expenses and any
statements regarding other future events or our future prospects, are
forward-looking statements. When used in this prospectus, the words "believe,"
"anticipate," "intend," "estimate," "expect," "project" and similar expressions
are intended to identify forward-looking statements, although not all
forward-looking statements contain such words. These forward-looking statements
speak only as of the date hereof. Neither we nor the initial purchasers
undertake any obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
Although management believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to be correct or that savings or other benefits
anticipated in the forward-looking statements will be achieved. Important
factors, some of which may be beyond our control, that could cause actual
results to differ materially from management's expectations ("cautionary
statements") are disclosed in this prospectus, including in conjunction with the
forward-looking statements included in this prospectus and under "Risk Factors."
Prospective purchasers are cautioned not to place undue reliance on these
forward-looking statements. All subsequent written and oral forward-looking
statements attributable to us are expressly qualified in their entirety by the
cautionary statements. See "Risk Factors." These forward-looking statements are
subject to risks, uncertainties and assumptions about us, including, among other
things:
o Our high degree of leverage and significant debt service obligations
o Our dependence on domestic automotive production and the cyclical nature
of the automotive industry
o Our reliance on revenues derived from sales to GM
o The successful transition from a single component supply agreement to a
series of supply agreements with GM, including the related transition of
purchasing activities from GM to us
o Risks related to labor relations, labor expenses and work stoppages
affecting GM or us
o The highly competitive nature of the automotive component manufacturing
and supply industry
o Our reliance on single source suppliers for component parts
o Our ability to retain existing and obtain new customers
o Risks related to environmental costs, liabilities or claims
o The potential effect of Year 2000 computer issues
i
<PAGE>
SUMMARY
This summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements
(including the notes thereto) appearing elsewhere in this prospectus. Statements
concerning the automotive industry contained in this prospectus are based on
information compiled by us or derived from public sources which we believe to be
reliable, including J.D. Power & Associates, Inc. ("J.D. Power") and Autofacts
Automotive Outlook. As used in this prospectus, unless the context otherwise
requires, references to "we", "us" or "American Axle" shall mean collectively
(i) American Axle & Manufacturing, Inc. ("AAM Inc." or the "Issuer"), a Delaware
corporation, and its predecessor and direct and indirect subsidiaries and
(ii) American Axle & Manufacturing Holdings, Inc. and its predecessor
("Holdings" or the "Guarantor"), a Delaware corporation and the direct parent
corporation of the Issuer. Holdings has no material operations or assets other
than its ownership of 100% of the issued and outstanding common stock of the
Issuer.
THE COMPANY
We are a Tier I supplier to the automotive industry and a world leader in
the design, engineering and manufacturing of driveline systems for light trucks
and sport-utility vehicles ("SUVs"). The driveline system includes all of the
components that transfer power from the transmission and deliver it to the drive
wheels. Driveline products produced by us include axles, propeller shafts,
chassis components and forged products. We are the leading independent supplier,
with an estimated 33% market share (by 1997 sales), of driveline components for
light trucks and SUVs manufactured in North America and sold in the United
States. The light truck and SUV segment is the fastest growing segment of the
light vehicle market. We also manufacture axles, propeller shafts and other
products for rear-wheel drive ("RWD") passenger cars. Additionally, we have the
second largest (by sales) automotive forging operation in North America.
We are General Motors Corporation's ("GM") principal supplier of driveline
components for light trucks, SUVs and RWD passenger cars manufactured in North
America, supplying substantially all of GM's rear axle and front four-wheel
drive ("4WD") axle requirements and over 75% of its propeller shaft requirements
for these vehicle platforms in 1997. Approximately 93% of our 1998 net sales of
$2.04 billion were to various divisions and subsidiaries of GM. Our second
largest customer is the Ford Motor Company ("Ford"), for which we produce axle
shafts and double cardan joints for light trucks and SUVs manufactured by Ford
in North America. Net sales and Adjusted Net Sales (as defined) were
$2.04 billion and $2.28 billion, respectively, and EBITDA and Adjusted EBITDA
(each as defined) were $119.2 million and $241.9 million, respectively, for the
year ended December 31, 1998.
We, through our October 1998 acquisition of Albion Automotive (Holdings)
Limited ("Albion"), supply front steerable and rear axles, driving heads,
crankshafts, chassis components and transmission parts used primarily in
medium-duty trucks and buses for customers located in the United Kingdom and
elsewhere in Europe. Albion's sales for the year ended December 31, 1998 were
approximately $130 million. Albion's results after the October 1998 acquisition
date have been included in our consolidated financial results for the year ended
December 31, 1998.
COMPANY BACKGROUND
We are the successor to the former Final Drive and Forge Business Unit of
the Saginaw Division of GM (the "Business Unit" or "Predecessor") and have
produced driveline components and forged products for over 75 years. We were
formed in March 1994 when a private investor group led by Richard E. Dauch
purchased the Business Unit from GM (the "1994 Acquisition"). In connection with
the 1994 Acquisition, we entered into a Component Supply Agreement (the "CSA")
with GM under which we became the sole-source supplier to GM of all the products
and components previously supplied to GM by the Business Unit. In September
1997, we signed an additional binding agreement with GM, the Amended and
Restated Memorandum of Understanding (the "MOU"), which became operative after
our recapitalization described below. Under the MOU, we have agreed with GM to
transition the CSA into a number of separate Lifetime Program Contracts
("LPCs"), substantially all of which have been entered into and under which we
will supply products and components for the life of each GM vehicle program
covered by an LPC. These LPCs will ultimately replace the CSA. See
"Business--Contractual Arrangements with GM."
1
<PAGE>
Our management team, which was formed in connection with the 1994
Acquisition, is led by Mr. Dauch as Chairman of the Board, Chief Executive
Officer and President and was carefully selected on the basis of its management
expertise in the automotive industry. Mr. Dauch has over 34 years of experience
in the industry and was an Executive Vice President for Chrysler Corporation
("Chrysler") from 1980 to 1991, and was instrumental in Chrysler's manufacturing
and financial turnaround. As an executive of GM, he also managed the Business
Unit's largest manufacturing plant (Detroit Gear & Axle) from 1974 to 1976. Our
senior management team is comprised of 13 executives with an average of
25 years experience in the automotive industry, including both automotive
original equipment manufacturer ("OEM") and supplier operations.
POST-ACQUISITION IMPROVEMENTS
Since the 1994 Acquisition, we have dramatically improved product quality
and manufacturing efficiency through a combination of management leadership,
significant investments in new equipment and technology, workforce training, and
process improvements resulting in increased capacity utilization. From
March 1994 through December 1998, we have invested approximately $825 million in
capital expenditures and 1.4 million labor hours for training and education of
our associates and have received and maintained ISO/QS 9000 certification for
each of our facilities. As a result:
o the average number of axles produced per production day increased from
approximately 10,000 in March 1994 to approximately 14,000 in December
1998;
o discrepant parts shipped to GM (as measured by GM) decreased from
approximately 13,400 parts per million ("PPM") during the six months
ended December 31, 1994 to approximately 118 PPM during the six months
ended December 31, 1998; and
o parts returned by GM decreased from 5,136 PPM during the ten months ended
December 31, 1994 to 223 PPM during the twelve months ended December 31,
1998.
In February 1996, we were chosen as the design, development and production
supplier for the GMT-800 Program, which represents the new generation of GM's
full-size pickup trucks and SUVs, including the GMC and Chevrolet full-size
pickup trucks and the Suburban, Tahoe and Yukon SUVs. GM began to phase in
production of GMT-800 vehicles in June 1998. Additionally, in June 1997, we were
chosen as the supplier for the next generation of GM's mid-size SUVs, including
the Blazer, Bravada and Jimmy (the "M-SUV Program"). These new programs replace
existing programs supplied by us that accounted for approximately 65% of our
1997 net sales, thereby extending our contract privileges for the life of these
new programs (which typically run six to twelve years). These new programs also
are expected to generate greater revenues for us through higher "Sales-Dollar
Content" per vehicle (our revenue per vehicle containing our products) as a
result of engineering enhancements and product improvements. This increase in
Sales-Dollar Content per vehicle is already being realized with the GMT-800
Program, for which we have designed and engineered significant improvements in
the quality and reliability of its driveline products that have improved the
ride and handling of these light trucks and SUVs.
In August 1998, we were awarded the mid-size pick-up truck replacement
program (the "MST Program") for the GMT-325 Program, for which we will supply
front and rear axles for future generation mid-sized pick-up trucks to be
manufactured by GM in North America and Brazil. These axles are new product
offerings for us.
THE RECAPITALIZATION
Blackstone Capital Partners II Merchant Banking Fund L.P. and certain of
its affiliates (collectively, "Blackstone") acquired a controlling interest in
Holdings in a leveraged recapitalization transaction consummated in
October 1997. See "The Recapitalization."
INDUSTRY
The automotive industry has been and continues to be significantly
influenced by several industry trends which we believe will enhance our
strategic position and growth prospects. First, consumer demand for light trucks
and SUVs continues to grow both in the United States and worldwide. In fact, in
November 1998, sales of light trucks and SUVs exceeded 50% of all light vehicle
sales in the United States for the first time ever. We benefit directly from
this trend due to our leading United States market share position as an
independent supplier of driveline components for the light truck and SUV
segment. Second, sales penetration of 4WD vehicles in the
2
<PAGE>
United States light vehicle market has increased from 7% in 1990 to over 15% in
1997 and, according to J.D. Power, is expected to continue to rise. We benefit
from this trend since our Sales-Dollar Content per vehicle is approximately 80%
higher on a 4WD vehicle than on a comparable two-wheel drive vehicle. Third,
automotive OEMs continue to outsource component manufacturing as a result of
competitive pressures to improve quality and reduce capital expenditures,
production costs and inventory levels. A significant portion of driveline
components are currently manufactured by OEMs, representing a substantial
outsourcing opportunity for us. Fourth, in connection with this outsourcing
trend, OEMs are placing greater reliance on large Tier I full-service suppliers
that are capable of supplying integrated systems. It is anticipated that as this
trend continues, the number of suppliers will substantially decrease. As the
16th largest (by sales) North American automotive OEM parts supplier (according
to the March 30, 1998 Automotive News), we believe we are well positioned to
compete successfully as a systems integrator in the consolidating supplier
market. Fifth, OEMs are expanding manufacturing operations into global markets,
thereby providing Tier I suppliers the opportunity to follow OEMs into those
markets. We have participated in this trend by being awarded contracts to supply
components to GM's operations in South America, Indonesia and Mexico.
BUSINESS STRATEGY
We plan to leverage our competitive advantages and actively pursue the
following strategies to increase revenue and profitability:
Improve Product Quality and Manufacturing Efficiency. Since the 1994
Acquisition, we have dramatically improved product quality and efficiency. We
are committed to continue reducing operating costs by developing new
manufacturing processes and by investing in new equipment, technologies and
improvements in product designs. We believe that the significant modernization
of our manufacturing equipment and facilities which has been completed over the
last four years, as well as initiatives to be undertaken in connection with the
GMT-800, the M-SUV and the MST Programs, will generate enhanced productivity and
operating efficiency. From March 1994 through December 1998, we have invested
approximately $825 million in the modernization of our equipment and facilities.
Diversify, Strengthen and Globalize OEM Customer Base. We currently provide
axle shafts and double cardan joints to Ford and have begun to pursue strategic
initiatives to further diversify our customer base by providing products for
vehicles manufactured by Isuzu, Nissan, CAMI (a joint venture between GM and
Suzuki), and DaimlerChrysler. Through our diversification efforts (including our
acquisition of Albion), we have increased our sales to customers other than GM
to approximately $134 million in 1998. We will continue to seek new business
from existing customers, as well as develop relationships with new customers
worldwide. We sell our products primarily in North America and Europe. In 1997
and 1998, we established sales offices in Tokyo, Japan and Ulm, Germany,
respectively, in order to access new markets for our products. Additionally, we
are establishing a sales office and constructing a manufacturing facility in
Guanajuato, Mexico, which is currently scheduled to begin production in the fall
of 2000.
Expand Systems Integrator Capability. OEMs continue to consolidate their
supplier base and shift the design, engineering and manufacturing functions of
complete systems to their remaining Tier I suppliers. We currently supply axles,
propeller shafts, chassis components and forged products for light trucks and
SUVs. Through our recently acquired Albion subsidiary, we also supply front
steerable and rear axles, driving heads, crankshafts, chassis components and
transmission parts used primarily in medium-duty trucks and buses. We intend to
provide additional driveline components through a combination of developing new
technologies and other capabilities, managing Tier II and Tier III suppliers and
acquiring other suppliers in order to offer our customers more fully-integrated
driveline systems.
Develop New Products. We intend to diversify our product portfolio by
designing and developing new products and systems. As part of our commitment to
product development, we opened our Technical Center in 1995 which provides
resources to our engineers to improve the design of our existing products and to
design new products. We invested $29.5 million and $27.8 million in research and
development in 1998 and 1997, respectively. To date, these initiatives have
resulted in several new products such as the new 11.5" axle (initially being
used in the GMT-800 Program), multi-link rear axles, an integral oil pan front
axle, precision steering system joints (which utilize lash free/low lash idlers
and radiax pivot sockets) and improved propeller shaft "U-Joints." We are also
in the process of developing other new products such as independent rear drive
system
3
<PAGE>
modules, traction-enhancing advanced differentials, banjo-style axles, aluminum
rear axle carriers, axle cooler covers, spherical differential cases and near
net/net shaped forgings.
Pursue Selected Acquisition Opportunities. We are pursuing an acquisition
strategy which is intended to advance the implementation of our strategic
initiatives. This acquisition strategy will enhance our efforts to diversify our
customer base, expand our product offerings, selectively globalize our
operations and/or leverage our design, engineering and validation expertise. We
have established strict criteria in our assessment of potential acquisition
candidates focused primarily on strong operating potential, complementary
product platforms and strong existing management teams. The acquisition
candidates we are evaluating include:
o suppliers of driveline components which complement our current product
offerings;
o companies in the highly fragmented forging industry, which will allow us
to capitalize upon the trend toward OEM supplier consolidation; and
o other automotive parts suppliers.
We recently completed the acquisitions of Colfor Manufacturing, Inc.
("Colfor") and MSP Industries Corporation ("MSP") as described below, and are
currently in various stages of discussions or negotiations with acquisition
candidates of the types described above. It is possible that an agreement with
respect to an acquisition could be reached in the near future. We do not expect
that any such acquisition, if consummated, would have a material impact on our
financial condition. As of the date of this prospectus, no definitive agreement
with any such acquisition candidate has been entered into and there can be no
assurance that any such acquisition will be successfully negotiated, financed or
consummated. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources" and "Description of
Certain Indebtedness--Senior Secured Credit Facilities."
Our October 1998 acquisition of Albion illustrates how the implementation
of our strategic initiatives can be advanced through an acquisition, as it
provides us with diversified product lines, a broader customer base and expanded
geographic presence. Albion manufactures front steerable and rear axles, driving
heads, crankshafts, chassis components and transmission parts used primarily in
medium-duty trucks and buses for customers located in the United Kingdom and
elsewhere in Europe. This acquisition adds product offerings for vehicle classes
in gross vehicle weight ("GVW") 4-8, expanding our product portfolio to include
vehicle classes GVW 1-8. This acquisition also broadens our customer base by
adding Caterpillar (Perkins), LDV, PACCAR (Leyland and DAF), Renault,
Rolls-Royce, Rover and Volvo. Finally, Albion expands our geographic presence by
adding manufacturing capabilities in Europe which will complement our existing
sales office in Ulm, Germany.
RECENT DEVELOPMENTS
On February 3, 1999, we consummated our IPO. The net proceeds to us from
the IPO totaled approximately $108 million, and were used to reduce outstanding
borrowings (but not the related commitments) under the Revolving Credit
Facility.
On April 1, 1999, we announced the closing of our purchase of two forging
companies, Colfor and MSP, for an aggregate cash purchase price of approximately
$223 million. Colfor specializes in precision cold, warm and hot forgings and
operates three manufacturing facilities in Ohio. Giving effect as of January 1,
1998 to Colfor's October 1998 acquisition of Valley Forge, Inc., Colfor's pro
forma 1998 sales would have been approximately $126 million. MSP manufactures
precision forged powertrain, driveline, chasis and other components for the
automotive industry using cold and warm forging processes at three manufacturing
facilities in Michigan. MSP's 1998 sales were $56 million.
4
<PAGE>
SUMMARY OF TERMS OF THE EXCHANGE OFFER
On March 5, 1999, the Issuer completed the private offering of the
outstanding Notes. References to the "Notes" in this prospectus are references
to both the outstanding Notes and the exchange Notes.
The Issuer and the Guarantor entered into an exchange and registration
rights agreement with the initial purchasers in the private offering in which
the Issuer and the Guarantor agreed to deliver to you this prospectus as part of
the exchange offer and the Issuer agreed to complete the exchange offer within
210 days after the date of original issuance of the outstanding Notes. You are
entitled to exchange in the exchange offer your outstanding Notes for exchange
Notes which are identical in all material respects to the outstanding Notes
except:
o the exchange Notes have been registered under the Securities Act,
o the exchange Notes are not entitled to certain registration rights which
are applicable to the outstanding Notes under the exchange and
registration rights agreement, and
o certain contingent interest rate provisions are no longer applicable.
<TABLE>
<S> <C>
The Exchange Offer........................ The Issuer is offering to exchange up to $300 million aggregate
principal amount of outstanding Notes for up to $300 million
aggregate principal amount of exchange Notes. Outstanding Notes may
be exchanged only in integral multiples of $1,000.
Resale.................................... Based on an interpretation by the staff of the Securities and
Exchange Commission (the "Commission") set forth in no-action letters
issued to third parties, we believe that the exchange Notes issued
pursuant to the exchange offer in exchange for outstanding Notes may
be offered for resale, resold and otherwise transferred by you
(unless you are an "affiliate" of American Axle & Manufacturing, Inc.
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 you are acquiring the exchange
Notes in the ordinary course of your business and that you have not
engaged in, do not intend to engage in, and have no arrangement or
understanding with any person to participate in, a distribution of
the exchange Notes.
Each participating broker-dealer that receives exchange Notes for its
own account pursuant to the exchange offer in exchange for
outstanding Notes that were acquired as a result of market-making or
other trading activity must acknowledge that it will deliver a
prospectus in connection with any resale of the exchange Notes. See
"Plan of Distribution."
Any holder of outstanding Notes who:
o is an affiliate of American Axle & Manufacturing, Inc.;
o does not acquire exchange Notes in the ordinary course of its
business; or
o tenders in the exchange offer with the intention to participate, or
for the purpose of participating, in a distribution of exchange
Notes;
cannot rely on the position of the staff of the Commission enunciated
in Exxon Capital Holdings Corporation, Morgan Stanley & Co.
Incorporated or similar no-action letters and, in the absence of an
exemption therefrom, must comply with the registration and
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
prospectus delivery requirements of the Securities Act in connection
with the resale of the exchange Notes.
Expiration Date; Withdrawal of
Tender.................................. The exchange offer will expire at 5:00 p.m., New York city time, on
, 1999, or such later date and time to which the Issuer
extends it (the "expiration date"). The Issuer does not currently
intend to extend the expiration date. A tender of outstanding Notes
pursuant to the exchange offer may be withdrawn at any time prior to
the expiration date. The expiration date for the exchange offer will
not in any event be extended to a date later than ,
1999. Any outstanding Notes not accepted for exchange for any reason
will be returned without expense to the tendering holder promptly
after the expiration or termination of the exchange offer.
Certain Conditions to the Exchange
Offer................................... The exchange offer is subject to customary conditions, which the
Issuer may waive. Please read the section captioned "The Exchange
Offer--Certain Conditions to the Exchange Offer" of this prospectus
for more information regarding the conditions to the exchange offer.
Procedures for Tendering Outstanding
Notes................................... If you wish to participate in the exchange offer, you must complete,
sign and date the accompanying letter of transmittal, or a facsimile
of the letter of transmittal, according to the instructions contained
in this prospectus and the letter of transmittal. You must also mail
or otherwise deliver the letter of transmittal, or a facsimile of the
letter of transmittal, together with your outstanding Notes and any
other required documents, to the exchange agent at the address set
forth on the cover page of the letter of transmittal. If you hold
outstanding Notes through The Depository Trust Company ("DTC") and
wish to participate in the exchange offer, you must comply with the
Automated Tender Offer Program procedures of DTC, by which you will
agree to be bound by the letter of transmittal. By signing, or
agreeing to be bound by, the letter of transmittal, you will
represent to us that, among other things:
o you acquired your outstanding Notes in the ordinary course of your
business;
o you have no arrangement or understanding with any person or entity
to participate in the distribution of the exchange Notes;
o if you are a broker-dealer that will receive exchange Notes for
your own account in exchange for outstanding Notes that were
acquired as a result of market-making activities, that you will
deliver a prospectus, as required by law, in connection with any
resale of such exchange Notes; and
o you are not an "affiliate," as defined in Rule 405 of the
Securities Act, of American Axle & Manufacturing, Inc. or, if you
are an affiliate, that you will comply with any applicable
registration and prospectus delivery requirements of the Securities
Act.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Special Procedures for Beneficial
Owners.................................. If you are a beneficial owner of outstanding Notes which are
registered in the name of a broker, dealer, commercial bank, trust
company or other nominee, and you wish to tender such outstanding
Notes in the exchange offer, you should contact such registered
holder promptly and instruct such registered holder to tender on your
behalf. If you wish to tender on your own behalf, you must, prior to
completing and executing the letter of transmittal and delivering
your outstanding Notes, either make appropriate arrangements to
register ownership of the outstanding Notes in your name or obtain a
properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time and may
not be able to be completed prior to the expiration date.
Guaranteed Delivery Procedures............ If you wish to tender your outstanding Notes and your outstanding
Notes are not immediately available or you cannot deliver your
outstanding Notes, the letter of transmittal or any other documents
required by the letter of transmittal or comply with the applicable
procedures under DTC's Automated Tender Offer Program, prior to the
expiration date, you must tender your outstanding Notes according to
the guaranteed delivery procedures set forth in this prospectus under
"The Exchange Offer--Guaranteed Delivery Procedures."
Effect on Holders of Outstanding
Notes................................... As a result of the making of, and upon acceptance for exchange of all
validly tendered outstanding Notes pursuant to the terms of the
exchange offer, we will have fulfilled a covenant contained in the
registration rights agreement and, accordingly, there will be no
increase in the interest rate on the outstanding Notes under the
circumstances described in the registration rights agreement. If you
are a holder of outstanding Notes and you do not tender your
outstanding Notes in the exchange offer, you will continue to hold
such outstanding Notes and you will be entitled to all the rights and
limitations applicable to the outstanding Notes in the indenture,
except for any rights under the registration rights agreement that by
their terms terminate upon the consummation of the exchange offer.
To the extent that outstanding Notes are tendered and accepted in the
exchange offer, the trading market for outstanding Notes could be
adversely affected.
Consequences of Failure to Exchange....... All untendered outstanding Notes will continue to be subject to the
restrictions on transfer provided for in the outstanding Notes and in
the indenture. In general, the outstanding Notes may not be offered
or sold, unless registered under the Securities Act, except pursuant
to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. Other than in
connection with the exchange offer, the Issuer does not currently
anticipate that it will register the outstanding Notes under the
Securities Act.
Certain U.S. Federal Income Tax
Considerations.......................... The exchange of outstanding Notes for exchange Notes in the exchange
offer will not be a taxable event for United States federal
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
income tax purposes. See "Certain United States Federal Income Tax
Consequences of the Exchange Offer."
Use of Proceeds........................... We will not receive any cash proceeds from the issuance of exchange
Notes pursuant to the exchange offer.
Exchange Agent............................ IBJ Whitehall Bank & Trust Company is the exchange agent for the
exchange offer. The address and telephone number of the exchange
agent are set forth in the section captioned "Exchange Offer--
Exchange Agent" of this prospectus.
</TABLE>
SUMMARY OF TERMS OF THE EXCHANGE NOTES
<TABLE>
<S> <C>
Issuer.................................... American Axle & Manufacturing, Inc.
Securities Offered........................ $300,000,000 aggregate principal amount of 9 3/4% Senior Subordinated
Notes due 2009.
Maturity.................................. March 1, 2009.
Interest.................................. Annual rate 9 3/4%.
Payment frequency: every six months on March 1 and September 1.
First payment: September 1, 1999.
Sinking Fund.............................. None.
Optional Redemption....................... Except as described below, the Issuer may not redeem the Notes prior
to March 1, 2004. After such date, the Issuer may redeem the Notes,
in whole or in part, at any time at the redemption prices set forth
herein, together with accrued and unpaid interest and liquidated
damages, if any, to the date of redmeption. In addition, at any time
and from time to time on or prior to March 1, 2002, the Issuer may,
subject to certain requirements, redeem up to 35% of the original
aggregate principal amount of the Notes with the net cash proceeds
received from one or more equity offerings:
o by the Issuer; or
o by Holdings to the extent the net cash proceeds thereof are
contributed to the Issuer or are used to purchase certain capital
stock of the Issuer, at a redemption price equal to 109.75% of the
principal amount of the Notes to be redeemed, together with accrued
and unpaid interest and liquidated damages, if any, to the date of
redemption, provided that at least 65% of the original aggregate
principal amount of the Notes remains outstanding immediately after
each such redemption, and provided further that such redemption
shall occur within 90 days after the date on which such equity
offering is consummated. See "Description of Notes--Optional
Redemption."
Change of Control......................... Upon the occurrence of a change of control you will have the right to
require the Issuer to repurchase your Notes at a price equal to 101%
of the principal amount together with accrued and unpaid interest and
liquidated damages, if any, to the date of repurchase. See
"Description of Notes--Change of Control."
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Guarantees................................ The outstanding Notes are, and the exchange Notes when issued will
be, guaranteed by Holdings. The Notes and the guarantee are unsecured
senior subordinated debts. None of the Issuer's subsidiaries have
guaranteed the outstanding Notes. In the future, each of the Issuer's
direct and indirect restricted subsidiaries organized under the laws
of the United States or any state thereof that incurs or guarantees
certain indebtedness will guarantee the Notes on a senior
subordinated basis. See "Description of Notes--Guarantees."
Ranking................................... The Notes are unsecured and rank behind all of the Issuer's current
and future senior indebtedness, including all borrowings of the
Issuer under its credit facilities. The Notes will rank equally in
right of payment with all senior subordinated debts of the Issuer and
will rank senior in right of payment to all subordinated debts of the
Issuer. The Indenture governing the Notes will permit the Issuer and
its subsidiaries to incur additional indebtedness including senior
indebtedness, subject to certain limitations. See "Description of
Notes--Ranking."
Assuming the Issuer had completed its IPO and the private placement
of the outstanding Notes on December 31, 1998 and applied the
proceeds as intended (but without giving effect to any borrowings to
finance the acquisition of Colfor or MSP):
o the Issuer would have had $407.4 million aggregate principal amount
of senior indebtedness outstanding (excluding unused commitments)
all of which would have been secured indebtedness;
o the Issuer would have had no debt that ranked equally with the
Notes outstanding other than the Notes and no indebtedness that is
junior in right of payment to the Notes; and
o the Issuer's subsidiaries would have had total liabilities
(excluding intercompany liabilities) of $56.5 million. None of the
Issuer's subsidiaries have guaranteed the Notes as of the date
hereof.
See "--Recent Developments," "Description of Notes--Ranking" and
"Description of Certain Indebtedness--Senior Secured Credit
Facilities."
Certain Covenants......................... The Issuer issued the outstanding Notes and will issue the exchange
Notes under an Indenture with IBJ Whitehall Bank & Trust Company, the
trustee. The Indenture, among other things, restricts our ability and
the ability of our subsidiaries to:
o borrow money;
o issue disqualified stock and preferred stock;
o pay dividends on and redeem capital stock;
o redeem debt that is junior to the Notes;
o make certain other restricted payments and investments;
o sell certain assets;
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
o enter into certain transactions with affiliates;
o create certain liens; and
o enter into certain consolidations, mergers and transfers of all or
substantially all of the Issuer's assets.
In addition, the Indenture also prohibits certain restrictions on
distributions from the Restricted Subsidiaries.
However, all of these limitations are subject to a number of
important qualifications and exceptions.
For more details, see "Description of Notes--Certain Covenants."
Absence of a Public Market for the
Notes................................... The exchange Notes will generally be freely transferable but will be
new securities for which there will not initially be a market.
Accordingly, there can be no assurance as to the development or
liquidity of any market for the exchange Notes. The initial
purchasers in the private placement of the outstanding Notes have
advised us that they currently intend to make a market in the
exchange Notes. However, they are not obligated to do so, and any
market making with respect to the exchange Notes may be discontinued
at any time without notice.
</TABLE>
RISK FACTORS
Prospective participants in the exchange offer should carefully consider
the risk factors set forth under the caption "Risk Factors" and the other
information included in this prospectus prior to tendering their outstanding
Notes. See "Risk Factors."
------------------------
The Issuer and Holdings are Delaware corporations. Our principal offices
are located at 1840 Holbrook Avenue, Detroit, Michigan 48212, and our telephone
number is (313) 974-2000.
10
<PAGE>
SUMMARY HISTORICAL AND ADJUSTED CONSOLIDATED FINANCIAL DATA
The following summary historical consolidated financial data at and for the
years ended December 31, 1995, 1996 and 1997 and the two months and ten months
ended February 28, 1994 and December 31, 1994, respectively, were derived from
audited consolidated financial statements of Holdings and its subsidiaries,
which have been audited by Ernst & Young LLP, independent auditors. The summary
historical consolidated financial data at and for the year ended December 31,
1998 were derived from audited consolidated financial statements of Holdings and
its subsidiaries, which have been audited by Deloitte & Touche LLP, independent
auditors. Holdings is a guarantor of the Notes and the Credit Facilities and has
no material operations or assets other than the capital stock of the Issuer. As
a result, the consolidated financial position, results of operations and cash
flows of Holdings are substantially the same as those of the Issuer. The column
below titled "As Adjusted Year Ended December 31, 1998" gives effect to certain
adjustments to the financial information to reflect the impact of (i) the IPO
and the application of the net proceeds therefrom and the offering of the
outstanding Notes and the application of the net proceeds therefrom and (ii)
except in the case of interest expense, the EBITDA to pro forma interest expense
ratio and Balance Sheet Data, certain events that affected the Company's results
during the year ended December 31, 1998 that are based in part on estimates made
by the Company, but does not give effect to the acquisition of Colfor or MSP or
the financing thereof as described in "--The Company--Recent Developments." The
table should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations," the consolidated financial
statements of the Company and the related notes, and the other financial
information included elsewhere in this prospectus.
<TABLE>
<CAPTION>
HISTORICAL AS ADJUSTED
----------------------------------------------------------------------------- -----------------
PREDECESSOR
TWO MONTHS TEN MONTHS YEAR ENDED
ENDED ENDED DECEMBER 31,
FEBRUARY 28, DECEMBER 31, ---------------------------------------------- YEAR ENDED
1994(A) 1994(B) 1995 1996 1997 1998 DECEMBER 31, 1998
-------------- ------------- ---------- ---------- ---------- ---------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales.................. $294,466 $ 1,548,655 $1,968,076 $2,022,272 $2,147,451 $2,040,578
Gross profit (loss)........ (17,386) 141,997 179,488 176,550 220,087 156,381
Operating income (loss).... (21,921) 73,880 108,885 93,478 116,133 50,190
Interest expense........... 1,371 1,566 340 8,956 44,784 $ 67,195(c)
OTHER DATA:
Net cash provided by
operating activities..... N/A $ 196,990 $ 196,886 $ 65,687 $ 200,830 $ 81,353
EBITDA(d).................. N/A 96,038 144,779 134,740 152,838 119,194
Adjusted EBITDA............ $ 241,889(e)
Depreciation and
amortization............. $ 4,682 16,846 25,242 36,076 50,177 71,730
Capital expenditures ...... 9,600 25,168 147,077 162,317 282,625 209,993
SELECTED RATIOS:
Ratio of earnings to fixed
charges(f)............... N/A N/A 5.2 3.4 3.4 1.0
EBITDA to pro forma interest expense..................................................................... 1.8x
Adjusted EBITDA to pro forma interest expense............................................................ 3.6x
Pro forma total debt to Adjusted EBITDA(g)............................................................... 2.9x
BALANCE SHEET DATA:
Cash and equivalents....... $ 20,000 $ 120,822 $ 170,339 $ 126,034 $ 17,285 $ 4,547 $ 115,867(h)
Total assets............... 316,466 534,108 736,997 771,222 1,017,653 1,226,232 1,345,892(h)
Total debt(f).............. 82,192 11,192 1,000 2,368 507,043 693,368 705,028(i)
Stockholders' equity....... 20,500 88,101 168,572 250,168 37,231 40,468 148,468(j)
</TABLE>
(Footnotes on next page)
11
<PAGE>
NOTES TO SUMMARY HISTORICAL AND ADJUSTED CONSOLIDATED FINANCIAL DATA
(a) The accompanying statement of income data of the Predecessor for the two
months ended February 28, 1994 reflect its historical cost basis prior to
the 1994 Acquisition. Accordingly, the statement of income data for the
periods subsequent to the 1994 Acquisition are not comparable to the periods
prior to the 1994 Acquisition. The accompanying balance sheet data is as of
March 1, 1994 and include the accounts of the Company after adjustment of
the corresponding assets and liabilities to their estimated fair value to
reflect the allocation of the purchase price in connection with the 1994
Acquisition.
(b) Results are for the ten-month period beginning on the closing date of the
1994 Acquisition and ending on December 31, 1994.
(c) Pro forma interest expense represents interest expense adjusted as if the
IPO and the offering of the outstanding Notes occurred on January 1, 1998
and the Company used a portion of the aggregate net proceeds therefrom to
repay all outstanding borrowings under the Revolving Credit Facility and the
Receivables Facility. The following table reflects the calculation of such
pro forma interest expense. See note (h) below.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Interest expense................................................................... $ 44,784
Deduct: Interest on the Revolving Credit Facility and Receivables Facility
(weighted average interest rate of 7.8%), net of amounts capitalized............. (8,562)
Add: Interest on the Notes (9.75%)................................................. 29,250
Add: Amortization of discount on the Notes and deferred financing costs (over 10
years)........................................................................... 1,068
Add: Net increase in commitment fees on unused amounts under the Revolving Credit
Facility and the Receivables Facility............................................ 655
--------
Pro forma interest expense......................................................... $ 67,195
--------
--------
</TABLE>
(d) EBITDA represents income from continuing operations before interest expense,
income taxes, depreciation and amortization. EBITDA should not be construed
as income from operations, net income or cash flow from operating activities
as determined by generally accepted accounting principles. Other companies
may calculate EBITDA differently.
(e) Adjusted EBITDA represents EBITDA adjusted to add back: (i) net sales (and
related gross profit and operating income) estimated by the Company to have
been lost as a result of the GM work stoppage which occurred during June and
July of 1998 that resulted in the shutdown of nearly all of GM's North
American production facilities and impacted the Company's operations in June
and July 1998 and also resulted in related start-up inefficiencies in the
Company's operations in August 1998, and (ii) temporary reductions of
certain payments previously agreed to be made by GM to the Company as part
of the commercial arrangements between them. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Company
Overview."
<TABLE>
<CAPTION>
HISTORICAL AS ADJUSTED
----------------- ESTIMATED IMPACT TEMPORARY REDUCTIONS -----------------
YEAR ENDED OF 1998 GM WORK IN CERTAIN PAYMENTS YEAR ENDED
DECEMBER 31, 1998 STOPPAGE FROM GM DECEMBER 31, 1998
----------------- ---------------- -------------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales.................... $ 2,040,578 $187,656 $ 51,503 $ 2,279,737(1)
Gross profit................. 156,381 71,192 51,503 279,076
Operating income............. 50,190 71,192 51,503 172,885
EBITDA....................... 119,194 71,192 51,503 241,889(1)
(1) Referred to in this prospectus as "Adjusted Net Sales" and "Adjusted EBITDA", respectively.
</TABLE>
(f) For purposes of computing the ratio of earnings to fixed charges, earnings
represent net income before taxes and fixed charges. Fixed charges consist
of interest expense, capitalized interest, one-third of rental expense,
which the Company believes to be representative of interest, and preferred
stock dividends. Pro forma 1998 earnings, after giving effect (as if such
events occurred on January 1, 1998) to the IPO and the offering of the
outstanding notes and the application of a portion of the aggregate net
proceeds therefrom to repay all outstanding borrowings under the Revolving
Credit Facility and the Receivables Facility, would have been insufficient
to cover fixed charges by $20.6 million. See "Capitalization."
(g) Total debt includes capital lease obligations.
(h) Pro forma cash and equivalents and pro forma total assets represent cash and
equivalents and total assets, respectively, each adjusted as if the IPO and
the application of the net proceeds therefrom and the offering of the
outstanding Notes and the application of the estimated net proceeds
therefrom occurred on December 31, 1998 (resulting in repayment of
Indebtedness under the Revolving Credit Facility and the replacement of
financing provided by the Receivables Facility, together totaling an assumed
$286.0 million, and the addition of the remainder of such aggregate
estimated net proceeds of $111.3 million to cash and equivalents), but does
not give effect to the acquisition of Colfor or MSP which the Company
financed with cash and borrowings under the Credit Facilities. See
"Capitalization."
(i) Pro forma total debt represents total debt adjusted as if the IPO and the
application of the net proceeds therefrom and the offering of the
outstanding Notes and the application of the net proceeds therefrom
occurred on December 31, 1998 (including repayment of Indebtedness under
the Revolving Credit Facility and the replacement of financing provided by
the Receivables Facility, together totaling an assumed $286.0 million), but
does not give effect to the acquisition of Colfor or MSP, which the Company
financed with cash and borrowings under the Credit Facilities. See
"Capitalization." The Company may, in the future, incur additional
indebtedness, including to meet its working capital and capital expenditure
requirements and to finance acquisitions. The Company also intends to enter
into certain sale/leaseback transactions. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources," "Business--Business Strategy--Pursue Selected
Acquisition Opportunities" and "Description of Certain Indebtedness."
(j) Pro forma stockholders' equity represents stockholders' equity adjusted as
if the IPO occurred on December 31, 1998, but does not give effect to the
acquisition of Colfor or MSP.
12
<PAGE>
RISK FACTORS
Prior to tendering your outstanding Notes, you should consider carefully
all of the information set forth in this prospectus and, in particular, should
evaluate the following risks. The risks described below are not the only ones we
may face. Additional risks not presently known to us or that we currently deem
immaterial may also impair our business operations.
FAILURE TO EXCHANGE--THERE MAY BE ADVERSE CONSEQUENCES IF YOU DO NOT EXCHANGE
YOUR OUTSTANDING NOTES
If you do not exchange your outstanding Notes for exchange Notes in the
exchange offer, then you will continue to be subject to the transfer
restrictions on the outstanding Notes as set forth in the offering memorandum
distributed in connection with the private placement of the outstanding Notes.
In general, the outstanding Notes may not be offered or sold unless they are
registered or exempt from registration under the Securities Act and applicable
state securities laws. Except as required by the registration rights agreement,
we do not intend to register resales of the outstanding Notes under the
Securities Act. You should refer to "Prospectus Summary--Summary of the Exchange
Offer" and "The Exchange Offer" for information about how to tender your
outstanding Notes.
The tender of outstanding Notes under the exchange offer will reduce the
principal amount of the outstanding Notes outstanding, which may have an adverse
effect upon, and increase the volatility of, the market price of the outstanding
Notes due to a reduction in liquidity.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE--WE HAVE SUBSTANTIAL INDEBTEDNESS AND HAVE
SIGNIFICANT INTEREST PAYMENT REQUIREMENTS
We are, and will be, significantly leveraged. As of December 31, 1998, on a
pro forma basis after giving effect to the IPO and the application of the net
proceeds therefrom and the private placement of the outstanding Notes and the
application of the net proceeds therefrom (but without giving effect to the
borrowings to finance the acquisition of Colfor and MSP), we would have had
outstanding $705.0 million in aggregate principal amount of indebtedness
(excluding unused commitments), of which $407.4 million would have been senior
indebtedness, and stockholders' equity of $148.5 million. In addition, we
incurred approximately $65 million of additional borrowings under our Credit
Facilities which were used, together with cash, to finance the acquisition of
Colfor and MSP. We may incur additional indebtedness (including certain senior
indebtedness) in the future, including to meet our working capital and capital
expenditure requirements and to finance acquisitions, subject to certain
limitations contained in the instruments governing our indebtedness.
Accordingly, we will have significant debt service obligations. On a pro forma
basis after giving effect to the IPO and the application of the net proceeds
therefrom and the private placement of the outstanding Notes and the application
of the net proceeds therefrom, as if each had occurred on January 1, 1998, our
earnings would have been insufficient to cover our fixed charges by
$20.6 million for the year ended December 31, 1998. In addition, we intend to
enter into sale/leaseback transactions with respect to approximately
$200 million of our existing machinery and equipment during 1999, and such
sale/leaseback transactions and any additional sale/leaseback transactions we
may enter into are permitted by the terms of the Notes. We also refinanced the
Receivables Facility on similar terms and in connection therewith increased its
size to approximately $153 million. See "Capitalization," "Selected Consolidated
Financial and Other Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources,"
"Business--Business Strategy--Pursue Selected Acquisition Opportunities,"
"Description of Certain Indebtedness" and "Description of Notes."
Our high level of debt could have important consequences for you, including
the following:
o a substantial portion of cash flow from operations will be dedicated
to the payment of principal and interest on our indebtedness,
thereby reducing the funds available to us for operations, future
business opportunities and other purposes;
o indebtedness under our Credit Facilities and under our Receivables
Facility are at variable rates of interest, and therefore we will be
vulnerable to increases in prevailing interest rates;
13
<PAGE>
o our ability to obtain additional financing for working capital,
capital expenditures, acquisitions, general corporate purposes or
other purposes may be impaired, which may adversely affect, among
other things, our ability to successfully implement our acquisition
strategy;
o we may be substantially more leveraged than certain of our
competitors, which may place us at a competitive disadvantage;
o our operations are restricted by the agreements governing our
long-term indebtedness, including the Indenture with respect to the
Notes, which contain certain financial and operating covenants;
o all of the indebtedness outstanding under the Credit Facilities is
secured by substantially all our assets; and
o our substantial degree of leverage may limit our flexibility to
adjust to changing market conditions, reduce our ability to
withstand competitive pressures and make us more vulnerable to a
downturn in general economic conditions or our business.
o the degree to which we are leveraged could prevent us from
repurchasing all of the Notes tendered to us upon a Change of
Control.
See "--Limitations on Change of Control," "Description of Certain
Indebtedness--Senior Secured Credit Facilities" and "Description of Notes."
Our ability to make scheduled payments of principal of, or to pay interest
on, or to refinance our indebtedness (including the Notes) and to make scheduled
payments under our operating leases or to fund planned capital expenditures or
to finance acquisitions will depend on our future operating performance, which
to a certain extent is subject to economic, financial, competitive and other
factors beyond our control. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
If our cash flow and capital resources are insufficient to fund our debt service
obligations, lease obligations, capital expenditures or acquisition financing
needs, we could be required to:
o reduce or delay planned capital expenditures;
o obtain additional equity capital;
o refinance all or a portion of amounts outstanding under the Credit
Facilities at or prior to their maturity, which is prior to the
maturity of the Notes; and/or
o sell material assets or operations.
No assurance can be given that any such transaction would be possible or would
not contain terms and conditions that could have a material adverse effect on us
and our financial condition or results of operations. In addition, our ability
to raise funds by selling assets is restricted by the Credit Facilities, and our
ability to effect equity financings is dependent on our results of operations
and market conditions. In the event that we are unable to refinance such
indebtedness or raise funds through asset sales, sales of equity or otherwise,
our ability to pay principal of, and interest on, the Notes could be adversely
affected.
Additionally, if we were to sustain a decline in our operating results or
available cash, we could experience difficulty in complying with the covenants
contained in the Credit Facilities or the Indenture or any other agreements
governing future indebtedness. The failure to comply with such covenants could
result in an event of default under these agreements, thereby permitting
acceleration of such indebtedness as well as indebtedness under other
instruments that contain cross-acceleration and cross-default provisions.
We believe, based on current circumstances, that our cash flow, together
with available borrowings under the Credit Facilities, will be sufficient to
permit us to meet our operating expenses and to service our debt requirements.
Significant assumptions underlie this belief, including, among other things,
that we will succeed in implementing our business and growth strategies and
there will be no material adverse developments in our business, liquidity or
capital requirements. It is anticipated that we will increase our leverage to
meet our working capital and capital expenditure requirements in the future or
to finance future acquisitions. The impact of work
14
<PAGE>
stoppages at GM has had and may in the future have a significant adverse impact
on our results of operations and liquidity and has contributed and may
contribute in the future to an increase in our leverage.
SUBORDINATION--THE NOTES ARE JUNIOR TO OUR SENIOR DEBT
The Notes will be general unsecured obligations of the Issuer that will be
subordinated to all existing and future Senior Indebtedness of the Issuer. As of
December 31, 1998 on a pro forma basis after giving effect to the IPO and the
application of the net proceeds therefrom and the private placement of
outstanding Notes and the application of the net proceeds therefrom (but without
giving effect to approximately $65 million of borrowings used to finance the
acquisition of Colfor and MSP):
o the Issuer would have had $407.4 million aggregate principal amount
of senior indebtedness outstanding (excluding unused commitments),
all of which would have been secured indebtedness;
o the Issuer would have had no debt that ranked equally with the Notes
outstanding other than the Notes and no indebtedness that is junior
in right of payment to the Notes;
o Holdings, the only guarantor of the Notes on the Issue Date, would
have had no senior indebtedness outstanding (exclusive of its
guarantee of the Credit Facilities);
o Holdings would have had no debt that ranked equally with its
Guarantee outstanding (exclusive of its Guarantee) and no
indebtedness that is junior in right of payment to its Guarantee and
no outstanding liabilities (excluding its guarantee of the Credit
Facilities and indebtedness and liabilities owed to the Issuer); and
o the subsidiaries of the Issuer (none of which are guarantors of the
Notes on the Issue Date) would have had total liabilities (excluding
intercompany liabilities) of $56.5 million.
As of December 31, 1998, the Issuer's subsidiaries had total liabilities
(excluding intercompany liabilities) of $119.5 million. See "Description of
Notes--Ranking" and "Description of Certain Indebtedness--Senior Secured Credit
Facilities." Although the Indenture contains limitations on the amount of
additional indebtedness which the Issuer and its subsidiaries may incur, under
certain circumstances the amount of such indebtedness could be substantial and
such indebtedness may be senior indebtedness. See "Description of Notes." The
Indenture provides that the Issuer and its restricted subsidiaries that become
Guarantors may not incur or otherwise become liable for any indebtedness that is
junior in right of payment to any senior indebtedness and senior in any respect
in right of payment to the Notes.
The Issuer may not pay principal, premium (if any), interest or other
amounts on account of the Notes in the event of a payment default or certain
other defaults in respect of certain designated senior indebtedness unless such
indebtedness has been paid in full or the default has been cured or waived. In
addition, in the event of certain other defaults with respect to designated
senior indebtedness, the Issuer may not be permitted to make any payment on
account of the Notes for a designated period of time. See "Description of
Notes." In the event of our insolvency, liquidation, reorganization, dissolution
or other winding-up or upon a default in payment with respect to, or the
acceleration of, any senior indebtedness, any indebtedness owed to the holders
of such senior indebtedness, to any other creditors who are holders of senior
indebtedness and to creditors of subsidiaries must be paid in full before the
assets of the Issuer may be applied to pay obligations on the Notes. There can
be no assurance that there will be sufficient assets to pay amounts due on all
or any of the Notes.
ASSET ENCUMBRACES--OUR ASSETS ARE PLEDGED TO SECURE PAYMENT OF THE SENIOR CREDIT
FACILITIES
In addition to being contractually subordinated, the Notes and the
Guarantees are unsecured and thus will effectively rank junior to any secured
indebtedness of Holdings, the Issuer or its restricted subsidiaries, including
the indebtedness outstanding under the Credit Facilities. We have granted the
lenders under the Credit Facilities first priority security interests in
substantially all of the tangible and intangible current and future assets of
Holdings, the Issuer and its domestic subsidiaries (excluding receivables
related to the Receivables Facility), including a pledge of all of the issued
and outstanding shares of capital stock of the Issuer and all the capital stock
of, or other equity interests in, the Issuer's existing or subsequently acquired
or organized direct or indirect domestic subsidiaries and 65% of the capital
stock of, or other equity interests in, each direct foreign subsidiary
15
<PAGE>
of the Issuer. In the event of a default on such indebtedness (whether as a
result of the failure to comply with a payment or other covenant, a
cross-default or otherwise), the parties granted such security interests will
have a prior secured claim on the capital stock that was pledged and our assets.
If such parties should attempt to foreclose on their collateral, our financial
condition and the value of the Notes would be materially adversely affected. See
"Description of Certain Indebtedness--Senior Secured Credit Facilities."
WE DEPEND ON THE AUTOMOTIVE INDUSTRY WHICH IS A CYCLICAL INDUSTRY
Our operations are cyclical because they are directly related to domestic
automotive production, which is itself cyclical and dependent on general
economic conditions and other factors. Sales of products for light trucks and
SUVs constituted approximately 90% of our revenues in 1998. There can be no
assurance that positive trends in sales of these vehicles, or that the
increasing penetration of 4WDs as a percentage of the light vehicle market, will
continue. A decrease in consumer demand for the models that generate the most of
our sales, our failure to obtain sales orders for new or redesigned models or
pricing pressure from our customers or competitors could have a material adverse
effect on us. Government regulations, including those relating to Corporate
Average Fuel Economy regulations, could impact vehicle mix and volume which
could adversely affect the demand for our existing products.
In addition, we may be unable to pass on raw material price increases to
our customers due to pricing pressure to remain competitive. There is
substantial and continuing pressure from the major automotive companies to
reduce the number of outside suppliers and reduce costs. Management believes
that our ability to control our own costs and to develop new products will be
essential to remain competitive. There can be no assurance that we will be able
to improve or maintain our profitability on product sales.
WE RELY ON GM FOR BUSINESS
Sales to GM constituted approximately 93% of our sales in 1998 and 96% of
our sales in 1997 and 1996. See "Business--Contractual Arrangements with GM." In
connection with the purchase of the Business Unit, GM agreed pursuant to the
Component Supply Agreement (the "CSA") to continue to purchase all of the
components that were supplied to GM by the Business Unit at the time of the 1994
Acquisition. In 1997, we entered into a binding Amended and Restated Memorandum
of Understanding (the "MOU") with GM which provides for transitioning the CSA
into a number of separate Lifetime Program Contracts ("LPCs"), substantially all
of which have been entered into, applicable for the life of each GM vehicle
program covered by an LPC. Such programs typically run 6 to 12 years. Although
pricing has been established for products sold under the LPCs, we must remain
competitive with respect to technology, design and quality. There can be no
assurance that we will remain competitive with respect to technology, design and
quality to GM's reasonable satisfaction. We will have to compete for future GM
business upon the termination of the LPCs. In addition, pricing negotiated for
future programs may be more or less favorable than currently applicable terms.
If we lose any significant portion of our sales to GM, or if GM significantly
reduces its production of light trucks or SUVs, it would have a material adverse
effect on our results of operations and financial condition. Disputes arising
under any current or future agreements between GM and ourselves could have a
material adverse effect on our relations or our results of operations or
financial condition. Moreover, prolonged labor disruptions involving GM and its
workers have had and could in the future have a negative impact upon us.
In addition, GM provides purchasing services to us pursuant to various
agreements executed by GM or one of GM's subsidiaries and ourselves in
connection with the 1994 Acquisition. We expect to begin transitioning this
purchasing function from GM to ourselves during 1999. See "Business--Contractual
Arrangements with GM."
WE PLAN TO TRANSITION CERTAIN PURCHASING ACTIVITIES FROM GM TO OURSELVES
We currently purchase through GM's purchasing network certain materials for
use in the manufacture of products sold under the Component Supply Agreement
(the "CSA") and the Lifetime Program Contracts ("LPCs"). While we pay current
market prices for such materials, increases or decreases in such prices from
levels established under the CSA or LPCs currently result in corresponding
increases or decreases in the aggregate amount paid to us by GM for our
products, thereby protecting us from increases in the costs of such
16
<PAGE>
materials while such purchasing arrangement is in effect. We have agreed with GM
to develop a mutually satisfactory plan to terminate this purchasing arrangement
no later than December 2002, although we will continue to be eligible to
participate in GM's then current steel resale program and pricing adjustment
policy for non-ferrous metals. We expect to begin transitioning this purchasing
function from GM to ourselves during 1999. See "Business--Contractual
Arrangements with GM."
While the prices at which we sell our products under the CSA and the LPCs
have been established, under the LPCs, upon termination of the purchasing
arrangement described above, we will no longer have a contractual right to pass
on any future increases in the cost of such materials. Increases in material
costs beyond the established prices are the only costs passed on to GM under the
CSA and under the LPCs. There can be no assurance that we will be able to pass
on any increased labor, materials or other costs to GM in the future as we have
from time to time in the past pursuant to the above-described terms of the CSA
or by certain additional payments agreed to as part of the commercial
arrangements between GM and ourselves (subject to certain temporary reductions
described in "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Company Overview"). LPCs have been entered into for
substantially all GM vehicle programs supplied by us, including the GMT-800 and
the M-SUV Programs.
Under the CSA, we are not liable for warranty costs for our products after
the relevant vehicle has been sold to a retail purchaser unless it is determined
that the frequency or total cost of warranty claims for a given period
significantly exceeds the historical frequency of such claims for a comparable
model. Under the LPCs, our products are subject to the warranty provisions of
GM's standard purchase order, including warranties as to the absence of defects
and as to fitness and sufficiency for the particular purposes for which such
products are to be used by GM.
WE ARE AFFECTED BY WORK STOPPAGES AT GM
Over the past four years, there have been labor strikes against GM which
have resulted in work stoppages at GM. It is estimated that work stoppages at GM
resulted in lost sales to us of approximately $95 million and $60 million in
1996 and 1997, respectively. We estimate that the work stoppage at GM during
June and July of 1998 resulted in lost sales to us of approximately
$188 million and lost operating income (including related start-up
inefficiencies in our operations in August 1998) of approximately $71 million.
Since GM accounted for approximately 93% of our 1998 net sales, future work
stoppages at GM could materially and adversely affect our financial condition,
results of operations and the conduct of our business.
WE ARE AFFECTED BY OUR LABOR RELATIONS
Our current national collective bargaining agreements with the United
Automobile, Aerospace and Agricultural Implement Workers of America ("UAW") and
the International Association of Machinists ("IAM") run through February 25,
2000 and May 5, 2000, respectively. Since the 1994 Acquisition, we have not
experienced any strikes. In addition, associates at our recently acquired Albion
subsidiary are represented by labor unions under various collective bargaining
agreements, certain of which may be terminated upon six-months' notice. Although
we believe our relations with our unions are positive, there can be no assurance
that future issues with our labor unions will be resolved favorably to us or
that we will not experience a work stoppage which could adversely affect our
business.
WE ARE AFFECTED BY OUR LABOR EXPENSES
Our associates represented by the UAW or IAM are currently paid at wage
levels commensurate with wages paid to such union-represented employees of GM,
which are higher than the wages generally paid to similar employees of other
Tier I suppliers. Upon the expiration of the current collective bargaining
agreements, either union may demand a continuation of GM-level compensation,
while we may be unwilling or unable to continue to pay wages at the GM level. If
negotiations reach an impasse, a work stoppage could result.
To the extent we continue to pay GM-level wages, we may find ourselves at a
competitive disadvantage if other suppliers with whom we compete have lower
labor expenses and are able to offer their products at lower prices or on more
attractive terms. To the extent our labor expenses increase in future years,
profitability could be
17
<PAGE>
adversely affected. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Company Overview."
WE ARE SUBJECT TO CERTAIN RESTRICTIVE DEBT COVENANTS
The Indenture imposes restrictions on us and our restricted subsidiaries.
These restrictions include, among other things:
o the incurrence of additional indebtedness;
o the issuance of disqualified stock and preferred stock;
o the payment of dividends on, and redemption of, capital stock;
o the redemption of indebtedness that is junior in right of payment to
the Notes;
o certain other restricted payments and investments;
o certain sales of assets;
o certain transactions with affiliates;
o the creation of certain liens and
o consolidations, mergers and transfers of all or substantially all of
our assets.
The Indenture also prohibits certain restrictions on distributions from our
restricted subsidiaries.
The Credit Agreement contains other and more restrictive covenants and
prohibits us from prepaying our other indebtedness (including the Notes) while
indebtedness under the Credit Agreement is outstanding. See "Description of
Notes--Certain Covenants" and "Description of Certain Indebtedness--Senior
Secured Credit Facilities." The Credit Facilities also require us to comply with
financial covenants relating to interest coverage, leverage, retained earnings
and capital expenditures. Our ability to meet those financial ratios and tests
can be affected by events beyond our control, and there can be no assurance that
we will meet those tests. A breach of any of these covenants, ratios or tests
could result in a default under the Credit Facilities and/or the Indenture. We
are currently in compliance with the covenants and restrictions contained in the
Credit Facilities. However, our ability to continue to comply may be affected by
events beyond our control, including prevailing economic, financial and industry
conditions. Certain events of default under the Credit Facilities would prohibit
the Issuer from making payments on the Notes, including payment of interest when
due. In addition, upon the occurrence of an event of default under the Credit
Facilities, the lenders could elect to declare all amounts outstanding under the
Credit Facilities, together with accrued interest, to be immediately due and
payable. If we were unable to repay those amounts, the lenders could proceed
against the collateral granted to them to secure that indebtedness. If the
lenders under the Credit Facilities accelerate the payment of the indebtedness,
there can be no assurance that our assets would be sufficient to repay in full
such indebtedness and our other indebtedness, including the Notes. See
"--Subordination; Asset Encumbrance" and "Description of Certain
Indebtedness--Senior Secured Credit Facilities."
WE PLAN TO IMPLEMENT CERTAIN PRODUCT PROGRAMS
GM began to phase in the launch of a new light truck product program in
June 1998, known as the GMT-800 Program. Although we have installed and
certified the equipment needed to produce products for the GMT-800 Program in
time for the start of production, there can be no assurance that GM will phase
in the GMT-800 Program on schedule. In addition, there can be no assurance that
the transitioning of manufacturing facilities and resources to full production
under the GMT-800 Program, or any other future product programs, will not impact
production rates or other operational efficiency measures at our facilities. GM
has also announced that it plans to launch a new truck product program, referred
to herein as the M-SUV Program and we have been awarded the mid-size pick-up
truck replacement program for the GMT-325, referred to as the MST Program.
Engineering changes necessitated by the M-SUV Program and the MST Program will
require us to make capital investments currently estimated to be approximately
$115 million and approximately $65 million, respectively. There can be no
assurance that we will be able to install and certify the equipment needed to
produce products for
18
<PAGE>
the M-SUV Program or MST Program in time for the start of production. Moreover,
there can be no assurance that GM will execute the M-SUV Program or MST Program,
or that GM or any of our future significant customers will execute any other
additional future program for which we may supply components, on schedule.
WE FACE SUBSTANTIAL COMPETITION
The automotive OEM supply industry is highly competitive with a number of
other manufacturers that produce competitive products. Quality, service and
price, as well as technological innovation, are the primary elements of
competition. There can be no assurance that our products will compete
successfully with those of our competitors. These competitors include driveline
component manufacturing facilities of existing OEMs, as well as independent
domestic and international suppliers. Certain competitors are more diversified
and have greater access to financial resources. There can be no assurance that
our business will not be adversely affected by increased competition, or that we
will be able to maintain our profitability, if the competitive environment
changes.
WE ARE DEPENDENT ON KEY PERSONNEL
Our success depends, in part, on the efforts of our executive officers and
other key associates, including Richard E. Dauch, Chairman of the Board, Chief
Executive Officer and President. In addition, our future success depends on,
among other factors, our ability to continue to attract and retain qualified
personnel. We do not have employment agreements with, or "key man" life
insurance on, any of our associates other than Mr. Dauch. The loss of the
services of any of our key associates or the failure to attract or retain
associates could have a material adverse effect on our financial condition and
results of operations. See "Management."
WE ARE SUBJECT TO ENVIRONMENTAL REGULATION AND COULD BECOME INVOLVED WITH
CERTAIN LEGAL PROCEEDINGS
Our operations are subject to federal, state, local and foreign laws and
regulations governing, among other things, emissions to air, discharges to
waters, the generation, handling, storage, transportation, treatment and
disposal of waste and other materials and the cleanup of any contaminated
properties. We believe that our 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. The operation of
automotive parts manufacturing plants entails risks in these areas, however, and
there can be no assurance that we will not incur material costs, liabilities or
claims with respect to our existing operations or with respect to operations or
facilities acquired by us in connection with acquisitions. 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.
We believe that the overall impact of compliance with regulations and
legislation protecting the environment will not have a material effect on our
future financial position or results of operations, although no assurance can be
given in this regard. Capital expenditures and expenses in 1997 and 1998
attributable to compliance with such regulations and legislation were not
material. See "Business--Environmental Matters."
INVENTORY MANAGEMENT--WE RELY ON SINGLE SOURCE SUPPLIERS
We have, since the 1994 Acquisition, purchased through GM's purchasing
network certain materials for use in the manufacture of products sold under the
CSA and LPCs. We have agreed with GM to terminate this arrangement and, in
anticipation of such termination, we have initiated a policy of strengthening
our supplier relationships by concentrating our productive material purchases
with a limited number of suppliers. We believe that this policy contributes to
quality and cost controls and increases the suppliers' commitments to us. We
rely upon, and expect to continue to rely upon, single source suppliers for
certain critical components that are not readily available in sufficient volume
from other sources. There can be no assurance that the suppliers of these
productive materials will be able to meet our future needs on a timely basis, or
be willing to continue to be our suppliers, or that a disruption in a supplier's
business would not disrupt the supply of productive materials that could not
easily be replaced.
19
<PAGE>
We have an agreement with General Motors of Canada Limited ("GMCL"), an
affiliate of GM, whereby GMCL has agreed to provide axles to us for resale to
GM. This agreement, as amended, expires in September 1999. An interruption in
production of the axles supplied by GMCL could have a material adverse effect on
us. See "Business--Contractual Arrangements with GM."
YEAR 2000--WE MAY BE ADVERSELY AFFECTED BY THE YEAR 2000 PROBLEM
While we believe that we are taking appropriate steps so that our computer
systems and software will be "Year 2000" compliant, we are dependent on
third-party software and computer technology, used internally, which, if not
Year 2000 compliant, may have a material impact on us. Further, our operations
may be at risk if our suppliers, customers or other third parties fail to
adequately address the problem or our software conversions or other
modifications result in system incompatibilities with these third parties. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Compliance."
WE ARE CONTROLLED BY A PRINCIPAL STOCKHOLDER
Blackstone owns approximately 54.3% of Holdings' Common Stock, on a fully
diluted basis. In addition, we are parties to a stockholders' agreement with
Blackstone, Jupiter Capital Corporation ("Jupiter"), Richard E. Dauch, Morton E.
Harris, Michael D. Alexander and Gary J. Witosky (the "Stockholders' Agreement")
executed in connection with the Recapitalization. Generally, pursuant to the
Stockholders' Agreement, so long as Blackstone owns at least one-third of the
Common Stock held by it at the closing of the Recapitalization:
o if Blackstone receives and accepts an offer from a person to
purchase all, or substantially all, of the Common Stock held by
Blackstone, Jupiter and Messrs. Dauch, Alexander, Witosky and
Harris, then Jupiter and Messrs. Dauch, Alexander, Witosky and
Harris are required to offer their shares of Common Stock in any
such sale; and
o if Blackstone proposes to transfer all or a portion of its shares of
Common Stock, other than to its affiliates or in connection with a
public offering registered under the Securities Act, Jupiter and
Messrs. Dauch, Alexander, Witosky and Harris have the right to
require the transferee to purchase a proportional share of their
respective shares.
Moreover, Blackstone's ownership of approximately 54.3% of the outstanding
Common Stock, on a fully diluted basis, will enable it to control the election
of Holdings' Board of Directors and the outcome of votes on all matters
submitted to Holdings' stockholders for approval (other than matters for which a
supermajority is required). See "Related Party Transactions--Stockholders'
Agreement and Recapitalization."
FRAUDULENT CONVEYANCE AND PREFERENTIAL TRANSFER LAW MAY INTERFERE WITH PAYMENT
OF THE NOTES
If the court in a lawsuit brought by an unpaid creditor or representative
of creditors, such as a trustee in bankruptcy, were to find under relevant
federal and state fraudulent conveyance statutes that the Issuer did not receive
fair consideration or reasonably equivalent value for incurring the indebtedness
represented by the Notes, and that, at the time of such incurrence, the Issuer:
o was insolvent;
o was rendered insolvent by reason of such incurrence;
o was engaged in a business or transaction for which the assets
remaining with the Issuer constituted unreasonably small capital; or
o intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured,
then such court, subject to applicable statutes of limitation, could void the
Issuer's obligations under the Notes, subordinate the Notes to other
indebtedness of the Issuer or take other action detrimental to the holders of
the Notes.
The measure of insolvency for these purposes will vary depending upon the
law of the jurisdiction being applied. Generally, however, a company will be
considered insolvent for these purposes if the sum of that company's debts is
greater than all of that company's assets at a fair valuation, or if the present
fair saleable value of that company's assets is less than the amount that will
be required to pay its probable liability on its existing debts as they become
absolute and matured. Moreover, regardless of solvency, a court could avoid an
incurrence
20
<PAGE>
of indebtedness, including the Notes, if it determined that such transaction was
made with the intent to hinder, delay or defraud creditors, or a court could
subordinate the indebtedness, including the Notes, to the claims of all existing
and future creditors on similar grounds. Based upon financial and other
information currently available to it, management believes the Issuer is solvent
and will continue to be solvent after the consummation of the Exchange Offer.
However, there can be no assurance as to what standard a court would apply in
order to determine whether the Issuer was "insolvent".
Additionally, under federal bankruptcy or applicable state insolvency law,
if certain bankruptcy or insolvency proceedings were initiated by or against the
Issuer within 90 days after any payment by the Issuer with respect to the Notes
or if the Issuer anticipated becoming insolvent at the time of such payment or
incurrence, all or a portion of such payment could be avoided as a preferential
transfer and the recipient of such payment could be required to return such
payment.
LACK OF A PUBLIC MARKET--YOU MAY NOT BE ABLE TO SELL YOUR EXCHANGE NOTES
The exchange Notes are new securities for which there is no existing
market. Accordingly, there can be no assurance as to the development or
liquidity of any market for the exchange Notes. The Notes are eligible for
trading in the PORTAL market. The initial purchasers of the outstanding Notes
have advised us that they currently intend to make a market in the exchange
Notes. However, the initial purchasers of the outstanding Notes are not
obligated to do so, and any market making with respect to the exchange Notes may
be discontinued at any time without notice. We do not intend to apply for a
listing of the exchange Notes on any securities exchange or on any automated
dealer quotation system.
No assurance can be given to non-exchanging holders of outstanding Notes as
to the liquidity of the trading market for the outstanding Notes following the
Exchange Offer.
The liquidity of, and trading market for, the exchange Notes also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of our financial performance and prospects.
LIMITATION ON CHANGE OF CONTROL--WE MAY NOT BE ABLE TO FINANCE A CHANGE OF
CONTROL OFFER REQUIRED BY THE INDENTURE
The Indenture requires the Issuer, in the event of a Change of Control, to
repurchase any Notes that holders thereof desire to have repurchased at 101% of
the principal amount thereof, plus accrued and unpaid interest and liquidated
damages, if any, to the Change of Control repurchase date. See "Description of
Notes--Change of Control." The provisions of the Indenture may not, however,
afford holders of the Notes protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction
involving us that may adversely affect holders of the Notes, if such transaction
does not result in a Change of Control.
The occurrence of a Change of Control may also result in a default, or
otherwise require repayment of indebtedness, under the Credit Facilities. The
exercise by the respective holders of the outstanding Notes and the exchange
Notes of their right to require the Issuer to repurchase the outstanding Notes
and the exchange Notes upon the occurrence of a Change of Control could also
cause a default under our other indebtedness, even if the Change of Control
itself does not, because of the financial effect of such repurchase on us. In
addition, the Credit Facilities prohibit the repayment of the Notes by the
Issuer upon the occurrence of a Change of Control, unless and until such time as
the indebtedness under the Credit Facilities is repaid in full or the Issuer
obtains the consent of the lenders. The Issuer's failure to make such repayments
in such instances or to obtain the consent of the lenders would result in a
default under both the Indenture and the Credit Facilities. Our future
indebtedness may also contain restrictions or repayment requirements with
respect to certain events or transactions that could constitute a Change of
Control. In the event of a Change of Control, there can be no assurance that we
would have sufficient assets to satisfy all of our obligations under the Notes
and the Credit Facilities. See "Description of Notes--Change of Control" and
"Description of Certain Indebtedness--Senior Secured Credit Facilities."
Furthermore, the Change of Control purchase feature of the Notes may in
certain circumstances discourage or make more difficult a sale or takeover of
Holdings.
21
<PAGE>
THE RECAPITALIZATION
On September 17, 1997, AAM Acquisition, Inc., an entity organized by
Blackstone, Jupiter, Mr. Dauch, Mr. Harris and the Issuer, then the parent of
Holdings, entered into an agreement (the "Recapitalization Agreement") pursuant
to which Blackstone acquired control of Holdings on October 29, 1997 (the
"Recapitalization"). Prior to the Recapitalization, Holdings was a wholly-owned
subsidiary of the Issuer. Pursuant to the Recapitalization, Holdings acquired a
100% ownership interest in the Issuer by exchanging shares of its own stock, on
a one-for-one basis, for the outstanding shares of common stock of the Issuer.
The exchange of shares has been accounted for in a manner similar to a pooling
of interest since both Holdings and the Issuer were under common control.
Following the exchange of shares, on October 29, 1997, pursuant to the
Recapitalization Agreement, Blackstone acquired shares of Holdings' Common Stock
from Jupiter and Mr. Dauch. We used approximately $474 million of aggregate
proceeds from certain financings described below (the "Financings"), to:
o repay certain indebtedness of the Issuer;
o redeem all of the issued and outstanding shares of Class A Preferred
Stock of the Issuer;
o repurchase certain shares of Holdings' Common Stock held by Jupiter and
Mr. Harris;
o pay costs and expenses incurred in connection with the Recapitalization,
including fees, expenses and payments relating to certain of Holdings'
then existing stock options; and
o fund the working capital requirements of Holdings.
Immediately after the closing of the Recapitalization, on a fully diluted basis
Blackstone owned approximately 63.9% of the Common Stock, members of our senior
management owned approximately 29.0% of the Common Stock and Jupiter and Mr.
Harris collectively owned approximately 5.5% of the Common Stock. See "Principal
Stockholders" and Notes 2 and 11 to the Consolidated Financial Statements.
The Financings included:
o a senior secured term loan facility (the "Tranche A Term Loan
Facility") providing for delayed draw term loans in an aggregate
principal amount of $125 million;
o a senior secured term loan facility (the "Tranche B Term Loan
Facility" and, together with the Tranche A Term Loan Facility, the
"Term Loan Facility") providing for term loans in an aggregate
principal amount of $375 million;
o a $250 million senior secured revolving credit facility (the
"Revolving Credit Facility" and, together with the Term Loan
Facility, each as amended, the "Credit Facilities"), of which
$474 million was drawn at the closing of the Recapitalization; and
o a $125 million receivables purchase facility (the "Receivables
Facility") of which $75 million was drawn at the closing of the
Recapitalization.
See "Description of Certain Indebtedness."
22
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the outstanding Notes was approximately
$289 million after deduction of discounts to the initial purchasers and other
fees and expenses. A portion of such net proceeds was used to repay existing
debt under the Revolving Credit Facility and replace financing provided by the
Receivables Facility, with the remainder of such net proceeds used for general
corporate purposes, including financing acquisitions and capital expenditures.
Any such capital expenditures will be used for machinery and equipment necessary
to support new product programs, construction of our production facility in
Guanajuato, Mexico or other cost, quality and productivity initiatives. Pending
such uses, we invested the net proceeds from the sale of the outstanding Notes
in short-term investment grade, interest bearing securities. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Business--Business
Strategy--Pursue Selected Acquisition Opportunities."
As of December 31, 1998, we had an aggregate of $598.0 million of
indebtedness outstanding under the Credit Facilities, including $223.0 million
outstanding under the Revolving Credit Facility, and had an aggregate of
$63.0 million of indebtedness outstanding under the Receivables Facility. See
"Description of Certain Indebtedness." Borrowings under the Tranche A Term Loan
Facility due October 2004, the Tranche B Term Loan Facility due April 2006, the
Revolving Credit Facility which terminates on October 30, 2005 and the
Receivables Facility which terminates in October 2003, each bear interest, at
our option, at rates based on LIBOR or the Base Rate (each as defined in the
Credit Facilities and Receivables Facility, respectively) plus, in each case, an
applicable margin. The weighted average interest rate under the Revolving Credit
Facility and the Receivables Facility at December 31, 1998 were approximately
8.5% and 7.2%, respectively.
We will not receive any cash proceeds from the issuance of the exchange
Notes. In consideration for issuing the exchange Notes as contemplated in this
prospectus, we will receive in exchange a like principal amount of outstanding
Notes, the terms of which are identical in all material respects to the exchange
Notes. The outstanding Notes surrendered in exchange for the exchange Notes will
be retired and canceled and cannot be reissued. Accordingly, issuance of the
exchange Notes will not result in any change in our capitalization.
23
<PAGE>
CAPITALIZATION
The following table sets forth the cash and equivalents and capitalization
of the Company at December 31, 1998, as adjusted to give effect to the IPO and
the application of the net proceeds therefrom and as further adjusted to give
effect to sale of the outstanding Notes and the application of the net proceeds
therefrom as described under "Use of Proceeds." The following table does not
give effect to (i) the acquisition of Colfor or MSP, each of which the Company
financed with cash and approximately $65 million of borrowings under the Credit
Facilities or (ii) the sale/leaseback transactions the Company intends to enter
into during 1999 with respect to approximately $200 million of its existing
machinery and equipment. The Company may incur additional indebtedness in the
future, including to meet its working capital and capital expenditure
requirements and to finance acquisitions. The following table should be read in
conjunction with the historical consolidated financial statements of the Company
and the notes thereto which are included elsewhere in this prospectus. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Business--Business
Strategy--Pursue Selected Acquisition Opportunities."
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998
------------------------------------------
AS FURTHER
ADJUSTED
AS ADJUSTED FOR THIS
HISTORICAL FOR THE IPO OFFERING
---------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash and equivalents.................................................. $ 4,547 $ 4,547 $ 115,867
-------- --------- ---------
-------- --------- ---------
Long-term debt and capital lease obligations:
Revolving Credit Facility(a)........................................ $223,000 $ 115,000 $ --
Term Loan Facility(b)............................................... 375,000 375,000 375,000
Receivables Facility(c)............................................. 63,000 63,000 --
Other............................................................... 32,368 32,368 32,368
Notes, net of discount.............................................. -- -- 297,660
-------- --------- ---------
Total long-term debt and capital lease obligations............. 693,368 585,368 705,028
-------- --------- ---------
Stockholders' equity:
Common Stock, par value $.01 per share; 150,000,000 shares
authorized; 32,456,107 shares issued and outstanding, historical;
39,456,107 shares issued and outstanding, as adjusted and as
further adjusted................................................. 1 395 395
Paid-in capital..................................................... 92,527 200,133 200,133
Accumulated deficit................................................. (51,467) (51,467) (51,467)
Cumulative translation adjustment................................... (593) (593) (593)
-------- --------- ---------
Total stockholders' equity..................................... 40,468 148,468 148,468
-------- --------- ---------
Total capitalization........................................... $733,836 $ 733,836 $ 853,496
-------- --------- ---------
-------- --------- ---------
</TABLE>
- ------------------
(a) The Revolving Credit Facility provides for borrowings of up to
$250.0 million.
(b) The Term Loan Facility consists of a delayed draw Tranche A Term Loan
Facility of up to $125.0 million, which is available for borrowings until
October 1999, and a fully drawn Tranche B Term Loan Facility of
$375.0 million.
(c) The Receivables Facility provides for borrowings of up to $125.0 million,
based on availability of eligible receivables. Based on eligible
receivables, the Company would have had available borrowing capacity under
the Receivables Facility of approximately $66 million as of December 31,
1998, after giving pro forma effect to the IPO and the application of the
net proceeds therefrom and the Offering of the outstanding Notes and the
application of the net proceeds therefrom. See "Description of Certain
Indebtedness--Receivables Facility."
24
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth selected consolidated historical financial
and other data of Holdings and its subsidiaries at and for the years ended
December 31, 1995, 1996, 1997 and 1998 and the two months and ten months ended
February 28, 1994 and December 31, 1994, respectively. The statement of income
data for the two months and ten months ended February 28, 1994 and December 31,
1994, respectively, and the years ended December 31, 1995, 1996 and 1997 and the
balance sheet data as of December 31, 1994, 1995, 1996 and 1997 and March 1,
1994 were derived from audited consolidated financial statements of Holdings and
its subsidiaries, which have been audited by Ernst & Young LLP, independent
auditors. The statement of income data for the year ended December 31, 1998 and
the balance sheet data as of December 31, 1998 were derived from audited
consolidated financial statements of Holdings and its subsidiaries, which have
been audited by Deloitte & Touche LLP, independent auditors. The table should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the consolidated financial statements of
the Company and the related notes and the other financial information included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
PREDECESSOR
TWO MONTHS TEN
ENDED MONTHS ENDED YEAR ENDED DECEMBER 31,
FEBRUARY 28, DECEMBER 31, -------------------------------------------------
1994(A) 1994(B) 1995 1996 1997 1998
--------------- ------------ ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales........................... $ 294,466 $1,548,655 $1,968,076 $2,022,272 $2,147,451 $2,040,578
Cost of goods sold.................. 311,852 1,406,658 1,788,588 1,845,722 1,927,364 1,884,197
--------- ---------- ---------- ---------- ---------- ----------
Gross profit (loss)................. (17,386) 141,997 179,488 176,550 220,087 156,381
Selling, general and administrative
expenses.......................... 4,535 68,117 70,603 83,072 103,954 106,191
--------- ---------- ---------- ---------- ---------- ----------
Operating income (loss) ............ (21,921) 73,880 108,885 93,478 116,133 50,190
Net interest (expense) income....... -- 3,941 9,086 9,412 (1,846) (44,337)
Recapitalization expense ........... -- -- -- -- (15,929) --
Other (expense) income, net ........ 552 -- -- (4,566) (4,161) (251)
--------- ---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes
(benefit)......................... (21,369) 77,821 117,971 98,324 94,197 5,602
Income taxes........................ -- 41,375 47,400 36,600 38,933 2,074
--------- ---------- ---------- ---------- ---------- ----------
Net income (loss)................... $ (21,369) $ 36,446 $ 70,571 $ 61,724 $ 55,264 $ 3,528
--------- ---------- ---------- ---------- ---------- ----------
--------- ---------- ---------- ---------- ---------- ----------
Net income per share--diluted....... N/A N/A $ .50 $ .43 $ .43 $ .08
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
BALANCE SHEET DATA:
Working capital (deficit)........... $ 88,224 $ 97,143 $ 80,894 $ 103,271 $ (96,826) $ (68,869)
Total assets........................ 316,466 534,108 736,997 771,222 1,017,653 1,226,232
Total debt and capital lease
obligations....................... 82,192 11,192 1,000 2,368 507,043 693,368
Preferred stock..................... 200,000 200,000 200,000 200,000 -- --
Shareholders' equity................ 20,500 88,101 168,572 250,168 37,231 40,468
OTHER DATA:
Net cash provided by operating
activities........................ N/A $ 196,990 $ 196,886 $ 65,687 $ 200,830 $ 81,353
EBITDA(c)........................... N/A 96,038 144,779 134,740 152,838 119,194
Ratio of earnings to fixed
charges(d)........................ N/A N/A 5.2 3.4 3.4 1.0
Depreciation and amortization....... $ 4,682 16,846 25,242 36,076 50,177 71,730
Pension and OPEB expenses(e)........ N/A 36,761 36,319 48,050 34,620 37,724
Capital expenditures................ 9,600 25,168 147,077 162,317 282,625 209,993
Net sales per year-end hourly
associate(f) ..................... N/A 214 258 268 293 280
Hourly associates at year-end(g).... N/A 7,242 7,631 7,542 7,323 7,192
</TABLE>
(Footnotes on next page)
25
<PAGE>
NOTES TO SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(a) The accompanying statement of income data of the Predecessor for the two
months ended February 28, 1994 reflect its historical cost basis prior to
the 1994 Acquisition. Accordingly, the statement of income data for the
periods subsequent to the 1994 Acquisition are not comparable to such data
for periods prior to the 1994 Acquisition. The accompanying balance sheet
data is as of March 1, 1994 and includes the accounts of the Company after
adjustment of the corresponding assets and liabilities to their estimated
fair value to reflect the allocation of the purchase price in connection
with the 1994 Acquisition.
(b) Results are for the ten-month period beginning on the closing date of the
1994 Acquisition and ending on December 31, 1994.
(c) EBITDA represents income from continuing operations before interest expense,
income taxes, depreciation and amortization. EBITDA should not be construed
as a substitute for income from operations, net income or cash flow from
operating activities as determined by generally accepted accounting
principles. Other companies may calculate EBITDA differently.
(d) For purposes of computing the ratio of earnings to fixed charges, earnings
represent net income before taxes and fixed charges. Fixed charges consist
of interest expense, capitalized interest, one-third of rental expense,
which the Company believes to be representative of interest, and preferred
stock dividends. Pro forma 1998 earnings, after giving effect (as if such
events occurred on January 1, 1998) to the IPO and the offering of the
outstanding notes and the application of a portion of the aggregate net
proceeds therefrom to repay all outstanding borrowings under the Revolving
Credit Facility and the Receivables Facility, would have been insufficient
to cover fixed charges by $20.6 million. See "Capitalization."
(e) Total expenses related to pension and other post-retirement benefits other
than pension ("OPEB"), the non-cash portion of which was $18.0 million for
the ten months ended December 31, 1994; $20.8 million, $22.1 million, $30.7
million and $36.9 million for the years ended December 31, 1995, 1996, 1997,
and 1998, respectively. In addition, the Company paid approximately
$16.8 million of prior year pension and OPEB obligations in 1998.
(f) Represents the net sales of the Company's United States manufacturing
facilities divided by the number of U.S. associates.
(g) Represents the number of United States associates.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis presents the factors that had a material
effect on our results of operations and cash flows during the three years ended
December 31, 1998, and our financial position at December 31, 1998 and
December 31, 1997. This discussion and analysis should be read in conjunction
with the "Selected Consolidated Financial and Other Data" and the Consolidated
Financial Statements and notes thereto appearing elsewhere in this prospectus.
COMPANY OVERVIEW
We are a Tier I supplier to the automotive industry and a world leader in
the design, engineering and manufacturing of driveline systems for light trucks
and SUVs. The driveline system includes all of the components that transfer
power from the transmission and deliver it to the drive wheels. The driveline
products produced by us include axles, propeller shafts, chassis components and
forged products. We are GM's principal supplier of driveline components for
light trucks, SUVs and RWD passenger cars. Sales to GM were approximately 93%,
96% and 96% of our net sales in 1998, 1997 and 1996, respectively.
In March 1994, we purchased the assets of the Final Drive and Forge
Business Unit of the Saginaw Division of GM. In connection with our acquisition
of the Business Unit, we entered into the Component Supply Agreement (the "CSA")
with GM under which we became the sole-source supplier to GM of all the products
and components previously supplied to GM by the Business Unit. In October 1997,
we entered into a Recapitalization Agreement pursuant to which Blackstone
acquired control of us. In connection with the Recapitalization, we entered into
an additional binding agreement with GM, the Amended and Restated Memorandum of
Understanding (the "MOU"). Under the MOU, we have agreed with GM to commit to
transition the CSA into a number of separate Lifetime Program Contracts ("LPCs")
applicable for the life of each GM vehicle program covered by an LPC. These LPCs
will ultimately replace the CSA. LPCs have been entered into for substantially
all GM vehicle programs supplied by us, including the GMT-800 and the M-SUV
Programs.
In order to induce GM to enter into the MOU and commit to enter into the
LPCs, in 1997, we agreed to temporary reductions of certain payments previously
agreed to be made by GM to us as part of the commercial arrangements between us,
including certain payments pursuant to the CSA. Such reductions amounted to
approximately $11.4 million in 1997 and approximately $51.5 million in 1998.
Such reductions terminated at December 31, 1998.
We sell most of our products under long-term contracts at fixed prices,
some of which are subject to annual price reductions in subsequent years, and
all of which are subject to negotiated price increases for engineering changes.
With respect to GM, pricing has been established for products sold under the CSA
and the LPCs; however, we must remain competitive with respect to technology,
design and quality. We currently purchase through GM's purchasing network
certain materials for use in the manufacture of products sold under the CSA and
the LPCs. Under the CSA and currently under the LPCs, we pay current market
prices for certain materials used in the manufacture of products sold to GM, but
increases or decreases in such prices from levels established under the CSA or
LPCs currently result in corresponding increases or decreases in the aggregate
amount paid to us by GM for our products, thereby protecting us from increases
in the costs of such materials while such purchasing arrangement is in effect.
We have agreed with GM to develop a mutually satisfactory plan to terminate this
purchasing arrangement no later than December 2002. Thus, while the prices at
which we sell our products under the CSA and the LPCs have been established,
under the LPCs, upon termination of the purchasing arrangement described above,
we will no longer have a contractual right to pass on any future increases in
the cost of such materials. Increases in material costs beyond the established
prices are the only costs passed on to GM under the CSA and under the LPCs.
There can be no assurance that we will be able to pass on any increased labor,
materials or other costs to GM in the future as we have from time to time in the
past pursuant to the above-described terms of the CSA or by certain additional
payments agreed to as part of the commercial arrangements between GM and
ourselves. LPCs have terms equal to the lives of the relevant vehicle programs,
which typically run 6 to 12 years. We will have to compete for future GM
business upon the termination of the LPCs. See "Risk Factors--Reliance on GM,"
"--Transition of Agreements with GM" and "--Labor Expenses" and
"Business--Contractual Arrangements with GM."
ALBION ACQUISITION
In October 1998, we completed the acquisition of Albion. Albion
manufactures front steerable and rear axles, driving heads, crankshafts, chassis
components and transmission parts used primarily in medium-duty trucks and buses
for customers located in the United Kingdom and elsewhere in Europe. Albion's
sales for the year ended December 31, 1998 were approximately $130 million and
its major customers include Caterpillar
27
<PAGE>
(Perkins), LDV, PACCAR (Leyland and DAF), Renault, Rolls-Royce, Rover and Volvo.
The acquisition has been accounted for under the purchase method of accounting,
and Albion's results since the acquisition date have been included in our
consolidated financial results for the year ended December 31, 1998.
GM WORK STOPPAGE
The GM work stoppage which occurred in June and July of 1998 resulted in
the shutdown of nearly all of GM's North American production facilities and
impacted our operations in June and July 1998 and also resulted in related
start-up inefficiencies in our operations in August 1998. We estimate that sales
lost as a result of the GM work stoppage were approximately $188 million and
operating income was adversely impacted by approximately $71 million.
INDUSTRY AND COMPETITION
Our operations are cyclical because they are directly related to domestic
automotive production, which is itself cyclical and dependent on general
economic conditions and other factors. The axle and related driveline systems
segment of the automotive industry is highly competitive. The current trend in
the automotive industry is for OEMs to shift research and development ("R&D"),
design and testing responsibility to suppliers to take advantage of certain
efficiencies. The OEMs have also been reducing the number of their suppliers,
preferring stronger relationships with fewer suppliers. As a result, the Tier I
supplier market has been undergoing consolidation over the past three to four
years. This trend is expected to continue, leaving the industry with only a
small number of dominant, worldwide suppliers.
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data
expressed as a percentage of net sales:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
Statement of income data: 1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Net sales............................................................. 100.0% 100.0% 100.0%
Cost of goods sold.................................................... 91.3 89.8 92.3
----- ----- -----
Gross profit.......................................................... 8.7 10.2 7.7
Selling, general and administrative expenses.......................... 4.1 4.8 5.2
----- ----- -----
Operating income...................................................... 4.6 5.4 2.5
Other (expense) income................................................ .3 (1.0) (2.2)
----- ----- -----
Income before income taxes............................................ 4.9 4.4 .3
Income tax expense.................................................... 1.8 1.8 .1
----- ----- -----
Net income............................................................ 3.1% 2.6% .2%
----- ----- -----
----- ----- -----
</TABLE>
RESULTS OF OPERATIONS--YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED
DECEMBER 31, 1997
Net Sales. Net sales decreased approximately 5% to $2.04 billion for the
year ended December 31, 1998 compared with $2.15 billion for the year ended
December 31, 1997. This decrease was primarily due to the adverse impact of the
GM work stoppage which occurred in June and July of 1998 and the impact of the
$51.5 million temporary payment reductions discussed under "--Company Overview"
above, partially offset by higher average Sales-Dollar Content per vehicle and
the inclusion of Albion sales since the acquisition. We estimate that sales lost
as a result of GM work stoppages approximated $188 million and $60 million for
the years ended December 31, 1998 and 1997, respectively. We estimate that net
sales growth would have approximated 3% for the year ended December 31, 1998
after excluding the effects of the temporary payment reductions in 1998 and the
effects of the GM work stoppages in 1998 and 1997. Average Sales-Dollar Content
per vehicle for the year ended December 31, 1998 for GM light trucks, SUVs and
vans (excluding front-wheel drive mini-vans) increased slightly over average
Sales-Dollar Content per vehicle for such vehicles for the year ended December
31, 1997 primarily due to:
o higher average Sales-Dollar Content per vehicle for the GMT-800 Program
versus the GMT-400 Program; and
o revenue increases related to certain cost increases and engineering
changes that could be passed on to GM.
As adjusted for the GM work stoppages, 1998 production volumes were slightly
below 1997 levels primarily due to the 1998 launch of the GMT-800 Program.
Sales to customers other than GM increased 51% to $134.1 million for the
year ended December 31, 1998, versus $88.5 million for the year ended
December 31, 1997. The increase in sales to customers other than GM is
principally due to the inclusion of Albion's sales and additional business we
have obtained. We had sales outside the United States of $421.5 million in 1998
compared to $421.7 million in 1997. The change in international
sales is principally due to the inclusion of Albion's sales offset by the
unfavorable sales impact of the GM work stoppage in 1998.
28
<PAGE>
Gross Profit. Gross profit decreased 29% to $156.4 million for the year
ended December 31, 1998 compared with $220.1 million for the year ended December
31, 1997. Gross margin decreased to 7.7% in the year ended December 31, 1998
compared to 10.2% for the year ended December 31, 1997. The decreases in gross
profit and gross margin in the year ended December 31, 1998 were due primarily
to the impact of the 1998 GM work stoppage, which is estimated to have caused
approximately $71 million of the decrease in gross profit, and the temporary
payment reductions discussed above, partially offset by increased productivity
as a result of the prior capital expenditures made to improve manufacturing
processes, reduce labor intensive operations and achieve other cost
efficiencies.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (including R&D) increased 2% to $106.2 million for the
year ended December 31, 1998 compared with $104.0 million for the year ended
December 31, 1997. Selling, general and administrative expenses as a percentage
of sales increased to 5.2% for the year ended December 31, 1998 compared to 4.8%
for the year ended December 31, 1997. The increase in spending was principally
due to our increase in personnel to support our growth and continued investments
for information systems as we complete our transition from GM systems. The
increase as a percent of sales was primarily due to lost sales as a result of
the 1998 GM work stoppage. R&D expenses were $29.5 million for the year ended
December 31, 1998 compared to $27.8 million for the year ended December 31,
1997. The increase in R&D expenses in the year ended December 31, 1998 compared
to the year ended December 31, 1997 is primarily due to R&D expenses incurred to
support new product programs.
Operating Income. Operating income was $50.2 million for the year ended
December 31, 1998 compared to $116.1 million for the year ended December 31,
1997. Operating margin decreased to 2.5% for the year ended December 31, 1998
compared to 5.4% for the year ended December 31, 1997. The decrease in operating
income was primarily due to the impact of the 1998 GM work stoppage which is
estimated to have caused approximately $71 million of the decrease, the impact
of the temporary payment reductions and increased selling, general and
administrative expenses.
Net Interest. Net interest expense was $44.3 million for the year ended
December 31, 1998 compared to net interest expense of $1.8 million for the year
ended December 31, 1997. The increase in net interest expense was due to the
borrowings incurred in connection with the Recapitalization.
Income Tax Expense. There was an income tax expense of $2.1 million for
the year ended December 31, 1998 compared to $38.9 million for the year ended
December 31, 1997. Our effective income tax rate was 37.0% for the year ended
December 31, 1998 versus 41.3% for the year ended December 31, 1997.
Net Income. There was net income of $3.5 million for the year ended
December 31, 1998 compared to $55.3 million for the year ended December 31,
1997, primarily due to the operating results discussed previously and the impact
of additional interest expense in 1998.
RESULTS OF OPERATIONS--YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED
DECEMBER 31, 1996
Net Sales. Net sales increased 6% to $2.15 billion for 1997 compared to
$2.02 billion for 1996. This increase was primarily due to:
o a slight increase in the volume of our products for GM light trucks, SUVs
and vans (excluding front-wheel drive mini-vans); and
o an estimated 6% increase in the average Sales-Dollar Content per vehicle
for GM light trucks, SUVs and vans (excluding front-wheel drive
mini-vans) primarily related to changes in product mix and revenue
increases related to certain cost increases and engineering changes that
could be passed on to GM.
Sales to GM were approximately 96% of our total sales in both 1997 and
1996. Sales to customers other than GM increased approximately 12% to
approximately $88.5 million in 1997 compared to $78.8 million in 1996. We had
sales outside the United States of $421.7 million in 1997 compared to
$360.5 million in 1996. These increases were a result of new business
initiatives that we implemented.
Gross Profit. Gross profit increased approximately 25% to $220.1 million
for 1997 compared to $176.6 million for 1996. Gross margin increased to 10.2%
for 1997 compared to 8.7% for 1996. These increases were primarily due to
increased net sales as described above and increased productivity primarily as a
result of the capital expenditures to support manufacturing initiatives, reduce
labor intensive operations and achieve cost productivity initiatives, as well as
a benefit of approximately $20 million related to a change in assumptions in
1997 related to pensions and other postretirement benefits other than pensions,
and a decrease in depreciation resulting from a change in estimated lives,
partially offset by higher labor costs associated with the February 1997 labor
negotiations and resulting contracts.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (including R&D) increased approximately 25% to
$104.0 million for 1997 compared to $83.1 million for 1996. Selling, general and
administrative expenses as a percentage of sales increased to 4.8% for 1997
compared to 4.1% for
29
<PAGE>
1996. These increases were principally due to our increase in personnel to
support our growth, investments made for information systems as we transition
from GM systems, certain stock compensation expenses totaling $9.2 million and
increases in R&D expenses. R&D expenses increased approximately 19% to $27.8
million for 1997 compared to $23.4 million for 1996. The increases in R&D
spending were primarily related to our initiative to expand our customer and
product base through the development of advanced driveline systems including the
support of the M-SUV Program.
Operating Income. Operating income increased approximately 24% to
$116.1 million for 1997 compared to $93.5 million for 1996. Operating margins
increased to 5.4% for 1997 compared to 4.6% for 1996. These increases were
primarily due to increased volumes and increased productivity, the impact of the
change in assumptions and depreciable lives partially offset by the impact of
increased selling, general and administrative expenses discussed above.
Net Interest. Net interest expense was $1.8 million for 1997 compared to
net interest income of $9.4 million for 1996. The increase was due to the
additional borrowings incurred in connection with the Recapitalization. For most
of 1996 and 1997, we had excess cash invested in short-term investments and
limited outstanding debt.
Recapitalization Expenses. We incurred $15.9 million of expenses in 1997
related to the Recapitalization. These expenses were seller-related expenses
which included professional advisory fees.
Income Tax Expense. Income tax expense increased 6% to $38.9 million for
1997 compared to $36.6 million in 1996. Our effective income tax rate was 41.3%
for 1997 compared to 37.2% for 1996. The increase in the effective tax rate for
1997 was primarily due to non-deductible permanent items related to stock
compensation.
Net Income. Net income decreased 10% to $55.3 million for 1997 compared to
$61.7 million for 1996 primarily due to the factors described above.
LIQUIDITY AND CAPITAL RESOURCES
Management assesses our liquidity in terms of our overall ability to
mobilize cash to support business needs and to fund growth. We rely primarily
upon cash flow from operations and borrowings under our Credit Facilities and
Receivables Facility to finance operations and capital expenditures. See
"Description of Certain Indebtedness" and Note 3 to the Consolidated Financial
Statements.
The acquisition price for Albion was approximately $42 million in cash,
provided by borrowings under our Revolving Credit Facility, and approximately
$30 million of assumed debt and capital lease obligations. Approximately $14
million of consideration may be payable to Albion's former shareholders based
upon Albion's future financial performance.
At December 31, 1998, we had a working capital deficit of $68.9 million
versus a deficit of $96.8 million at December 31, 1997. This decrease was a
result of lower accounts receivable partially offset by increased inventories,
prepaid expenses principally related to income taxes and lower levels of accrued
compensation and benefits. The decrease in accounts receivable at December 31,
1998 from December 31, 1997 was due to the receipt of payments from GM for
rebillable tooling charges, premium charges for additional manufacturing
capacity and volume and raw material rebates.
As part of the arrangements with GM, payment terms for products shipped to
GM will steadily lengthen during the three-year period beginning March 1, 1999,
resulting in an expected increase in accounts receivable balances and
anticipated increased interest expense related to our funding of working
capital. We anticipate that this working capital increase will be funded from
available sources including cash flow from operations and our Credit Facilities.
At December 31, 1998, $375.0 million of borrowings were outstanding and
$125.0 million was available for future borrowings under the Term Loan Facility
and $223.0 million was outstanding and $27.0 million was available for future
borrowings under the Revolving Credit Facility. Additionally at December 31,
1998, approximately $66 million was available under the variable funding
certificates of the Receivables Facility, of which $63.0 million was utilized
and borrowed. These facilities were established in connection with the
Recapitalization. The $186.3 million increase in long-term debt and capital
lease obligations at December 31, 1998, as compared to December 31, 1997, was
principally related to the effects of the GM work stoppage on cash flow from
operations, capital expenditures, the approximately $42 million of cash used to
acquire Albion and the assumption of the debt and capital lease obligations of
Albion.
The weighted average interest rate of our long-term debt outstanding as of
December 31, 1998 was approximately 8.0% and was approximately 8.1% at December
31, 1997.
Capital expenditures were $210.0 million, $282.6 million and
$162.3 million in 1998, 1997 and 1996, respectively. These investments in
machinery and equipment were primarily made to support the launch of the
30
<PAGE>
GMT-800 Program, to reduce labor-intensive operations, to support additional
capacity and for cost reduction programs including upgrades in machinery
technology and quality standards. We estimate that we will invest approximately
$360 million in capital expenditures during 1999.
We intend to fund our capital expenditures by borrowing under the Credit
Facilities or the Receivables Facility. We believe our lines of credit are
adequate to support ongoing operational requirements. Beyond that, we believe we
have sufficient financial flexibility to attract long-term funding on acceptable
terms as may be needed to support our growth objectives.
On February 3, 1999, Holdings consummated its IPO, the net proceeds of
which totaled approximately $108 million and have been used to reduce
outstanding borrowings under the Revolving Credit Facility (but not the related
commitments).
We also intend to enter into sale/leaseback transactions with respect to
approximately $200 million of our existing machinery and equipment in 1999. On
March 31, 1999, we announced the closing of one such sale/leaseback transaction
involving approximately $49 million of machinery and equipment. This
sale/leaseback transaction was financed under an operating lease that will have
a negative impact on our operating income and will result in lower depreciation
and amortization, but will have no material impact on our net income. Additional
sale/leaseback transactions, which together with the March 31, 1999 transaction,
would involve approximately $200 million of machinery and equipment, would be
structured in a similar manner and would have a similar effect on operating
income, depreciation and amortization and net income. Additionally, if such
transactions are consummated they would provide us with additional financial
flexibility. The terms of the Notes do not restrict our ability to enter into
sale/leaseback transactions that are financed under operating leases.
On March 31, 1999, we announced the closing of the refinancing of the
Receivables Facility. This refinancing was accomplished through the
resyndication of a revolving receivables facility by AAM Receivables Corp., our
indirect wholly owned subsidiary, under similar terms as the preexisting
Receivables Facility. In addition, this facility has been expanded from $125
million to $153 million. See "Description of Certain Indebtedness--Receivables
Facility."
On April 1, 1999, we announced the closing of our purchase of two forging
companies, Colfor and MSP, for an aggregate cash purchase price of approximately
$223 million. Colfor specializes in precision cold, warm and hot forgings and
operates three manufacturing facilities in Ohio. Giving effect as of January 1,
1998 to Colfor's October 1998 acquisition of Valley Forge, Inc., Colfor's pro
forma 1998 sales would have been approximately $126 million. MSP manufactures
precision forged powertrain, driveline, chasis and other components using cold
and warm forging processes at three manufacturing facilities in Michigan.
MSP's 1998 sales were $56 million.
We are currently in various stages of discussions or negotiations with
additional acquisition candidates. It is possible that an agreement with respect
to an acquisition could be reached in the near future. We do not expect that any
such acquisition, if consummated, would have a material impact on our financial
condition. We expect that the aggregate purchase price for Colfor, MSP and these
other potential acquisition candidates would be less than the amount of
permitted acquisitions under the Credit Facilities, which, after giving effect
to the private placement of the outstanding Notes, would be approximately $400
million. As of the date of this prospectus, no definitive agreement with any
such acquisition candidate has been entered into, and there can be no assurance
that any such acquisition will be successfully negotiated, financed or
consummated. See "Description of Certain Indebtedness--Senior Secured Credit
Facilities."
We may also incur additional indebtedness (including certain Senior
Indebtedness) in the future, including to finance future acquisitions, subject
to certain limitations contained in the instruments governing our indebtedness.
See "Business--Business Strategy--Pursue Selected Acquisition Opportunities,"
"Description of Certain Indebtedness--Senior Secured Credit Facilities" and
"Description of Notes."
SEASONALITY
Our business is moderately seasonal as our major OEM customers historically
have a two week shutdown of operations in July and approximately a one week
shutdown in December. In addition, traditionally in the third quarter OEM
customers have incurred lower production rates as model changes enter
production. Accordingly, third and fourth quarter results may reflect these
trends.
EFFECTS OF INFLATION
Inflation generally affects us by increasing the cost of labor, equipment
and raw materials. We believe that the relatively moderate rate of inflation
over the past few years has not had a significant impact on our operations as we
offset the increases by realizing improvements in operating efficiency or by
passing through certain increases in the cost of raw materials to GM under the
terms of the CSA. See "Business--Contractual Arrangements with GM."
31
<PAGE>
FINANCIAL INSTRUMENTS MARKET RISK
Our business and financial results are affected by fluctuations in world
financial markets, including interest rates and currency exchange rates. Our
hedging policy attempts to manage these risks to an acceptable level based on
management's judgment of the appropriate trade-off between risk, opportunity and
costs. We hedge our interest rate risks by utilizing swaps and collars. We do
not currently have significant exposures relating to currency risks and did not
have any financial instruments to reduce currency risks at December 31, 1998 or
at December 31, 1997. We do not hold financial instruments for trading or
speculative purposes.
The Credit Facilities required us to enter into interest rate hedging
arrangements with a notional value of $112.5 million. The arrangements entered
into by us, which terminate in December 2000, require us to pay a floating rate
of interest based on three-month LIBOR with a cap rate of 6.5% and a floor rate
of 5.5%.
Interest Rate Risk. As part of our risk-management program, we perform
sensitivity analyses to assess potential gains and losses in earnings and
changes in fair value relating to hypothetical movements in interest rates. A
100 basis-point increase in interest rates (approximately 12.5% of our weighted
average interest rate) affecting our debt obligations, related interest rate
swaps and collars (based on balances existing at December 31, 1998), would
impact our 1998 pretax earnings by approximately $5.9 million. See Note 5 to the
Consolidated Financial Statements.
Currency Risk. We do not currently have material exposures to currency
exchange-rate risk as most of our business is denominated in U.S. dollars.
Future business operations and opportunities, including the construction of our
new manufacturing facility in Guanajuato, Mexico and our recently acquired
Albion operations in Europe, may expose us to the risk that the eventual net
dollar cash inflows resulting from these activities may be adversely affected by
changes in currency exchange rates. We intend to manage these risks by utilizing
various types of foreign exchange contracts where appropriate.
YEAR 2000 COMPLIANCE
We have implemented a program to identify Year 2000 compliance issues and
develop detailed project plans so that our computer information systems will be
able to interpret the calendar year term "2000". Systems that process
transactions based on storing two digits for the year rather than the full four
digits may encounter significant process inaccuracies and even inoperability in
attempting to process Year 2000 transactions.
The Year 2000 compliance program implemented by us addresses all plant
equipment, computer hardware and software, and business support equipment. The
Year 2000 compliance program also includes modifications and conversions
necessary to address our systems and process interfaces with third-party
suppliers and customers. To date, we have named a Year 2000 compliance program
team leader, established a project team covering all locations worldwide,
completed our assessment of all systems which we believe could be significantly
affected by the Year 2000 issue, defined plans for remediation and issued
communications to all our departments regarding Year 2000 issues and strategies.
Management presently believes that, with planned modifications to existing
systems and processes scheduled to be completed in September 1999, Year 2000
compliance will not pose significant operational problems.
Our design, engineering, manufacturing and administrative functions are
reliant upon a variety of third parties who could also be affected by the Year
2000 issue. As a part of our Year 2000 compliance program, we have initiated
communications with key suppliers, customers and other such third parties to
evaluate their Year 2000 readiness and to determine whether a Year 2000-related
event could impede the ability of such suppliers, customers or other third
parties to interact with and support our operations effectively. Issues
identified as a result of these communications have been addressed in our Year
2000 compliance program remediation and contingency planning actions.
Costs incurred by us to address Year 2000 compliance include the
acquisition of computer hardware and software to replace existing Year 2000
non-compliant systems. These costs have been capitalized and amortized over the
assets' estimated useful lives. There are no significant systems replacement
initiatives that have been accelerated as a result of our Year 2000 compliance
assessments.
Costs associated with modifying existing Year 2000 non-compliant systems
are expensed as incurred. The amounts expensed to date have been immaterial and
we do not expect amounts required to be expensed in the future to have a
material effect on our financial position or results of operations.
If the modifications and conversions planned by us to address Year 2000
compliance are not completed on a timely basis, or if our key suppliers,
customers or other third parties have significant unresolved systems problems,
there is a risk that Year 2000 compliance could have a material impact on our
operations. Potential sources of risk include:
o the inability of key suppliers (or their suppliers) to be Year 2000
ready, which could result in delays in product or service deliveries
from such suppliers;
32
<PAGE>
o the inability of key customers (or their other suppliers) to be Year
2000 ready, which could result in the cancellation or postponement
of orders from such customers;
o systems incompatabilities with key suppliers or customers resulting
from software conversions or other modifications; and
o our inability to modify or replace systems on a timely basis, which
could result in manufacturing process delays that interrupt product
shipments.
We are presently developing contingency plans for all significant
components of our computer information systems, including all plant equipment
and business support equipment, and expects to complete such contingency
arrangements by June 1999. These contingency plans involve, among other things,
manual work-arounds, alternative sourcing strategies and flexible staffing
arrangements.
LITIGATION AND ENVIRONMENTAL REGULATIONS
We are involved in various legal proceedings incidental to our business.
Although the outcome of these matters can not be predicted with certainty,
management believes that none of these matters, individually or in the
aggregate, will have a material adverse effect on the financial condition,
results of operations or cash flows.
GM has agreed to indemnify and hold harmless the Issuer from certain
environmental issues identified as potential areas of environmental concern at
the time of the 1994 Acquisition. GM has also agreed to indemnify the Issuer,
under certain circumstances, for up to ten years from the date of closing of the
1994 Acquisition with respect to certain pre-closing environmental conditions.
Approximately one-acre of a parking lot at our Buffalo facility has been
designated by the New York Department of Environmental Conservation ("NYDEC") as
a Class 3 Inactive Hazardous Waste Disposal Site due to the presence of
polychlorinated byphenyls in subsurface soil and groundwater below existing
pavement, and an elevated level of lead in the soil. A Class 3 designation is
given to a site which does not present a significant threat to the public health
or environment and at which action may be deferred. The area is the subject of
an Order of Consent between GM and NYDEC effective February 2, 1995. Remediation
required thereunder is being performed by GM in the ordinary course of business.
In addition, GM is conducting remediation at our Tonawanda facility as a result
of the presence of polychlorinated biphenyls in the soil. The contamination of
both sites took place prior to our acquiring the properties and is the
responsibility of GM.
Based on our assessment of costs associated with our environmental
responsibilities, including recurring administrative costs, capital expenditures
and other compliance costs, such costs have not had, and in management's
opinion, will not have in the foreseeable future, a material effect on our
financial condition, results of operations, cash flows or competitive position.
EFFECT OF NEW ACCOUNTING STANDARDS
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities
was issued in June 1998. SFAS No. 133 establishes standards for the recognition
and measurement of derivatives and hedging activities. This statement is
effective for fiscal years beginning after June 15, 1999. We are currently
analyzing the impact SFAS No. 133 will have on our financial statements.
Statement of Position ("SOP") 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use, was issued in March 1998. SOP
98-1, among other things, requires that certain costs of internal use software,
whether purchased or developed internally, be capitalized and amortized over the
estimated useful life of the software. Adoption of SOP 98-1 is required as of
January 1, 1999. We have historically followed the guidelines specified in SOP
98-1.
SOP 98-5, Reporting on the Costs of Start-Up Activities, was issued in
April, 1998. SOP 98-5 establishes standards for the financial reporting of
start-up costs and organization costs and requires such costs to be expensed as
incurred. SOP 98-5 is effective for fiscal years beginning after December 15,
1998. We do not expect the adoption of SOP 98-5 to have a material effect on our
financial condition or results of operations.
33
<PAGE>
BUSINESS
GENERAL
We are a Tier I supplier to the automotive industry and a world leader in
the design, engineering and manufacturing of driveline systems for light trucks
and SUVs. The driveline system includes all of the components that transfer
power from the transmission and deliver it to the drive wheels. Driveline
products produced by us include axles, propeller shafts, chassis components and
forged products. We are the leading independent supplier, with an estimated 33%
market share (by 1997 sales), of driveline components for light trucks and SUVs
manufactured in North America and sold in the United States. The light truck and
SUV segment is the fastest growing segment of the light vehicle market. We also
manufacture axles, propeller shafts and other products for RWD passenger cars.
Additionally, we have the second largest (by sales) automotive forging operation
in North America.
We are General Motors Corporation's ("GM") principal supplier of driveline
components for light trucks, SUVs and RWD passenger cars manufactured in North
America, supplying substantially all of GM's rear axle and front 4WD axle
requirements and over 75% of its propeller shaft requirements for these vehicle
platforms in 1997. Approximately 93% of our 1998 net sales of $2.04 billion were
to various divisions and subsidiaries of GM. Our second largest customer is
Ford, for which we produce axle shafts and double cardan joints for light trucks
and SUVs manufactured by Ford in North America.
We, through our October 1998 acquisition of Albion, supply front steerable
and rear axles, driving heads, crankshafts, chassis components and transmission
parts used primarily in medium-duty trucks and buses for customers located in
the United Kingdom and elsewhere in Europe.
COMPANY BACKGROUND
We are the successor to the former Final Drive and Forge Business Unit of
the Saginaw Division of GM and have produced driveline components and forged
products for over 75 years. We were formed in March 1994 when a private investor
group led by Richard E. Dauch purchased the Business Unit from GM and
consummated the 1994 Acquisition. In connection with the 1994 Acquisition, we
entered into the Component Supply Agreement (the "CSA") with GM under which we
became the sole-source supplier to GM of all the products and components
previously supplied to GM by the Business Unit. In September 1997, we signed an
additional binding agreement with GM, the Amended and Restated Memorandum of
Understanding (the "MOU"), which became operative after our recapitalization.
Under the MOU, we have agreed with GM to transition the CSA into a number of
separate Lifetime Program Contracts ("LPCs"), under which we will supply
products and components for the life of each GM vehicle program covered by an
LPC. These LPCs will ultimately replace the CSA. LPCs have been entered into for
substantially all GM vehicle programs supplied by us, including the GMT-800 and
the M-SUV programs. See "Contractual Arrangements with GM."
Our management team, which was formed in connection with the 1994
Acquisition, is led by Mr. Dauch as Chairman of the Board, Chief Executive
Officer and President and was carefully selected on the basis of its management
expertise in the automotive industry. Mr. Dauch has over 34 years of experience
in the industry and was an Executive Vice President for Chrysler from 1980 to
1991, and was instrumental in Chrysler's manufacturing and financial turnaround.
As an executive of GM, he also managed the Business Unit's largest manufacturing
plant (Detroit Gear & Axle) from 1974 to 1976. Our senior management team is
comprised of 13 executives with an average of 25 years experience in the
automotive industry and experience in both automotive original equipment
manufacturer ("OEM") and supplier operations.
POST-ACQUISITION IMPROVEMENTS
Since the 1994 Acquisition, we have dramatically improved product quality
and manufacturing efficiency through a combination of management leadership,
significant investments in new equipment and technology, workforce training, and
process improvements resulting in increased capacity utilization. From
March 1994 through December 1998, we have invested approximately $825 million in
capital expenditures and 1.4 million labor hours for training and education of
its associates and have received and maintained ISO/QS 9000 certification for
each of its facilities. As a result:
o the average number of axles produced per production day increased from
approximately 10,000 in March 1994 to approximately 14,000 in December
1998;
34
<PAGE>
o discrepant parts shipped to GM (as measured by GM) decreased from
approximately 13,400 parts per million ("PPM") during the six months
ended December 31, 1994 to approximately 118 PPM during the six months
ended December 31, 1998; and
o parts returned by GM decreased from 5,136 PPM during the ten months ended
December 31, 1994 to 223 PPM during the twelve months ended December 31,
1998.
INDUSTRY OVERVIEW
The automotive industry has been and continues to be significantly
influenced by several trends which we believe will enhance our strategic
position and growth prospects.
Demand for Light Trucks and SUVs. From 1990 to 1997, domestic unit sales
of light trucks and SUVs increased as a percentage of total U.S. light vehicle
unit sales from 33% to 45%. During the same period, GM's sales of light trucks
and SUVs followed a similar trend, increasing to 43% in 1997. Despite this
increase, GM still trailed Chrysler and Ford which had penetrations of 68% and
58%, respectively, in 1997. Increased consumer demand for light trucks and SUVs
increases the demand for our products.
4WD Penetration. Between 1990 and 1997, 4WD sales penetration of the U.S.
light vehicle market doubled, from 7% to over 15% and, according to J.D. Power,
is expected to continue to rise. The increasing penetration of 4WD vehicles is
also evident in the sales of GM light trucks and SUVs. For example, in 1990, 4WD
penetration of GM light truck and SUV sales was 31%. By 1997, this penetration
rate had risen to nearly 42%. We benefit from this trend to increased 4WD
penetration since our Sales-Dollar Content per vehicle is approximately 80%
higher on a 4WD vehicle than on a comparable two-wheel drive vehicle.
Outsourcing. In recent years, OEMs have been shifting research and
development, design, testing and validation responsibilities to suppliers to
take advantage of suppliers' lower cost structures, allocate engineering
resources more efficiently, and realize the synergistic benefits of a systems
approach. The trend has also been driven by the competitive pressures on OEMs to
improve product quality and to reduce capital expenditures, production costs and
inventory levels. A significant portion of driveline components are currently
manufactured by OEMs, representing a substantial outsourcing opportunity for us.
Supplier Consolidation and Systems Integration. The OEMs have been
reducing the number of their suppliers, establishing stronger relationships with
large Tier I full-service suppliers. In conjunction with this trend, OEMs are
transitioning from purchasing components to shifting complete responsibility for
design, engineering and manufacturing full component systems to their remaining
Tier I suppliers. In response to this trend, suppliers have combined with other
suppliers to gain the critical mass to support research and development and
realize economies of scale. Furthermore, these combinations have been pursued to
add capabilities to manufacture complementary components and achieve more
complete systems supplier capabilities. We believe that this trend toward
multi-component system integrators will compel further consolidation, leaving
the industry with only a small number of dominant, worldwide suppliers.
Globalization. Tier I suppliers are increasingly following their OEM
customers as they expand manufacturing into global markets. Shipping costs,
import duties and local content laws make it advantageous for OEMs to purchase
from Tier I suppliers with a local presence. We are positioning ourselves to
follow the industry as it expands globally. We are establishing a sales office
and constructing a manufacturing facility in Guanajuato, Mexico; this facility
is currently scheduled to begin production in the fall of 2000.
We believe that as a result of our leading U.S. market position as an
independent supplier of driveline systems for the light truck and SUV segment,
management expertise, strong OEM and labor relationships, full service
engineering capabilities, high quality products, critical mass and access to
capital, we are well positioned to take advantage of trends in the industry and
to compete successfully as both a sub-assembly supplier and as a manufacturing
process specialist in the consolidating OEM supplier market.
BUSINESS STRATEGY
We plan to leverage our competitive advantages and actively pursue the
following strategies to increase revenue and profitability:
Improve Product Quality and Manufacturing Efficiency. Since the 1994
Acquisition, we have dramatically improved product quality and efficiency. We
are committed to continue reducing operating costs by developing
35
<PAGE>
new manufacturing processes and by investing in new equipment, technologies and
improvements in product designs. We believe that the significant modernization
of our manufacturing equipment and facilities which has been completed over the
last four years, as well as initiatives to be undertaken in connection with the
GMT-800, the M-SUV and the MST Programs, will generate enhanced productivity and
operating efficiency. From March 1994 through December 1998, we have invested
approximately $825 million in the modernization of our equipment and facilities.
Diversify, Strengthen and Globalize OEM Customer Base. We currently provide
axle shafts and double cardan joints to Ford and have begun to pursue strategic
initiatives to further diversify our customer base by providing products for
vehicles manufactured by Isuzu, Nissan, CAMI (a joint venture between GM and
Suzuki), and DaimlerChrysler. Through our diversification efforts (including our
acquisition of Albion), we have increased our sales to customers other than GM
to approximately $134 million in 1998. We will continue to seek new business
from existing customers, as well as develop relationships with new customers
worldwide. We sell our products primarily in North America and Europe. In 1997
and 1998, we established sales offices in Tokyo, Japan and Ulm, Germany,
respectively, in order to access new markets for our products. Additionally, we
are establishing a sales office and constructing a manufacturing facility in
Guanajuato, Mexico, which is currently scheduled to begin production in the fall
of 2000.
Expand Systems Integrator Capability. OEMs continue to consolidate their
supplier base and shift the design, engineering and manufacturing functions of
complete systems to their remaining Tier I suppliers. We currently supply axles,
propeller shafts, chassis components and forged products for light trucks and
SUVs. Through our recently acquired Albion subsidiary, we also supply front
steerable and rear axles, driving heads, crankshafts, chassis components and
transmission parts used primarily in medium-duty trucks and buses. We intend to
provide additional driveline components through a combination of developing new
technologies and other capabilities, managing Tier II and Tier III suppliers and
acquiring other suppliers in order to offer our customers more fully-integrated
driveline systems.
Develop New Products. We intend to diversify our product portfolio by
designing and developing new products and systems. As part of our commitment to
product development, we opened our Technical Center in 1995 which provides
resources to our engineers to improve the design of our existing products and to
design new products. We invested $29.5 million and $27.8 million in research and
development in 1998 and 1997, respectively. To date, these initiatives have
resulted in several new products such as the new 11.5" axle (initially being
used in the GMT-800 Program), multi-link rear axles, an integral oil pan front
axle, precision steering system joints (which utilize lash free/low lash idlers
and radiax pivot sockets) and improved propeller shaft "U-Joints." We are also
in the process of developing other new products such as independent rear drive
system modules, traction-enhancing advanced differentials, banjo-style axles,
aluminum rear axle carriers, axle cooler covers, spherical differential cases
and near net/net shaped forgings.
Pursue Selected Acquisition Opportunities. We are pursuing an acquisition
strategy which is intended to advance the implementation of our strategic
initiatives. This acquisition strategy will enhance our efforts to diversify our
customer base, expand our product offerings, selectively globalize our
operations and/or leverage our design, engineering and validation expertise. We
have established strict criteria in our assessment of potential acquisition
candidates focused primarily on strong operating potential, complementary
product platforms and strong existing management teams. The acquisition
candidates we are evaluating include:
o suppliers of driveline components which complement our current product
offerings;
o companies in the highly fragmented forging industry, which will allow us
to capitalize upon the trend toward OEM supplier consolidation; and
o other automotive parts suppliers.
On April 1, 1999, we announced the closing of our purchase of two forging
companies, Colfor and MSP, for an aggregate cash purchase price of approximately
$223 million. Colfor specializes in precision cold, warm and hot forgings and
operates three manufacturing facilities in Ohio. Giving effect as of January 1,
1998 to Colfor's October 1998 acquisition of Valley Forge, Inc., Colfor's pro
forma 1998 sales would have been approximately $126 million. MSP manufactures
precision forged powertrain, driveline, chasis and other components for the
automotive industry using cold and warm forging processes at three manufacturing
facilities in Michigan. MSP's 1998 sales were $56 million.
36
<PAGE>
We are currently in various stages of discussions or negotiations with
additional acquisition candidates of the types described above. It is possible
that an agreement with respect to an acquisition could be reached in the near
future. We do not expect that any such acquisition, if consummated, would have a
material impact on our financial condition. We expect that the aggregate
purchase price for Colfor, MSP and these other potential acquisition candidates
would be less than the amount of permitted acquisitions under the Credit
Facilities, which, after giving effect to the private placement of the
outstanding Notes, would be approximately $400 million. As of the date of this
prospectus, no definitive agreement with any such acquisition candidate has been
entered into and there can be no assurance that any such acquisition will be
successfully negotiated, financed or consummated. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and "Description of Certain Indebtedness--Senior Secured
Credit Facilities."
Our October 1998 acquisition of Albion illustrates how the implementation
of our strategic initiatives can be advanced through an acquisition, as it
provides us with diversified product lines, a broader customer base and expanded
geographic presence. Albion manufactures front steerable and rear axles, driving
heads, crankshafts, chassis components and transmission parts used primarily in
medium-duty trucks and buses for customers located in the United Kingdom and
elsewhere in Europe. This acquisition adds product offerings for vehicle classes
in GVW 4-8, expanding our product portfolio to include vehicle classes GVW 1-8.
This acquisition also broadens our customer base by adding Caterpillar
(Perkins), LDV, PACCAR (Leyland and DAF), Renault, Rolls-Royce, Rover and Volvo.
Finally, Albion expands our geographic presence by adding manufacturing
capabilities in Europe which will complement our existing sales office in Ulm,
Germany.
PRODUCTS
We design, engineer and manufacture components for driveline systems. The
driveline system includes all the components that transfer power from the
transmission and deliver it to the drive wheels. Driveline products produced by
us include axles, propeller shafts, chassis components and forged products. The
following chart sets forth the percentage of total revenues attributable to our
products for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Rear Axles........................................................... 53.9% 53.0% 53.5%
Front Axles.......................................................... 15.2 16.5 16.3
Propeller shafts..................................................... 8.7 8.8 8.6
Chassis components................................................... 10.5 9.8 8.8
Forged products...................................................... 8.9 9.2 8.9
Other................................................................ 2.8 2.7 3.9
----- ----- -----
100.0% 100.0% 100.0%
----- ----- -----
----- ----- -----
</TABLE>
Rear Axles. Rear axles are rigid, integral drive axle modules for use on
light trucks, SUVs and RWD passenger cars. We offer a range of axle sizes, gear
ratios, differentials, brakes and anti-corrosion coatings. Each unit is
assembled, tested and shipped as an integrated system to minimize noise and
vibration. The products are available in semi-floating models for economy or
full-floating models for higher shaft torque and load capacity. Through Albion,
we produce rear axles used primarily in medium-duty trucks and buses in vehicle
classes GVW 4-8.
Front Axles. Independent front axles are chassis-mounted drive axles for
all-wheel and 4WD vehicles with independent front suspensions. Typical vehicle
applications include light trucks and SUVs. We produce a "shift-on-the-fly"
disconnect system that allows shifting into and out of 4WD while the vehicle is
moving. This innovation reduces system wear and extends service life by making
it easy to disconnect the front-drive system when not needed. Components are
matched and balanced to reduce noise and vibration. Through Albion, we produce
front steerable axles used primarily in medium-duty trucks.
Propeller Shafts. Propeller shafts, also referred to as driveshafts,
transmit power from the transmission to the axle. We produce one- and two-piece
propeller shafts for RWD vehicles and front-auxiliary shafts for 4WD and
all-wheel drive systems. Propeller shafts can be designed and manufactured to
meet customer requirements for torque, packaging, speed, size, joint type and
special configuration. Each propeller shaft can be system
37
<PAGE>
balanced with its corresponding axle or marked for future match-mounting
considerations. For applications requiring faster rotation speed, lighter weight
or longer distances, metal composites and all aluminum designs are also
manufactured.
Chassis Components. Chassis components consist of steering linkage
assemblies, stabilizer bars and other components. Steering linkage assemblies
convert the circular motion of the steering wheel into the linear motion which
is used to turn the front wheels and control the direction of the vehicle.
Stabilizer bars are used for anti-roll systems. Our chassis components also
include brake drums, front suspensions, rods, ball studs and stabilizer bar
links.
Forged Products. Our forge division designs and manufactures a wide
variety of forged light truck, SUV and passenger car products for sale to
external customers and for internal use in our driveline products. We have the
second largest (by sales) automotive forging operation in North America and have
invested significant capital in equipment and tooling which enables it to
produce large volumes of its products. Our forged products include: net shaped
differential gears, axle shafts, output shafts, hypoid driving gears, pinions,
weld yokes, tie rod sockets, relay rods, wheel spindles, hubs, struts,
connecting rods and caps, toe links, torsion bars and trunnions. Our forging
operations are designed to optimize material usage and provide a low cost, high
volume source for all forming needs. Computerized tool design, metal flow
simulation and computerized video gauging are all used to design products
quickly and efficiently, eliminating the costly trial and error process used by
other methods. We have developed advanced net-shape forging capabilities that
allow parts to be forged close to finished size greatly reducing machining
requirements after the forging process and reducing materials waste.
Other. Our other sales revenue is comprised of service parts and
aftermarket sales, and driving heads, crankshafts and transmission parts
produced by Albion.
CUSTOMERS
We are GM's principal supplier of driveline components for light trucks,
SUVs and RWD passenger cars manufactured in North America, supplying
substantially all of GM's rear axle and front 4WD axle requirements and over 75%
of its propeller shaft requirements for these vehicle platforms in 1997.
Approximately 93% of our 1998 sales were to various divisions and subsidiaries
of GM. Our second largest customer is Ford, for which we produce axle shafts and
double cardan joints for its light trucks and SUVs manufactured in North
America.
GM programs currently supplied and to be supplied by us include:
<TABLE>
<CAPTION>
VEHICLE PLATFORM VEHICLE DESCRIPTION VEHICLE NAMEPLATE
- ------------------------------------- ------------------------ ---------------------
<S> <C> <C>
C/K (GMT-400/GMT-800) Full-size Pick-up and Silverado, Sierra,
SUV Suburban, Tahoe and
Yukon
S/T (GMT-330/M-SUV and GMT-325/MST) SUV and Mid-size Pick-up Blazer, Jimmy,
Bravada, S-10 Pick-up
and Sonoma
M/L Mid-size Van Astro and Safari
G-VAN (GMT-600) Full-size Van Savana and Chevrolet
Express
F-CAR RWD Passenger Car Camaro and Firebird
P-TRUCK Medium-Duty Commercial Commercial trucks and
Truck motorhomes
</TABLE>
We have been chosen as the design, development and production supplier for
the GMT-800 and M-SUV Programs and, more recently, the MST Program. The GMT-800
Program represents the new generation of GM's full-size pickup trucks, and the
Suburban, Tahoe and Yukon SUVs. GM began to phase in production of GMT-800
vehicles in June 1998. The M-SUV Program represents the next generation of GM's
compact SUVs, including the Blazer, Bravada and Jimmy. The MST Program is the
future generation of mid-sized pick-up trucks for GM. See "Risk Factors--We plan
to implement certain product programs."
38
<PAGE>
While we are working to continue expanding our business with GM, we are
also pursuing strategic initiatives to diversify our customer base. In addition
to our business with Ford, we also currently supply products for vehicles
manufactured by Isuzu, Nissan, CAMI (a joint venture between Suzuki and GM), and
DaimlerChrysler. Through our diversification efforts (including our acquisition
of Albion), we have increased our sales to customers other than GM to
approximately $134 million in 1998. We will continue to seek new business from
existing customers, as well as develop relationships with new customers
worldwide. We currently have sales offices in Tokyo, Japan and Ulm, Germany and
are in the process of opening a sales office in Guanajuato, Mexico.
CONTRACTUAL ARRANGEMENTS WITH GM
In connection with our acquisition of the Business Unit in 1994, we entered
into the Component Supply Agreement (the "CSA") with GM pursuant to which we
became the sole-source supplier to GM of all products and components that were
supplied to GM by the Business Unit at such time. Substantially all of our 1997
sales to GM were under the CSA. In connection with the Recapitalization in 1997,
we entered into the Amended and Restated Memorandum of Understanding (the "MOU")
with GM. Under the MOU, which is a binding agreement, we have agreed with GM to
replace the CSA with separate sole-source Lifetime Program Contracts ("LPCs")
for each of the GM vehicle programs covered by the CSA. LPCs have been entered
into for substantially all GM vehicle programs supplied by us, including the
GMT-800 and M-SUV Programs described above. The material terms and conditions of
the CSA and the MOU as well as of the standard form LPCs entered into pursuant
to the MOU are discussed below.
The CSA has an initial term of seven years, expiring March 2001, and is
automatically extended for successive one-year periods unless otherwise
terminated. During the term of the CSA, GM has agreed to purchase all of its
requirements for the products and components subject to the CSA so long as GM
continues regular production of the applicable vehicle models or requires the
products or components for service parts. LPCs have terms equal to the lives of
the relevant vehicle programs, which typically run six to twelve years.
Prices for products sold under the CSA were established at the time the
parties entered into the agreement and are subject to adjustment for engineering
changes that result from changes in GM's component specifications. Prices for
products sold under the LPCs have been agreed to for existing programs,
including the GMT-800 and M-SUV Programs. Prices for future programs will be
negotiated at the time such programs are awarded, as was done for the MST
Program.
We currently purchase through GM's purchasing network certain materials for
use in the manufacture of products sold under the CSA and the LPCs. While we pay
current market prices for such materials, increases or decreases in such prices
from levels established under the CSA or LPCs currently result in corresponding
increases or decreases in the aggregate amount paid by GM to us for our
products, thereby protecting us from increases in the costs of such materials
while such purchasing arrangement is in effect. We have agreed with GM to
develop a mutually satisfactory plan to terminate this purchasing arrangement no
later than December 2002, although we will continue to be eligible to
participate in GM's then current steel resale program and pricing adjustment
policy for non-ferrous metals. We expect to begin transitioning this purchasing
function from GM to ourselves during 1999.
While the prices at which we sell our products under the CSA and the LPCs
have been established, under the LPCs, upon termination of the purchasing
arrangement described above, we will no longer have a contractual right to pass
on any future increases in the cost of such materials. There can be no assurance
that we will be able to pass on any increased labor, materials or other costs to
GM in the future as we have from time to time in the past pursuant to the
above-described terms of the CSA or by certain additional payments agreed to as
part of the commercial arrangements between GM and ourselves (subject to certain
temporary reductions described in "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Company Overview"). See "Risk
Factors--We are affected by our labor expenses." LPCs have been entered into for
substantially all GM vehicle programs supplied by us, including the GMT-800 and
M-SUV Programs.
Under the CSA, we have agreed with GM to share certain savings in costs
resulting from our mutual efforts or from labor contract negotiations. To date,
such shared cost savings have been minimal. Other cost savings resulting from
our management expertise and knowledge or contributions from our associates,
without input from
39
<PAGE>
GM, are not included in any such cost savings computations and are not shared
with GM. Sharing of cost savings under the LPCs is substantially similar as
under the CSA, but does not include savings resulting from labor contract
negotiations.
Under the CSA, we are not liable for warranty costs for our products after
the relevant vehicle has been sold to a retail purchaser unless it is determined
that the frequency or total cost of warranty claims for a given period
significantly exceeds the historical frequency of such claims for a comparable
model. Under the LPCs, our products are subject to the warranty provisions of
GM's standard purchase order, including warranties as to the absence of defects
and as to fitness and sufficiency for the particular purposes for which such
products are to be used by GM.
Under the terms of the CSA, if GM determines that a family of products (as
defined in the CSA) produced by us under the CSA is no longer competitive in
terms of quality, service or price and, following notice from GM, we fail to
remedy the noncompetitive condition within a specified period, then GM may elect
to discontinue purchasing such family of products from us beginning March 2001.
GM also may terminate the CSA in the event we become insolvent or enter into
bankruptcy or similar proceedings or if a significant portion of our assets
become subject to attachment, embargo or expropriation. Pursuant to the MOU, the
CSA will terminate when the materials purchasing arrangements described above
have been terminated and all products currently supplied under the CSA are
included in LPCs, but in any event no earlier than March 2001.
Under the terms of the standard form LPC, if GM determines that products
produced by us under an LPC are no longer competitive in terms of technology,
design or quality and, following notice from GM, we fail to remedy the
noncompetitive condition within a specified period, then GM may elect to
terminate such LPC. Termination with respect to such products becomes effective
one year after GM gives us notice of termination. Under the LPCs, we have agreed
not to sue GM or its other suppliers in the event GM terminates the LPC and
obtains similar products from other sources.
At the time of the 1994 Acquisition we also entered into a supply agreement
(the "GMCL Agreement") with General Motors of Canada, Limited ("GMCL"), an
affiliate of GM, whereby axles produced at GMCL's St. Catharines, Ontario
facility are purchased by us for resale to GM. The GMCL Agreement, as amended,
expires in September 1999. The axles produced at St. Catharines accounted for
less than 10% of our revenues in 1998. In addition, we have an irrevocable
option to purchase for a nominal amount the equipment used by GMCL at this
facility to produce axles.
SALES AND BUSINESS DEVELOPMENT
Our sales and business development organization is structured into three
groups. The first group manages the commercial sales to GM's North American
operations, the second group supports Ford, DaimlerChrysler and all forged
products customers while the third supports all other customers worldwide
(focusing on Asia, Europe and South America), including GM's international
divisions. Sales and business development associates work closely with customers
and our engineers to identify product needs and anticipate customer program
initiatives and timing in order to position us to support new programs,
beginning with the design and the development and continuing through product
launch.
As GM and other OEMs expand globally, we intend to support our customers
through regional sales offices. We currently have sales offices in Tokyo, Japan
and Ulm, Germany to support our customers and pursue business development
opportunities in Asia and Europe. We will consider sales offices in other
regions of the world in order to support OEM programs worldwide and provide
access to new markets for our products. We are constructing a manufacturing
facility, which includes a sales office, in Guanajuato, Mexico. Production in
this facility currently is scheduled to begin in the fall of 2000. The
Guanajuato sales office will pursue business development opportunities in Mexico
and South America.
RESEARCH AND DEVELOPMENT
Our research and development efforts are intended to facilitate our ability
to respond to the technological demands of the market and to support our
customers. In July 1995, we completed construction of our Technical Center in
Rochester Hills, Michigan, employing approximately 150 engineers, designers and
technicians,
40
<PAGE>
specializing in design, development and process engineering. The Technical
Center is located near GM's Truck Group Headquarters, as well as the technical
centers of other major OEMs, which facilitates communications between us and our
customers. The Technical Center includes a materials laboratory and complete
product testing and development equipment, including four-wheel drive chassis
and driveline dynamometers in semi-anechoic noise chambers to analyze complete
driveline systems for sources of noise and vibration. We engage in a multi-phase
program of management processes and product launch review to ensure product
readiness. We believe that this rigorous program of research and development,
testing and validation provides our customers with full-service design services
and high quality engineering and manufacturing.
Approximately $29.5 million and $27.8 million was invested in research and
development expenses, product enhancement and new designs during the years ended
December 31, 1998 and 1997, respectively, in order for us to maintain and expand
our technological expertise in both product and process. Our engineering design
involves the use of highly sophisticated analytical tools, computer-aided design
techniques and simultaneous engineering processes based on close communications
and teamwork among design engineers, manufacturing engineers and the customer.
We promote a cross-functional product team approach with respect to product and
process development that utilizes engineering tools such as:
o computer-aided design, manufacturing and engineering;
o computer-integrated manufacturing;
o engineering analysis;
o design validation plans and reports; and
o a fully integrated LAN/WAN computer network.
MANUFACTURING
We continue to expand and implement a flexible manufacturing strategy that
improves quality, delivery integrity and cost reduction ability. All of our
manufacturing plants, our Technical Center and our corporate headquarters have
received ISO/QS 9000 certifications, which are international and industry
quality standards.
We utilize the latest technology such as computer-aided design and
manufacturing to reduce lead time and to assure dimensional accuracy and quality
of our final products. For example, computer integrated manufacturing allows us
to validate tooling before release to actual production. Reductions in cost are
expected to result from newer flexible equipment, our ability to perform several
manufacturing processes at the same facility, less inventory, reduction in
defects and fewer returned sales. From March 1994 to December 1998, we have
invested approximately $825 million to upgrade our equipment and facilities.
We are committed to reducing operating costs by developing new
manufacturing processes, improving product design and investing in new equipment
and technology. Management continues to identify and implement new cost
reduction initiatives and believes that additional improvements can be achieved
through improved manufacturing methods, many of which involve minimal capital
expenditures. These initiatives have been focused on key capacity and efficiency
issues such as reducing equipment downtime, improving product and material
workflow, eliminating bottleneck operations and upgrading personnel through
training and hiring.
Another important element of our manufacturing strategy and a key to our
future success is the strategic investment of capital for new technology. Any
new machinery and equipment purchased by us is analyzed for its flexibility,
speed and reliability and must be capable of achieving maximum throughput at
world-class quality levels.
We (excluding Albion) produce on average approximately 14,000 axles, 15,000
propeller shafts, 9,000 steering linkages, 21,500 stabilizer bars and forgings
in excess of 250,000 each production day in December 1998. We have successfully
increased production of axles per production day from approximately 10,000 in
March 1994 to approximately 14,000 in December 1998 while reducing manufacturing
space requirements and improving quality. We have reduced discrepant parts
shipped to GM, as measured by GM, from approximately 13,400 PPM during the six
months ended December 31, 1994 to approximately 118 PPM during the six months
ended December 31, 1998, and parts returned by GM decreased from 5,136 PPM
during the ten months ended
41
<PAGE>
December 31, 1994 to 223 PPM during the twelve months ended December 31, 1998.
See "Risk Factors--We plan to implement certain product programs." Our
manufacturing facilities have adequate production capacity for our current
needs, and management believes our present facilities, enhanced by currently
budgeted capital expenditures for equipment additions and improvements, will be
adequate to meet currently anticipated customer requirements.
ASSOCIATES
We believe that one of our most important assets is our workforce. Since
the 1994 Acquisition, we have focused on making significant improvements in our
labor relations through improving working conditions, incentive programs and
town hall meetings with our hourly associates. We have also implemented a
program of continuous training whereby our associates are taught the skill sets
important to producing products of precision quality. In each of the past three
years, we have invested approximately 300,000 labor hours annually in various
training and educational programs.
We also recognize that a key element of our long-term competitiveness is
developing a constructive working relationship with our unions. In 1997, our
management negotiated, and our workers ratified, our first agreements with the
UAW and the IAM after our separation from GM in the 1994 Acquisition.
Significantly, the unions have committed to assist us in achieving both quality
and productivity gains over the life of the contract.
As of December 31, 1998, we employed approximately 8,500 associates in the
United States. Approximately 6,900 of our U.S.-based hourly associates are
represented by the UAW under a collective bargaining agreement which runs
through February 25, 2000. Our approximately 300 remaining U.S.-based hourly
associates are represented by the IAM under a collective bargaining agreement
which runs through May 5, 2000. In addition, we employ approximately 1,100
associates at our recently acquired Albion subsidiary who are represented by
labor unions under various collective bargaining agreements, certain of which
may be terminated upon six-months' notice. We believe our relationships with our
associates and their unions are positive.
As part of the 1994 Acquisition, our hourly associates were given the
option to transition back to GM as jobs at GM became available. Of the 6,500
hourly associates that were employed on March 1, 1994, approximately 2,900 have
returned to GM and as of December 31, 1998, approximately 1,500 associates are
eligible to return to GM. Such associates may transition back to GM once a
requested position becomes available on a schedule to be determined by us. Such
associates may also elect to remain with us. Many of those who returned to GM
were high seniority workers who were at or near retirement age. As a result of
this turnover, the average age of hourly associates has decreased and the level
of education of hourly associates in the workforce has increased.
COMPETITION
Our primary competitors in the North American light truck and SUV driveline
systems market are:
o the internal "captive" operations of Ford and DaimlerChrysler; and
o independent, publicly-traded Dana Corporation.
The Ford and DaimlerChrysler operations are strictly internal and do not
manufacture products for outside customers at this time. Several foreign firms
have niche driveline businesses which primarily supply foreign transplant auto
manufacturers.
The automotive industry is highly competitive. We compete based on
technology, quality, price, durability, reliability and overall customer
service. Our competitors include driveline component manufacturing facilities of
existing OEMs, as well as a small number of independent suppliers of driveline
systems and several independent suppliers of forged products. Certain of these
OEMs are also our customers. Our principal competitors are large and have
substantial resources, including those competitors that are owned by
OEMs. There can be no assurance that competitors will not be able to take
actions, including developing new technology or products, or offering prolonged
reduced pricing, which could adversely affect us.
We believe that the trend in the industry is for OEMs to reduce the number
of their suppliers and develop close ties and long term, partnership-style
relationships with those suppliers similar to the relationship developed between
GM and us.
42
<PAGE>
PRODUCTIVE MATERIALS
We believe we have adequate sources for the supply of productive materials
and components for our manufacturing needs. Our suppliers are located primarily
in North America. We have, since the 1994 Acquisition, purchased through GM's
purchasing network certain materials for use in the manufacture of products sold
under the CSA and LPCs. We have agreed with GM to terminate this arrangement
and, in anticipation of such termination, we have initiated a policy of
strengthening our supplier relationships by concentrating our productive
material purchases with a limited number of suppliers. We believe that this
policy contributes to quality and cost control and increases a supplier's
committment to us. We rely upon, and expect to continue to rely upon, single
source suppliers for certain critical components. See "Risk Factors--We rely on
GM for business" and "--Inventory Management--We rely on single source
suppliers."
PATENTS AND TRADEMARKS
We maintain and have pending various U.S. and foreign patents and other
rights to intellectual property relating to our business, which we believe are
appropriate to protect our interest in existing products, new inventions,
manufacturing processes and product developments. We do not believe any single
patent is material to our business nor would the expiration or invalidity of any
patent have a material adverse effect on our business or our ability to compete.
We are not currently engaged in any material infringement litigation, nor are
there any material claims pending by or against us.
PROPERTIES
Since the 1994 Acquisition, we have dedicated substantial resources to
improving the functionality and physical appearance of our facilities, making
renovations including painting, lighting, roofing, insulation, ventilation, fire
protection, fencing, parking lot, railroad and dock upgrades, and office
improvements. We have also purchased numerous buildings surrounding our
facilities and subsequently demolished these buildings and landscaped the areas.
Working with state and local governments, we have been successful in securing
infrastructure improvements surrounding the Detroit and Buffalo facilities,
including road, sewer and utility upgrades.
The following is a summary of our principal facilities:
<TABLE>
<CAPTION>
APPROX. TYPE OF
NAME SQ. FEET INTEREST FUNCTION
- ------------------------------------------ ---------------- ------- ------------------------------------------
<S> <C> <C> <C>
Detroit Gear & Axle ...................... 1,660,000 Owned Rear and front axles, front suspensions,
Detroit, MI brake assemblies, and rear brake drums
Buffalo Gear & Axle ...................... 1,165,000 Owned Rear axles and steering linkages
Buffalo, NY
Three Rivers Plant ....................... 750,000 Owned Rear propeller shafts, front auxiliary
Three Rivers, MI propeller shafts, and universal joints
Detroit Forge ............................ 710,000 Owned Forged products
Detroit, MI
Tonawanda Forge .......................... 470,000 Owned Forged products
Tonawanda, NY
Scotstoun Plant .......................... 460,000 Leased Front and rear axles for medium-duty
Glasgow, Scotland trucks and vans
Farington Plant .......................... 367,000 Leased Front and rear axles for buses and chassis
Leyland, England components
Guanajuato Gear & Axle ................... 335,000 Owned Rear axles
Guanajuato, Mexico (in construction
phase)
Spurrier Plant ........................... 290,000 Leased Crankshafts and fabricated parts
Leyland, England
Technical Center ......................... 66,000 Leased Research and development, design
Rochester Hills, MI engineering, metallurgy, testing,
validation, materials purchasing and sales
Corporate Headquarters ................... 31,000 Owned Executive and administrative offices
Detroit, MI located at the Detroit Gear & Axle
facility
</TABLE>
43
<PAGE>
The Detroit Gear & Axle, Detroit Forge, Three Rivers Plant and Corporate
Headquarters facilities are each subject to a mortgage executed in favor of the
several lenders party to the Credit Facilities. Such mortgages expire upon
satisfaction of all borrowings under the Credit Facilities.
SEASONALITY
Our business is moderately seasonal as we typically shut down our
operations for two weeks each July and approximately one week at the end of
December consistent with the work schedule of our principal customers. Our third
and fourth quarter results reflect the effects of these shutdowns. In addition,
our principal customers have incurred lower production rates in the third
quarter as model changes enter production.
ENVIRONMENTAL MATTERS
In connection with the 1994 Acquisition, GM has agreed to indemnify and
hold harmless the Issuer from certain environmental issues identified as
potential areas of environmental concern at the time of the 1994 Acquisition. GM
has also agreed to indemnify the Issuer, under certain circumstances, for up to
ten years from the date of closing of the 1994 Acquisition with respect to
certain pre-closing environmental conditions.
Approximately one acre of a parking lot at our Buffalo facility has been
designated by the New York Department of Environmental Conservation ("NYDEC") as
a Class 3 Inactive Hazardous Waste Disposal Site due to the presence of
polychlorinated biphenyls in subsurface soil and groundwater below existing
pavement, and an elevated level of lead in the soil. A Class 3 designation is
given to a site which does not present a significant threat to the public health
or the environment and at which action may be deferred. The area is the subject
of an Order of Consent between GM and NYDEC effective February 2, 1995.
Remediation required thereunder is being performed by GM in the ordinary course
of business. In addition, GM is conducting remediation at our Tonawanda facility
as a result of the presence of polychlorinated biphenyls in the soil. The
contamination of both sites took place prior to our acquiring the properties and
is the responsibility of GM.
LITIGATION
We are involved in various legal proceedings incidental to our business.
Although the outcome of these matters cannot be predicted with certainty,
management believes that none of these matters, individually or in the
aggregate, will have a material adverse effect on our financial condition,
results of operations or cash flows.
44
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our management team has proven leadership and extensive automotive industry
experience. The management team has been a critical factor in the turnaround of
our operations since the 1994 Acquisition. The directors and executive officers
of Holdings and the Issuer are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ ---- -----------------------------------------------------
<S> <C> <C>
Richard E. Dauch(2)....................... 56 Chairman of the Board of Directors, Chief Executive
Officer and President*
B.G. Mathis(1)............................ 66 Executive Vice President--Administration and Chief
Administrative Officer*; Director
Joel D. Robinson.......................... 55 Executive Vice President--Operations and Chief
Operating Officer**
Marion A. Cumo, Sr........................ 56 Vice President--Materials Management**
David C. Dauch............................ 34 Vice President--Sales, Marketing and Capacity
Planning**
Richard F. Dauch.......................... 38 Vice President--Manufacturing**
George J. Dellas.......................... 56 Vice President--Quality Assurance and Customer
Satisfaction**
David J. Demos............................ 48 Vice President--Procurement**
Patrick S. Lancaster...................... 51 Vice President, General Counsel and Secretary*
Allan R. Monich........................... 45 Vice President--Human Resources**
Daniel V. Sagady, P.E..................... 49 Vice President--Engineering and Product Development**
Michael D. Straney........................ 56 Vice President--Europe**
Gary J. Witosky........................... 42 Vice President--Finance and Chief Financial Officer*
Robert A. Krause.......................... 42 Treasurer*
Glenn H. Hutchins(2)...................... 43 Director
Bret D. Pearlman(1)....................... 32 Director
David A. Stockman(2)...................... 52 Director
</TABLE>
- ------------------
* Executive Officer of the Company and the Issuer
** Executive Officer of the Issuer
(1) Class II Director
(2) Class III Director
Richard E. Dauch has been our Chief Executive Officer, President and a
member of the Board of Directors since the 1994 Acquisition. In October 1997, he
was named Chairman of the Board of Directors. Prior to March 1994, he spent
12 years at Chrysler. He left Chrysler in 1991 as Executive Vice President of
Worldwide Manufacturing. Mr. Dauch also served as group vice president of
Volkswagen of America, where he established the manufacturing facilities for the
first automotive transplant in the United States. Mr. Dauch has over 34 years of
experience in the automotive industry. In 1996, Mr. Dauch was recognized as the
Worldwide Automotive Industry Leader of the Year by the Automotive Hall of Fame
and was recently named the 1997 Manufacturer of the Year by the Michigan
Manufacturer's Association. He has lectured extensively on the subject of
45
<PAGE>
manufacturing and authored the book, Passion for Manufacturing, which is
distributed in 80 countries in several languages.
B. G. Mathis became Executive Vice President--Administration and Chief
Administrative Officer in January 1999. From August 1998 to January 1999,
Mr. Mathis served as our Executive Vice President--Special Projects of the
Company and previously was Executive Vice President and Chief Administrative
Officer since November 1997 and was Vice President--Administration and Chief
Administrative Officer since we were purchased in the 1994 Acquisition.
Mr Mathis has also served as one of our directors since October 1997.
Mr. Mathis spent 28 years at Chrysler and held increasingly responsible
executive administrative positions, including Manager of Personnel for all
Chrysler Manufacturing Operations. He retired from Chrysler in 1988.
Joel D. Robinson has been Executive Vice President and Chief Operating
Officer since August 1998 and most recently was Vice President--Manufacturing
since April 1997. Mr. Robinson joined us in March 1994 and has held various
positions, including, most recently, Executive Director of the GMT-800 Program.
Mr. Robinson began his career in the automotive industry at Ford in 1963, where
he held a series of technical and manufacturing management positions.
Mr. Robinson also worked for American Motors Corporation, serving as Director of
Vehicle Assembly, and later, at Chrysler, where he was responsible for all car
body programs.
Marion A. Cumo, Sr. has been Vice President--Materials Management since May
1996 and was Vice President--Quality Assurance and Customer Satisfaction from
March 1994 to May 1996. Prior to joining us, Mr. Cumo spent 11 years from 1980
to 1991 working as a manufacturing executive at Chrysler. His most recent title
at Chrysler was General Plants Manager of Assembly Operations. After leaving
Chrysler in 1991, Mr. Cumo became President of Tri-County Chrysler Products in
Peebles/West Union, Ohio, and also worked as an automotive manufacturing
consultant.
David C. Dauch has been Vice President--Sales, Marketing and Capacity
Planning since August 1998 and most recently was Director of Sales--GM Full-Size
Truck Programs since May 1996, and previously was Manager--Sales Administration
since joining us in July 1995. Prior to joining us, Mr. Dauch held various
positions at Collins & Aikman Products Company, including Sales Manager, from
September 1987. David C. Dauch is a son of Richard E. Dauch.
Richard F. Dauch has been Vice President--Manufacturing since August 1998
and most recently was Director--Strategic and Capacity Planning since February
1998, and previously was Plant Manager for the Detroit Gear & Axle Plant since
May 1996 and was Corporate Manager--Labor Relations since joining the firm in
May 1995. Prior to joining us, Mr. Dauch worked as a Senior Business Manager and
as a Business Unit Manager with United Technologies Corporation from February
1992. Prior to his automotive career, Mr. Dauch served in the U.S. Army for
nine-years with assignments including platoon leader and company commander.
Richard F. Dauch is a son of Richard E. Dauch.
George J. Dellas has been Vice President--Quality Assurance and Customer
Satisfaction since May 1996 and prior thereto was Vice President--Procurement
and Material Management since the 1994 Acquisition. Prior to joining us,
Mr. Dellas spent 11 years in executive positions of increasing responsibility at
Chrysler. Before leaving Chrysler in 1991, he served as the Director of Advanced
Planning for the Assembly Division. Mr. Dellas has over 30 years experience in
the automotive industry.
David J. Demos has been Vice President--Procurement since August 1998 and
most recently was Vice President--Sales and Business Development since November
1997 and previously was Vice President--Sales since May 1996. Prior to joining
us, Mr. Demos worked for GM for 21 years in various engineering, quality and
sales positions in the United States and overseas. In his most recent position
with GM he was chief engineer for the European business unit of GM's Saginaw
Division and chief engineer of GM final drive systems. Since joining us he has
held the positions of Executive Director, Sales and Marketing, and Director,
Sales, Marketing and Planning.
Patrick S. Lancaster has been Vice President, General Counsel and Secretary
since November 1997, and previously was General Counsel and Secretary since June
1994. Prior to joining us, Mr. Lancaster worked at Fruehauf Trailer Corporation
and its predecessor company from 1981 to 1994 where he last served as General
Counsel and Assistant Secretary from March 1990.
46
<PAGE>
Allan R. Monich has been Vice President--Human Resources since August 1998
and most recently was Vice President--Personnel since November 1997. Mr. Monich
served as plant manager for the Buffalo Gear & Axle plant since our formation in
March 1994. Prior to joining us in March 1994, Mr. Monich worked for GM for
21 years in the areas of manufacturing, quality, sales and engineering,
including four years as a GM plant manager.
Daniel V. Sagady, P.E. has been Vice President--Engineering and Product
Development since November 1997 and previously was Executive Director of Product
Engineering since May 1996. Prior to his promotion, Mr. Sagady served as
Director of Product Engineering from March 1994. He began his career at GM in
1967 and has spent over 30 years in the automotive industry with both Ford and
GM where he has held various positions in manufacturing, quality, testing and
developmental engineering. Mr. Sagady is a licensed Professional Engineer.
Michael D. Straney has been Vice President--Europe since October 1998 and
most recently was Vice President--Mergers and Acquisitions since August 1998 and
previously was Vice President--Procurement since November 1997. Prior to his
current position, Mr. Straney served as Executive Director of Procurement from
May 1996 and Executive Director of Strategic Planning from August 1995 and
Director of Capacity, Planning, Modernization and Investment since joining us in
March 1994. Mr. Straney began his career in 1960 with GM and has served in
various capacities, including Plant Manager at our Buffalo facilities while they
were owned by GM, and as the Operations Manager of all driveline facilities.
Gary J. Witosky has been our Vice President--Finance and Chief Financial
Officer since March 1997. He also has been our Treasurer from March 1994 until
January 1998 and Vice President since July 1996. Prior to joining us,
Mr. Witosky worked for Park Corporation from 1986 to 1994 in Cleveland, Ohio
where he served in various positions including Corporate Controller, Assistant
Treasurer and Treasurer. In addition, Mr. Witosky spent several years in public
accounting and is a Certified Public Accountant.
Robert A. Krause has been our Treasurer since January 1998. Prior to
joining us, Mr. Krause worked for Baxter International Inc. from 1985 to 1997
where he served in various positions in treasury and corporate controller
functions including Director--International Treasury and Director--Corporate
Reporting. In addition, Mr. Krause spent several years in public accounting and
is a Certified Public Accountant.
Glenn H. Hutchins was elected one of our directors in connection with the
Recapitalization. Mr. Hutchins is a founder of Silver Lake Partners, a private
equity firm focused on technology and related investments. From 1994 until
January 31, 1999 he was a Senior Managing Director of The Blackstone Group L.P.
Mr. Hutchins was a Managing Director of Thomas H. Lee Co. ("THL") from 1987
until 1994 and, while on leave from THL during parts of 1993 and 1994, was a
Special Advisor in the White House. Mr. Hutchins is a member of the boards of
directors of Clark Refining & Marketing, Inc., Clark USA, Inc., CommNet Cellular
Inc., Corp Banca (Argentina) S.A. and Corp Group C.V.
Bret D. Pearlman was elected one of our directors in May 1998.
Mr. Pearlman became a Managing Director of The Blackstone Group L.P. in 1998,
and has been involved in the firm's principal activities since 1989.
David A. Stockman was elected one of our directors in connection with the
Recapitalization. He is a member of the limited liability company which acts as
the general partner of Blackstone. He is a Senior Managing Director of The
Blackstone Group L.P. and has been with Blackstone since 1988. Mr. Stockman is
also a Co-Chairman of the board of directors of Collins & Aikman Corporation and
a member of the boards of directors of Bar Technologies Inc., Clark Refining &
Marketing, Inc., Clark USA, Inc., and Haynes International, Inc.
Directors of each of Holdings and the Issuer hold office until the
expiration of their respective terms and until their successors have been
elected and qualified, or until their earlier death, resignation or removal.
Executive officers and other officers are elected or appointed by, and serve at
the pleasure of, the Board of Directors. Pursuant to Mr. Dauch's employment
agreement with Holdings (as successor by merger to AAMM), Holdings has agreed
that he will serve as Chairman of the Board, President and Chief Executive
Officer until the termination of the agreement. See "--Employment Agreement."
47
<PAGE>
COMMITTEES
Audit Committee. Holdings has established an Audit Committee. The Audit
Committee shall consider and recommend to the Board of Directors the engagement
of independent auditors to audit annually the books and records of Holdings and
the terms of such engagement; to review the reports of such independent
auditors; the appropriateness of the accounting principles followed in
preparation of Holdings' financial statements; to review the performance of
Holdings' program of internal control to ensure Holdings' compliance with legal
requirements; and to perform such other duties related to the foregoing as may
be directed by the Board of Directors. It is intended that Holdings will appoint
two independent directors to serve on this committee.
Executive Committee. Holdings has established an Executive Committee
consisting of Messrs. Dauch (Committee Chairman), Stockman and Hutchins. The
Executive Committee has the authority to exercise the powers of the full Board
between Board meetings.
Compensation Committee. Holdings has established a Compensation Committee
consisting of Messrs. Hutchins and Stockman. The duties of the Compensation
Committee are generally to review employment, development, reassignment and
compensation matters involving corporate officers and such other executive level
associates as may be appropriate, including, without limitation, issues relative
to salary, bonus, stock options and other incentive arrangements. The
Compensation Committee also oversees Holdings' and the Issuer's pension and
employee benefit plans. It is intended that Holdings will appoint two
independent directors to serve on this committee.
DIRECTOR COMPENSATION
Holdings expects to pay its non-employee and non-affiliated directors an
annual fee of $20,000, plus $1,000 for each regularly scheduled meeting attended
and an additional annual fee of $2,500 for service on each Board committee (or
$5,000 for chairing a Board committee).
EXECUTIVE COMPENSATION OF HOLDINGS AND THE ISSUER
The following tables set forth the compensation awarded or paid to, or
earned by, Holdings' and the Issuer's Chief Executive Officer and each of
Holdings' and the Issuer's other four most highly compensated executive officers
during 1998 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------- -------------
SECURITIES ALL OTHER
NAME AND SALARY BONUS UNDERLYING COMPENSATIONS
PRINCIPAL POSITION ($) ($)(1) OPTIONS(#) ($)(2)
- -------------------------------------------------------- -------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
Richard E. Dauch........................................ $750,000 $1,200,000 -- $ 22,700
Chairman of the Board, Chief Executive Officer and
President
B. G. Mathis............................................ 325,000 325,000 -- 8,499
Executive Vice President--Administration and Chief
Administrative Officer
Joel D. Robinson........................................ 220,837 250,000 -- 7,590
Executive Vice President--Operations and Chief
Operating Officer
Marion A. Cumo, Sr...................................... 200,000 200,000 -- 7,590
Vice President--Materials Management
George J. Dellas........................................ 200,000 200,000 -- 3,150
Vice President--Quality Assurance and Customer
Satisfaction
</TABLE>
48
<PAGE>
- ------------------
(1) Bonuses are paid in the year subsequent to the year in which they are
earned.
(2) The amounts shown represent the Issuer matching contributions in the
Issuer's qualified section 401(k) plan and the dollar value of life
insurance premiums and benefits. These amounts, expressed in the same order
as identified above, for the Named Executive Officers are as follows: Mr.
Dauch--$4,800 and $17,900; Mr. Mathis--$4,719 and $3,780; Messrs. Robinson
and Cumo, Sr.--$4,800 and $2,790; and Mr. Dellas--$0 and $3,150.
AGGREGATED OPTION/SAR EXERCISE IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/ IN-THE-MONEY OPTIONS/
SARS AT FISCAL YEAR-END (#) SARS AT FISCAL YEAR-END ($)
------------------------------ ------------------------------
NAME EXERCISEABLE UNEXERCISEABLE EXERCISEABLE UNEXERCISEABLE
- ------------------------------------------------------ ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Richard E. Dauch...................................... 7,015,551 1,730,639 $118,737,678 $ 22,048,341
B. G. Mathis.......................................... 578,337 419,539 9,566,917 5,344,927
Joel D. Robinson...................................... 8,995 125,862 114,596 1,603,482
Marion C. Cumo........................................ 336,430 125,862 5,599,132 1,603,482
George J. Dellas...................................... 336,430 125,862 5,599,132 1,603,482
</TABLE>
STOCK OPTIONS
Management Stock Option Plan
Holdings has adopted The Amended and Restated American Axle & Manufacturing
of Michigan, Inc. Management Stock Option Plan (the "Option Plan") under which
Holdings is authorized to grant options to purchase up to 5,621,625 shares of
Common Stock.
The Option Plan provides for the issuance of shares of authorized but
unissued or reacquired shares of Common Stock, subject to adjustment to reflect
certain events such as stock dividends, stock splits, mergers or reorganizations
of or by Holdings. The Option Plan is intended to assist Holdings in attracting
and retaining employees of outstanding ability and to promote the identification
of their interests with those of the stockholders of Holdings. The Option Plan
permits the grant of non-qualified stock options to purchase shares of Common
Stock. Unless sooner terminated by the Holdings' Board of Directors, the Option
Plan will terminate on December 31, 2004. Such termination will not affect the
validity of any outstanding grants on the date of the termination.
The Compensation Committee of the Board of Directors of Holdings
administers the Option Plan. The Board of Directors may from time to time amend
the terms of any grant of options, but, except for adjustments made upon a
change in the Common Stock by reason of a stock split, spin-off, stock dividend,
recapitalization, reorganization or similar event, such action will not
adversely affect the rights of any participant under the Option Plan without
such participant's consent. The Board of Directors will retain the right to
amend, suspend or terminate the Option Plan.
49
<PAGE>
In November 1997, Holdings granted certain options (the "Options") to key
employees to purchase an aggregate, less subsequently forfeited shares, of
approximately 5,203,220 shares of Common Stock (the "Option Shares") at a
purchase price of $4.26 per share. One-third of the Options vest and become
exercisable ratably over 5 years; provided, however, that such Options will
become immediately vested and exercisable upon the earlier of a Change of
Control, for certain participants, or a participant's termination of employment
due to death or disability, without Cause or voluntary termination of employment
for Good Reason, as those terms are defined in the Option Plan. The remaining
two-thirds of the Options vest and become exercisable on the seventh anniversary
of the grant date; provided, however, that such options may become exercisable
sooner upon the achievement of certain performance targets as specified in the
Option Plan. The Compensation Committee of Holdings has authorized the grant of
approximately 407,000 additional options under the Management Stock Option Plan
in 1999. The purchase price of such options will be the fair market value of the
Common Stock at the date the options are granted.
Replacement Plan
Holdings has also adopted the 1997 American Axle & Manufacturing of
Michigan, Inc. Replacement Plan (the "Replacement Plan") under which Holdings is
authorized to grant options to purchase up to 1,858,095 shares of Common Stock
at a nominal exercise price.
The purpose of the Replacement Plan is to provide the award of Replacement
Stock Options (as defined in the Replacement Plan) to certain current or former
executive officers or directors ("Eligible Holders") of Holdings whose awards
under the American Axle & Manufacturing, Inc. Phantom Stock Plan dated March 1,
1994 (the "PSP Plan") were voluntarily canceled in connection with the
Recapitalization. Following the Recapitalization, the PSP Plan was terminated.
The Replacement Stock Options are intended to preserve the economic value of the
cancelled awards. We expect that we will benefit from the added interest which
such Eligible Holders will have in our welfare as a result of their proprietary
interest in our success. Holdings has granted options to purchase an aggregate
of 1,858,095 shares of Common Stock under the Replacement Plan, subject to
adjustment to reflect certain events such as stock dividends, stock splits,
mergers or reorganizations of or by us. No further options may be granted under
the Replacement Plan.
The Compensation Committee of the Board of Directors administers the
Replacement Plan. The Board of Directors may from time to time amend the terms
of any grant of options, but, except for adjustments made upon a change in the
Common Stock by reason of a stock split, spin-off, stock dividend,
recapitalization, reorganization or similar event, such action will not
adversely affect the rights of any participant under the Replacement Plan
without such participants consent. The Board of Directors retains the right to
amend, suspend or terminate the Replacement Plan. The Replacement Stock Options
are non-qualified options and are fully vested and exercisable.
Nonqualified Stock Option Agreement
AAM, Inc. and Richard E. Dauch are parties to a nonqualified stock option
agreement dated February 27, 1994 and amended as of December 21, 1994. Pursuant
to the agreement, AAM, Inc. granted Mr. Dauch an option to purchase shares of
common stock of AAM, Inc. (the "AAM, Inc. Option"), with such number of shares
to be adjusted to reflect certain events such as stock dividends, stock splits,
mergers or reorganizations. In connection with the Recapitalization, Holdings
agreed to provide Mr. Dauch with an option to purchase 6,891,915 shares of
Holdings' Common Stock (the "Exchange Option") at a nominal exercise price per
share in exchange for the AAM, Inc. Option. The terms of the Exchange Option are
set forth in a nonqualified option agreement dated as of October 30, 1997 (the
"Nonqualified Option Agreement") (as amended by the Amendatory Agreement dated
December 11, 1998) between American Axle & Manufacturing of Michigan, Inc. and
Mr. Dauch. The Exchange Option expires 10 years after the date such Exchange
Option was granted, and is fully vested and exercisable.
The 1999 Stock Incentive Plan
The following are the material terms of the 1999 Stock Incentive Plan (the
"Incentive Plan"), approved by the Board of Directors as of January 8, 1999. The
purpose of the Incentive Plan is to provide our directors, officers and key
employees ("Participants") an opportunity to benefit from an appreciation in the
value of the
50
<PAGE>
Common Stock, thus providing an increased incentive for the Participants to
contribute to our future success and prosperity, enhancing the value of the
Common Stock for the benefit of the stockholders and increasing our ability to
attract and retain highly qualified individuals. The total number of shares of
Common Stock that may be issued under the Incentive Plan is 3,500,000 shares.
The maximum number of shares of Common Stock for which awards may be granted
during a calendar year to any Participant shall be 1,500,000 shares.
The Incentive Plan is administered by the Compensation Committee of the
Board of Directors or a subcommittee thereof. The Compensation Committee has the
authority to select the Participants to be granted awards under the Incentive
Plan, to determine the size and terms of an award and to determine the time when
grants of awards will be made. The Compensation Committee also is authorized to
interpret the Incentive Plan, to establish, amend and rescind any rules and
regulations relating to the Incentive Plan and to make any other determinations
that it deems necessary or desirable for the administration of the Incentive
Plan.
Under the Incentive Plan, the Compensation Committee may grant awards in
the form of options, which may be incentive stock options within the meaning of
Section 422 of the Code or non-qualified stock options; stock appreciation
rights; or other awards that are valued in whole or in part by reference to, or
are otherwise based on, the value of the Common Stock.
The terms and conditions of options granted under the Incentive Plan shall
be established by the Compensation Committee and set forth in a stock option
agreement with the Participant. The option price per share of Common Stock shall
be determined by the Compensation Committee but shall not be less than the fair
market value of the Common Stock on the date of the grant. Options granted under
the Incentive Plan shall be exercisable at such time and upon such terms and
conditions as may be determined by the Compensation Committee, but in no event
shall an option be exercisable more than ten years after the date it is granted.
The Compensation Committee may grant a stock appreciation right independent
of or in conjunction with an option or designated portion thereof at the time
the related option is granted or at any time prior to the exercise or
cancellation of the related option. The exercise price shall be an amount
determined by the Compensation Committee but in no event shall such amount be
less than the greater of:
(i) the fair market value of a share on the date the stock
appreciation right is granted or, in the case of a stock appreciation right
granted in conjunction with an option, or a portion thereof, the option
price of the related option; and
(ii) an amount permitted by applicable laws, rules, by-laws or
policies of applicable regulatory authorities or stock exchanges.
Upon the exercise of a stock appreciation right, the Participant shall be
entitled to receive with respect to each share to which such stock appreciation
right relates an amount in cash and/or shares, as the case may be, equal to the
excess of:
(i) the fair market value of a share of Common Stock on the date of
exercise, over
(ii) the exercise price of the stock appreciation right.
The Compensation Committee may impose conditions upon the exercisability of
stock appreciation rights.
The Compensation Committee may grant, in its sole discretion, other awards
of shares and awards that are valued in whole or in part by reference to, or are
otherwise based on the fair market value of, shares of Common Stock. Certain of
such other share-based awards may be granted in a manner that is deductible by
us under Section 162(m) of the Code and may be based upon stock price, market
share, sales, earnings per share, return on equity, costs or other performance
goals approved by the Compensation Committee. The Compensation Committee also
has the authority to grant other stock-based awards not specifically described
above, including awards of Common Stock subject to vesting conditions or
restrictions on transfer.
Except as otherwise provided in the Incentive Plan or in an award
agreement, an award may be exercised for all, or from time to time any part, of
the shares of Common Stock for which it is then exercisable. The purchase price
for the shares of Common Stock subject to an award may be paid to us in full at
the time of exercise at the election of the Participant:
51
<PAGE>
(i) in cash,
(ii) in shares of Common Stock having a fair market value equal to the
aggregate option price for the shares of Common Stock being purchased and
satisfying such other requirements as may be imposed by the Compensation
Committee,
(iii) partly in cash and partly in such shares of Common Stock, or
(iv) through the delivery of irrevocable instructions to a broker to
deliver promptly to us an amount equal to the aggregate exercise price for
the shares of Common Stock being purchased.
Each award will be non-transferable during the lifetime of the Participant
unless otherwise provided by the Compensation Committee. The Compensation
Committee may establish the terms and conditions, if any, under which awards may
be exercised by Participants following the termination of their employment or
service on the Board, as applicable.
The Board of Directors may suspend, amend or terminate the Incentive Plan,
in whole or in part. No amendment may be made without approval of the
stockholders, however, if such approval is required by stock exchange rules or
by law. Furthermore, no amendment, suspension or termination of the Incentive
Plan may, without the consent of a Participant, impair any of the rights under
any award previously granted to such Participant under the Incentive Plan.
In the event of any change in the outstanding shares of Common Stock by
reason of any stock dividend or split, reorganization, recapitalization, merger,
consolidation, spin-off, combination or exchange of shares of Common Stock or
other corporate exchange, or any distribution to stockholders of shares of
Common Stock, the Compensation Committee may make such substitution or
adjustment as it deems to be equitable to any affected terms of such awards. In
the event of a change of control, as defined in the Incentive Plan, the award
may provide that the nonvested portion thereof shall vest and become exercisable
in full.
RETIREMENT PROGRAM
The retirement program for our executives consists of the American Axle &
Manufacturing, Inc. Retirement Program for Salaried Employees, which is a
tax-qualified plan and subject to ERISA, as well as one non-qualified plan
(collectively the American Axle & Manufacturing Supplemental Executive
Retirement Program). The contributory portion of the tax-qualified plan provides
defined benefits under a formula based on eligible years of credited service,
and upon the average monthly remuneration received in the highest sixty months
out of the final ten years of service, subject to certain Code limitations which
change from time to time. In addition, employees receive an annual retirement
benefit which is equal to the sum of 100% of their contributions upon retirement
at or after age 65. If employees do not elect to contribute to the tax-qualified
plan, they are entitled to receive only basic retirement benefits equal to a
flat dollar amount per year of credited service, essentially equivalent to the
American Axle & Manufacturing Hourly-Rate Employees Pension Plan. All
participants in the plan are entitled to this flat dollar benefit. In accordance
with its terms, benefits under the tax-qualified plan fully vest after five
years of credited service and are payable at the normal retirement age of 65, or
earlier at the election of the participant, either in the form of a single life
annuity or in a reduced amount, in joint and survivor form. Supplemental early
retirement benefits are available for certain employees hired before 1998.
If executives made the required contributions to the tax-qualified plan,
they may also be eligible to receive the regular form of a supplemental
executive benefit. The regular form of the supplemental executive retirement
benefit will provide the executive with total monthly retirement benefits equal
to 2% of the average monthly base salary received in the highest sixty months
out of the final ten years of service, times the years of credited service
calculated for purposes of the contributory portion of the qualified plan, less
the sum of all benefits payable under this plan before reduction for any
survivor option plus 2% times the years of credited service times the maximum
monthly Social Security benefit payable to a person retiring at age 65. Table I
shows the regular form of the estimated total annual retirement benefit related
to final average base salary as of December 31, 1997, that would be payable in
12 equal monthly installments per annum as a single life annuity to executives
retiring in 1998 at age 65 (the benefits shown are based upon maximum annual
Social Security benefits of $16,104 payable to persons retiring in 1998). If the
executive elects to receive benefits in the form of 60% joint and survivor
annuity,
52
<PAGE>
the amounts shown would generally be reduced by 5%, subject to certain
adjustments depending on the age differential between spouses.
TABLE I
PROJECTED TOTAL ANNUAL SUPPLEMENTAL EXECUTIVE RETIREMENT BENEFITS
ASSUMING EXECUTIVE QUALIFIES FOR REGULAR RETIREMENT PROGRAM BENEFITS
<TABLE>
<CAPTION>
YEARS OF ELIGIBLE CONTRIBUTORY CREDITED SERVICE
- ---------------------------------------------------------------------
HIGHEST FIVE-YEAR
ANNUAL SALARY 15 YEARS 25 YEARS 35 YEARS 45 YEARS
- ----------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 150,000 $ 44,540 $ 74,240 $103,940 $133,640
200,000 55,169 91,948 128,727 165,506
300,000 85,169 141,948 198,727 255,506
400,000 115,169 191,948 268,727 345,506
500,000 145,169 241,948 338,727 435,506
600,000 175,169 291,948 408,727 525,506
</TABLE>
The annual base salaries for the most recent year(s) considered in the
calculations of the averages in Table I above are those reported in the Summary
Compensation Table in the column labeled "Salary."
An executive may be eligible to receive the alternative form of the
supplemental executive retirement benefit in lieu of the regular form of the
supplemental executive retirement benefit. The executive will receive the
greater of the regular form or alternative form of the supplemental executive
retirement benefit. The sum of the qualified plan benefits and the alternative
supplemental retirement benefit will provide the executive with total annual
retirement benefits that are equal to 1.5% times eligible years of credited
service times the average monthly compensation of the executive's highest five
years of total direct compensation (i.e., the average of the 60 highest months
of base salary plus the average monthly compensation of the five highest years
of bonus and/or restricted stock units awarded) out of the last ten years, less
100% of the maximum monthly Social Security benefit payable to a person in the
year of retirement. Table II shows the alternative form of the estimated total
supplemental executive annual retirement benefit related to final average total
direct compensation as of December 31, 1997, that would be payable in 12 equal
monthly installments per annum as a single annuity to executives retiring in
1998 at age 65 (the benefits shown are based upon the maximum Social Security
benefits of $16,104 payable to persons retiring in 1998). The amounts shown
would be reduced as described above if the executive were to elect joint and
survivor benefits.
TABLE II
PROJECTED TOTAL ANNUAL ALTERNATIVE RETIREMENT BENEFITS
ASSUMING EXECUTIVE QUALIFIES FOR ALTERNATIVE SUPPLEMENTAL
EXECUTIVE RETIREMENT PROGRAM BENEFITS
<TABLE>
<CAPTION>
YEARS OF ELIGIBLE CONTRIBUTORY CREDITED SERVICE
- --------------------------------------------------------------------------
HIGHEST FIVE-YEAR
AVERAGE ANNUAL TOTAL
DIRECT COMPENSATION 15 YEARS 25 YEARS 35 YEARS 45 YEARS
- -------------------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
$ 400,000 $ 76,916 $139,166 $201,416 $ 263,666
500,000 96,396 171,396 246,396 321,396
1,000,000 208,896 358,896 508,896 658,896
1,200,000 253,896 433,896 613,896 793,896
1,500,000 321,396 546,396 771,396 996,396
1,800,000 388,896 658,896 928,896 1,198,896
</TABLE>
The annual total direct compensation for the most recent year considered in
the calculation of average annual total direct compensation in Table II above
consists of salaries and bonuses as reported in the Summary Compensation Table
in the column labeled "Salary" and in the column labeled "Bonus."
53
<PAGE>
The regular or alternative form of the supplemental executive retirement
benefit is provided under a program which is non-qualified for tax purposes and
not pre-funded. Supplemental executive retirement benefits under the regular and
alternative formula can be reduced or eliminated for both retirees and active
employees by the Compensation Committee and the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For a discussion of certain business relationships between Richard E. Dauch
and us, see "Certain Transactions--Transactions with Management." Holdings has
established a Compensation Committee and intends to appoint two independent
directors to serve on this Committee.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
As permitted by the Delaware General Corporation Law ("Delaware Law"),
Holdings' Certificate of Incorporation eliminates the personal liability of a
director of Holdings for monetary damages for breach of fiduciary duty of care
as a director, except for:
(i) any breach of the director's duty of loyalty to Holdings or its
stockholders,
(ii) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
(iii) unlawful payment of dividends or stock purchases or redemptions
pursuant to Section 174 of the Delaware Law, and
(iv) any transaction from which the director derived an improper
personal benefit.
In addition, Holdings' Certificate of Incorporation provides for
indemnification, to the full extent specifically authorized under the Delaware
Law, of directors and officers of Holdings and persons who serve at the request
of Holdings as a director, officer, employee, agent or trustee of another
corporation, partnership, joint venture, trust or other enterprise. Holdings
also maintains an insurance policy that insures directors and officers of
Holdings and its subsidiaries against claims arising from alleged wrongful acts
in their respective capacities as directors and officers.
EMPLOYMENT AGREEMENT
Holdings' has an employment agreement with Mr. Dauch, which expires on
December 31, 2004, subject to periodic renewal, and provides for an annual base
salary of $750,000. Pursuant to the agreement, Mr. Dauch will be a voting member
of the Board of Directors for the term of his employment. Mr. Dauch's employment
agreement also provides, among other things, (i) for an annual bonus payable on
or before the March 15th following the year in which such bonus was earned and
(ii) participation in the Option Plan. Under the terms of his employment
agreement, Mr. Dauch is bound by confidentiality and non-competition covenants
for a period of two years following the expiration of the employment agreement.
Holdings may terminate Mr. Dauch's employment agreement for Cause (as defined
therein).
The Issuer has purchased a $5.0 million life insurance policy for the
benefit of Mr. Dauch, which the Issuer will maintain during employment and for
two years after termination other than for cause.
In connection with the commencement of his employment with American Axle &
Manufacturing, Inc., Mr. Dauch received an option to purchase shares of AAM,
Inc. In connection with the Recapitalization, Holdings agreed to provide Dauch
with an option to purchase 6,891,915 shares of Holdings' Common Stock (the
"Exchange Option") at a nominal exercise price per share in exchange for the
AAM, Inc. Option. The terms of the Exchange Option are set forth in a
nonqualified option agreement dated as of October 30, 1997 between American
Axle & Manufacturing of Michigan, Inc. and Mr. Dauch. The Exchange Option
expires 10 years after the date such Exchange Option was granted, and is fully
vested and exercisable.
54
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of February 1, 1999 (after giving effect to the
issuance by Holdings of 7,000,000 shares of Common Stock in connection with the
IPO) by (i) each person known by us to be the beneficial owner of 5% or more of
the outstanding Common Stock, (ii) each of the directors of Holdings and
(iii) all of Holdings' directors and our executive officers as a group. The
following table does not reflect additional shares of Common Stock that may have
been purchased by such persons in connection with the IPO. Unless otherwise
indicated, we believe that the beneficial owner has sole voting and investment
power over such shares. Holdings, Blackstone, Jupiter and Messrs. Dauch,
Alexander, Witosky and Harris are parties to a Stockholders' Agreement that
provides for certain tag-along and drag-along rights, the operation of which
could result in a change of control in American Axle. See "Related Party
Transactions--Stockholders' Agreement and Recapitalization."
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP PERCENT
NAME AND ADDRESS OF (NUMBER OF SHARES OF
BENEFICIAL OWNER BENEFICIALLY OWNED) CLASS
- ------------------------------------------------------------------------------ ------------------------- ---------
<S> <C> <C>
Blackstone(1)................................................................. 26,510,992 54.3%
Richard E. Dauch(2)(3)........................................................ 10,538,436 21.6
Glenn H. Hutchins(4).......................................................... -- --
B.G. Mathis(3)................................................................ 578,337 1.2
Bret D. Pearlman(5)........................................................... 26,510,992 54.3
David A. Stockman(5).......................................................... 26,510,992 54.3
All directors of Holdings and executive officers of the Company as a group
(18 persons)(6)............................................................. 38,797,970 79.5%
</TABLE>
- ------------------
(1) 26,510,992 shares, or 54.3%, of the outstanding shares are held collectively
by Blackstone Capital Partners II Merchant Banking Fund L.P., Blackstone
Offshore Capital Partners II L.P. and Blackstone Family Investment
Partnership II L.P. Blackstone Management Associates II L.L.C. ("BMA") is
the general partner of each of such entities. Messrs. Peter G. Peterson and
Stephen A. Schwarzman are the founding members of BMA and as such may be
deemed to share beneficial ownership of the shares owned by Blackstone.
Blackstone's business address is 345 Park Avenue, 31st Floor, New York, New
York 10154.
(2) Mr. Dauch's business address is 1840 Holbrook Avenue, Detroit, Michigan
48212. Includes 10,367,870 shares held by the Dauch Annuity Trust 2001, the
Dauch Annuity Trust 2004 and the Dauch Annuity Trust 2007 (collectively, the
"Trusts"). Mr. Dauch is Trustee of the Trusts and has the power to sell,
transfer or otherwise dispose of shares owned by the Trusts. Mr. Dauch
disclaims beneficial ownership of such shares.
(3) Includes 7,015,551 and 578,337 shares issuable pursuant to options that are
currently exercisable by Mr. Dauch and Mr. Mathis, respectively.
(4) Until January 31, 1999 Mr. Hutchins was a Senior Managing Director of The
Blackstone Group L.P.
(5) Each such person's business address is 345 Park Avenue, 31st Floor, New
York, New York 10154. Mr. Stockman is a member of BMA, which has investment
and voting control over the shares held or controlled by Blackstone.
Beneficial ownership of shares by such two individuals include the shares
beneficially owned by Blackstone. Each of such persons disclaims beneficial
ownership of such shares.
(6) Includes options to purchase 8,598,404 shares of Common Stock, and shares of
Common Stock beneficially owned by Blackstone as described in notes (1) and
(5) above.
RELATED PARTY TRANSACTIONS
TRANSACTIONS WITH BLACKSTONE AFFILIATES
In connection with the Recapitalization, we entered into a monitoring
agreement dated as of October 29, 1997 with Blackstone Management Partners L.P.
("Blackstone Management"), an affiliate of Blackstone (the "Monitoring
Agreement"), pursuant to which Blackstone Management will provide certain
advisory and consulting services to us in connection with our ongoing strategic
and operational affairs. The term of the Monitoring Agreement expires when
Blackstone ceases to own at least one-half of the Common Stock held by it
55
<PAGE>
at the closing of the Recapitalization. Under the Monitoring Agreement, we paid
Blackstone $2.4 million and $0.8 million during the years ended December 31,
1998 and 1997. On each of March 31 and September 30 after December 31, 1998, we
will pay Blackstone Management $1.0 million. In addition, on each March 31,
commencing in 1999, we will pay Blackstone an amount equal to 1.0% of EBITDA (as
defined in the Monitoring Agreement) for the most recently completed fiscal year
less $2.0 million (if such amount is positive). In addition, in 1997 we paid
Blackstone Management a $9.3 million transaction fee for services provided in
connection with the Recapitalization. Pursuant to the Recapitalization
Agreement, we paid approximately $5.4 million of legal, accounting and financial
advisory fees and expenses incurred in connection with the Recapitalization on
behalf of Blackstone. In 1998 we paid a $0.3 million transaction fee to
Blackstone Management for services provided in connection with the Albion
acquisition. David A. Stockman, who serves as one of our directors, is a senior
managing director of The Blackstone Group L.P., an affiliate of Blackstone
Management. Bret D. Pearlman, who also serves as one of our directors, is a
managing director of The Blackstone Group L.P. Another director, Glenn H.
Hutchins, was formerly a senior managing director of The Blackstone Group L.P.
STOCKHOLDERS' AGREEMENT AND RECAPITALIZATION
In connection with the Recapitalization, we entered into the Stockholders'
Agreement with Blackstone, Jupiter and Richard E. Dauch, Michael D. Alexander,
Gary J. Witosky and Morton E. Harris which provides for, among other things, the
matters described below:
Tag-Along Rights. So long as Blackstone owns not less that one-third of
the Common Stock held by it at the closing of the Recapitalization, the
Stockholders' Agreement grants each of Jupiter and Messrs. Dauch, Alexander,
Witosky and Harris the right, subject to certain exceptions, in connection with
a proposed transfer of Common Stock by Blackstone, to require the proposed
transferee to purchase a certain percentage of the Common Stock owned by them at
the same price and upon the same terms and conditions.
Drag-Along Rights. So long as Blackstone owns not less than one-third of
the Common Stock held by it at the closing of the Recapitalization, the
Stockholders' Agreement grants Blackstone the right, in connection with an offer
by a third party to purchase all of the Common Stock held by Blackstone, Jupiter
and Messrs. Dauch, Alexander, Witosky and Harris, to require Jupiter and Messrs.
Dauch, Alexander, Witosky and Harris to transfer all of the Common Stock owned
by them to such third party on the terms of the offer so accepted by Blackstone,
subject to certain restrictions.
Registration Rights. The Stockholders' Agreement grants "piggy-back"
registration rights to Blackstone, Jupiter and Messrs. Dauch, Harris, Alexander
and Witosky, subject to certain limitations, each time Holdings files a
registration statement in connection with the sale of Common Stock by Holdings.
The Stockholders' Agreement also grants "demand" registration rights to
Blackstone, Jupiter and Messrs. Dauch and Harris, subject to certain
limitations.
Participation Rights. The Stockholders' Agreement grants to Jupiter and
Messrs. Dauch, Alexander, Witosky and Harris the right, upon any issuance by
Holdings of additional Common Stock to Blackstone (other than pursuant to a
public offering or a pro rata issuance to all holders of Common Stock), to
subscribe for additional Common Stock at the same price and upon the same
conditions so that, after giving effect to the issuance and the exercise of such
rights, the Common Stock owned by each represents the same percentage of the
total outstanding Common Stock on a fully diluted basis as was owned by each
immediately prior thereto.
Approval of Affiliate Transactions. The Stockholders' Agreement generally
provides that, subject to certain conditions, Holdings will not, and will cause
its subsidiaries not to, enter into any transaction with an affiliate of
Holdings (other than Holdings and its subsidiaries) (an "Affiliate") for the
benefit of such an Affiliate that would require consent of the banks under the
Credit Facilities among us and the lenders thereto unless such transaction
o is approved by the Board of Directors of Holdings;
o is contemplated by the Recapitalization Agreement; or
o is the payment of certain management and monitoring fees or
customary investment banking fees to Blackstone.
56
<PAGE>
Such transactions with an Affiliate requiring the consent of the banks under the
Credit Facilities generally include
o the sale or transfer to, or purchase or acquisition of assets from
or any other transaction with, an Affiliate, subject to specified
exceptions; and
o the payment of monitoring or management fees to Blackstone or its
affiliates in an amount exceeding in any fiscal year the greater of:
o $2,000,000; or
o an amount equal to 1% of EBITDA (as defined under the Credit
Facilities) for the prior fiscal year.
Termination. The Stockholders' Agreement will terminate on the earliest
date on which Blackstone and its affiliates do not collectively own one-fifth or
more of the Common Stock on a fully diluted basis. See "Principal Stockholders."
In connection with the Recapitalization:
o Holdings repurchased shares of Common Stock held by Jupiter and
Morton E. Harris for an aggregate purchase price of approximately
$195.0 million and $21.3 million, respectively;
o Holdings redeemed all of the outstanding shares of Class A Preferred
Stock of the Issuer held by Jupiter for approximately $170.2
million;
o Holdings made a $74.2 million payment to Jupiter related to certain
tax payments; and
o the Issuer paid to James W. McLernon, the former chairman of the
board of directors of the Issuer, a bonus of approximately
$7.2 million pursuant to a letter agreement dated July 29, 1997.
Disposition Agreement. In December 1998, we entered into a disposition
agreement with Mr. Dauch ("Disposition Agreement"), which provides that upon the
termination of Mr. Dauch's employment due to death or Disability (as defined in
the Disposition Agreement) and subject to certain conditions, Mr. Dauch, his
estate or a trust acting on behalf of Mr. Dauch or the beneficiaries of his
estate (collectively the "Selling Entity"), will have the right to sell any
shares of Common Stock held by the Selling Entity for a period up to six months
after such termination, notwithstanding restrictions on transfer set forth in
the Stockholders' Agreement. If the Selling Entity offers such shares in a
registered offering pursuant to the demand rights provided for in the
Stockholders' Agreement during such six-month period, the Selling Entity would
be entitled to include its shares in such registered offering prior to shares,
if any, to be offered by Holdings or a third party. If the Selling Entity wishes
to accept an offer for such shares from a third party, first Holdings, and then
Blackstone, would have a right of first refusal to purchase such shares. In the
event of any conflicts between the Disposition Agreement and the Stockholders
Agreement, the Disposition Agreement shall control.
TRANSACTIONS WITH PARK CORPORATION
Immediately after the closing of the Recapitalization, Jupiter, a wholly
owned subsidiary of Park Corporation, owned 5.1% of the Common Stock. Prior to
the Recapitalization, Park Corporation provided the Issuer cash management
services whereby available cash balances of the Issuer were invested on its
behalf. Park Corporation received $12,536,288 from the Issuer in consideration
for services it provided to the Issuer from March 1994 to September 1997. In
addition, prior to the Recapitalization, the Issuer purchased certain
manufacturing equipment from Motch Corporation, an affiliate of Park
Corporation. During 1997, payments to Motch Corporation from the Issuer for such
equipment totaled approximately $9.6 million.
TRANSACTIONS WITH MANAGEMENT
In connection with the Recapitalization, the Issuer paid a bonus of
$11.0 million to Richard E. Dauch. In connection with this payment, Mr. Dauch
agreed to repay to the Issuer any refund, overpayment or other redistribution of
Election Taxes to be received by him from Jupiter in an amount up to
$11.0 million. The "Election Taxes" were corporate taxes due by Jupiter as a
result of the Section 338(h)(10) of the Internal Revenue Code election. The
amount of the tax payment was estimated at the closing of the Recapitalization
and
57
<PAGE>
was prefunded by Holdings. The final Election Taxes were paid by Jupiter as the
parent of the Issuer and the overpayment was refunded to the shareholders of the
Issuer. At Mr. Dauch's direction, Jupiter paid the Issuer approximately
$7.2 million due to Mr. Dauch in May 1998 in full satisfaction of such
agreement.
Holdings made a loan of $13.0 million in the third quarter of 1998 to
Richard E. Dauch, Chairman, pursuant to a $15.0 million Senior Secured
Promissory Note facility (the "Note"). The Note and interest payable at six
month LIBOR plus 2% was repaid in 1999.
Two sons of Richard E. Dauch and a son of Mr. Mathis are employed by us.
David C. Dauch serves as Vice President--Sales, Marketing and Capacity Planning,
Richard F. Dauch serves as Vice President--Manufacturing and Robert Mathis
serves as Manager, Human Resources Operations.
DESCRIPTION OF CERTAIN INDEBTEDNESS
SENIOR SECURED CREDIT FACILITIES
In connection with the Recapitalization, The Chase Manhattan Bank ("Chase")
and a group of other lenders provided us with Credit Facilities in an aggregate
principal amount not to exceed $750 million of which as of December 31, 1998:
o $375 million is borrowed under the Tranche B Term Loan Facility (as
defined below);
o $125 million is available under the Tranche A Term Loan Facility (as
defined below) to finance Capital Expenditures as defined in the
Credit Facilities and refinance the Revolving Credit Facility; and
o $223 million was borrowed and $27 million is available under the
Revolving Credit Facility (as defined below) for general corporate
purposes, each subject to customary borrowing conditions.
The Credit Facilities consist of:
o a Senior Secured Term Loan Facility (the "Tranche A Term Loan
Facility") providing for delayed draw term loans in an aggregate
principal amount of $125 million;
o a Senior Secured Term Loan Facility (the "Tranche B Term Loan
Facility" and, together with the Tranche A Term Loan Facility, the
"Term Loan Facility")) providing for term loans in an aggregate
principal amount of $375 million; and
o a Senior Secured Revolving Credit Facility (the "Revolving Credit
Facility") providing for revolving loans and the issuance of letters
of credit in an aggregate principal and stated amount not to exceed
$250 million (of which not more than $30 million may be represented
by letters of credit).
Except as set forth below, the full amount of the Tranche B Term Loan
Facility was drawn in a single drawing at the closing of the Recapitalization
and amounts repaid and prepaid under any Term Loan Facility may not be
reborrowed. Loans under the Tranche A Term Loan Facility are available at any
time prior to October 1999. Loans and letters of credit under the Revolving
Credit Facility are available at any time prior to October 30, 2004. In
connection with the Revolving Credit Facility, we may make short-term borrowings
of up to $20 million of swing-line loans. Any such swing-line loans will reduce
the amount available under the Revolving Credit Facility on a dollar-for-dollar
basis.
Loans made under the Tranche A Term Loan Facility will amortize
semi-annually and mature on October 30, 2004. The Tranche B Term Loan Facility
amortizes semi-annually and matures on April 30, 2006. Assuming the Tranche A
Term Loan Facility is fully drawn, annual payments for such facility total $15.0
million in 2000, $20.0 million in 2001, $25.0 million in 2002, $30.0 million in
2003, concluding with $35.0 million in 2004. Annual payments for the Tranche B
Term Loan Facility total $1.0 million from and including 2000 through 2003,
$21.0 million in 2004, $175.0 million in 2005, concluding with a final payment
in 2006 of $175.0 million on the maturity date.
We are required to make mandatory prepayments of term loans, and
commitments will be mandatorily reduced, in amounts, at specified times and
subject to certain exceptions:
58
<PAGE>
o in respect of:
(i) 75% of our consolidated excess cash flow and our subsidiaries;
or
(ii) 50% of our consolidated excess cash flow and our subsidiaries
if we meet specified financial performance tests (in each case after
giving effect to debt service on the Credit Facilities);
o in respect of 100% of the net proceeds of:
(i) certain dispositions by us or any of our subsidiaries of assets
or the stock of subsidiaries (other than asset sales effected pursuant
to certain lease financings and the Receivables Facility); or
(ii) the incurrence of certain indebtedness by our subsidiaries or
us; and
o in respect of 50% of the net proceeds of certain sales of our equity
securities other than the net proceeds of the sale of the first
$175.0 million of such equity securities (of which the IPO
constituted approximately $108 million).
Amounts outstanding under the Credit Facilities are unconditionally and
irrevocably guaranteed by Holdings and certain of its subsidiaries. In addition,
the Credit Facilities are secured by first priority security interests in
substantially all of our tangible and intangible assets and those of our
subsidiaries (excluding receivables related to the Receivables Facility),
including all the capital stock of, or other equity interests in, our domestic
subsidiaries and its existing or subsequently acquired or organized direct or
indirect domestic subsidiaries and 65% of the capital stock of, or other equity
interests in, each of our foreign subsidiaries.
At our option, the interests rates applicable to the Credit Facilities are
either based on Chase's alternate base rate plus a margin ranging from 0.50% to
1.50% or the eurodollar rate plus a margin ranging from 1.50% to 2.50%. The
alternate base rate is the higher of Chase's Prime Rate and the federal funds
effective rate plus 0.50%.
We pay a per annum fee equal to the applicable margin with respect to the
eurodollar rate then in effect under the Revolving Credit Facility multiplied by
the aggregate face amount of outstanding letters of credit under the Revolving
Credit Facility and a per annum fee ranging from 0.375% to 0.50% multiplied by
the undrawn portion of the commitments under the Tranche A Term Loan Facility
and the Revolving Credit Facility.
The Credit Facilities contain various operating covenants which, among
other things, impose certain limitations on our ability to redeem or repurchase
capital stock, incur liens, incur indebtedness, or merge, make acquisitions or
sell assets. The Credit Facilities also restrict the payment of dividends on, or
other distributions with respect to, our capital stock, other than:
o dividends or distributions payable solely in Common Stock; and
o subject to certain dollar limitations, payable to employee benefit
plans or to officers and employees in connection with stock option
and similar employee benefit plans. In addition, the Credit
Facilities require us to comply with financial covenants relating to
interest coverage, leverage, retained earnings and capital
expenditures.
Our Credit Facilities previously permitted acquisitions in an amount up to
the amount of new equity raised by us. We have obtained a modification to our
Credit Facilities increasing the amount of permitted acquisitions by the amount
of new subordinated financing raised by us, subject to a maximum increase of
$290 million. Therefore, our Credit Facilities permit us to complete up to
approximately $400 million of acquisitions. See "Use of Proceeds,"
"Capitalization," "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources" and
"Business--Business Strategy--Pursue Selected Acquisition Opportunities."
59
<PAGE>
RECEIVABLES FACILITY
The following is a summary of the material terms of the Receivables
Facility and is qualified in its entirety by reference to the Receivables Sale
Agreement and the Pooling Agreement (each as defined below).
General
We established AAM Receivables Corp. ("AAM Receivables") as a wholly-owned,
special purpose, bankruptcy-remote subsidiary that purchases all receivables
(the "Receivables") generated by the Issuer (in such capacity, the "Seller")
pursuant to a receivables sale agreement (the "Receivables Sale Agreement"). The
Receivables Sale Agreement contains customary terms for similar transactions,
including representations and warranties of the Seller as to the Receivables and
certain corporate matters, affirmative and negative covenants and purchase
termination events, and is limited recourse to the Seller for breach of
representations, warranties and covenants and as described below.
AAM Receivables also entered into a pooling agreement (the "Pooling
Agreement") with Chase as trustee (the "Trustee") pursuant to which AAM
Receivables transferred to a trust (the "Trust") all the Receivables, and
certain purchasers (in such capacity, the "Purchaser") provided financing to AAM
Receivables (which in turn used such financing to pay a portion of the purchase
price of the Receivables purchased from the Seller) through the purchase of an
undivided percentage ownership interest in the Trust ("Transferred Interests").
The Receivables Facility is supported by a commitment of the Purchasers, subject
to the terms and conditions of the Pooling Agreement, to purchase Transferred
Interests through the Trust on a revolving basis in an amount not to exceed
$153 million. The availability of the Receivables Facility is subject to the
Trust holding Receivables meeting certain eligibility requirements equal to the
amount of the outstanding Transferred Interests and required reserves. At
December 31, 1998, approximately $66 million was available under the Receivables
Facility, of which $63 million was utilized. The sale of Receivables to AAM
Receivables, the transfer of Receivables to the Trust and the sale of
Transferred Interests are without recourse to the Seller, except:
o to the extent a Receivable or portion thereof becomes subject to an
asserted defense, dispute, off-set or counterclaim (including by GM)
as a result of any action taken by, any failure to take action by or
any other event relating to the Seller;
o for claims arising from a breach of representations and warranties
or covenants; and
o for dilution adjustments arising from time to time in respect of
rebates, adjustments, returns or modifications of Receivables.
The Trust, on behalf of the Purchasers, has a first priority perfected
security interest in the Receivables, the rights of AAM Receivables under the
Receivables Sales Agreement and cash collections and other proceeds received in
respect of the Receivables.
The Receivables are not available to our general creditors. However, GM is
also a vendor to the Seller and, in certain circumstances, may be able to offset
amounts payable by the Seller against the Seller's trade receivables from GM,
which in each case would result in AAM Receivables having a claim against the
Seller for such offset amounts. Accordingly, the Receivables Facility has been
accounted for as if it were a secured borrowing and therefore is included in our
consolidated financial statements.
Pursuant to a servicing agreement entered into by the Issuer, AAM
Receivables and the Trust, the Issuer agreed to service the Receivables for the
Trust; provided, that, upon the occurrence of certain events, the servicing
agreement may be terminated by the Trustee.
60
<PAGE>
Interest
The Receivables Facility bears interest determined, at our option, at rates
based on Chase's alternate base rate or LIBOR, plus, in each case, an applicable
margin.
Fees
AAM Receivables pays certain fees with respect to the Receivables Facility,
including a commitment fee (the "Commitment Fee") to the Purchasers in an amount
equal to the excess of the average aggregate purchase commitment for any monthly
period over the average aggregate Transferred Interests for such period and a
monthly program fee.
Facility Reductions
The Receivables Facility is supported by a commitment of the Purchasers,
subject to the terms and conditions of the Pooling Agreement, providing for the
purchase of Receivables through November 2003 to purchase Transferred Interests
on a revolving basis. After such time, all collections in respect of Receivables
purchased by AAM Receivables from the Seller will be used to reduce the
Transferred Interests of the Purchasers in the Receivables. Additionally, at any
time, AAM Receivables at its option may reduce the purchase commitment upon
notice to the Purchaser or terminate the purchases of Transferred Interests by
the Purchasers.
Early Termination Events
The Pooling Agreement contains certain early amortization events which
would cause the termination of, or permit the Purchasers to terminate, the
revolving period and effectively reduce the amount of financing available under
the Receivables Facility to zero. Early amortization events include nonpayment
of amounts when due, violation of covenants, inaccuracy of representations and
warranties in any material respect, failure to comply with specified Receivables
performance tests, purchase termination events under the Receivables Sale
Agreement, bankruptcy, material judgments, imposition of PBGC liens or material
tax liens, and actual or asserted invalidity of the Purchaser's ownership
interest in the Receivables. Purchase termination events under the Receivables
Sales Agreement relating to the Seller include nonpayment of amounts when due,
violation of covenants, inaccuracy of representations and warranties in any
material respect, bankruptcy, ERISA events, imposition of PBGC liens or material
environmental or tax liens, and certain cross-defaults to the Credit Facilities.
61
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We have entered into an exchange and registration rights agreement with the
initial purchasers of the outstanding Notes in which we agreed, under certain
circumstances, to file a registration statement relating to an offer to exchange
the outstanding Notes for exchange Notes. We also agreed to use our reasonable
best efforts to cause such offer to be consummated within 210 days following the
original issue of the outstanding Notes. The exchange Notes will have terms
substantially identical to the outstanding Notes except that the exchange Notes
will not contain terms with respect to transfer restrictions, registration
rights and additional interest for failure to observe certain obligations in the
registration rights agreement. The outstanding Notes were issued on March 5,
1999.
Under the circumstances set forth below, we will use our reasonable best
efforts to cause the Securities and Exchange Commission to declare effective a
shelf registration statement with respect to the resale of the outstanding Notes
and keep the statement effective for up to two years after the effective date of
the shelf registration statement. These circumstances include:
o if any changes in law, Commission rules or regulations or applicable
interpretations thereof by the staff of the Commission do not permit us
to effect the exchange offer as contemplated by the registration rights
agreement;
o if any outstanding Notes validly tendered in the exchange offer are not
exchanged for exchange Notes within 210 days after the original issue of
the outstanding Notes;
o if any initial purchaser of the outstanding Notes so requests (but only
with respect to any outstanding Notes not eligible to be exchanged for
exchange Notes in the exchange offer); or
o if any holder of the outstanding Notes notifies us that it is not
permitted to participate in the exchange offer or would not receive fully
tradeable exchange Notes pursuant to the exchange offer; or
o if the Issuer elects to file a shelf registration statement with respect
to the resale of the outstanding Notes.
If we fail to comply with certain obligations under the registration rights
agreement, we will be required to pay additional interest to holders of the
outstanding Notes. Please read the section captioned "Registration Rights
Agreement" for more details regarding the registration rights agreement.
Each holder of outstanding Notes that wishes to exchange such outstanding
Notes for transferable exchange Notes in the exchange offer will be required to
make the following representations:
o any exchange Notes will be acquired in the ordinary course of its
business;
o such holder has no arrangement with any person to participate in the
distribution of the exchange Notes; and
o such holder is not our "affiliate," as defined in Rule 405 of the
Securities Act, or if it is our affiliate, that it will comply with
applicable registration and prospectus delivery requirements of the
Securities Act.
RESALE OF EXCHANGE NOTES
Based on interpretations of the Commission staff set forth in no action
letters issued to unrelated third parties, we believe that exchange Notes issued
under the exchange offer in exchange for outstanding Notes may be offered for
resale, resold and otherwise transferred by any exchange Note holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act, if:
o such holder is not our "affiliate" within the meaning of Rule 405 under
the Securities Act;
o such exchange Notes are acquired in the ordinary course of the holder's
business; and
o the holder does not intend to participate in the distribution of such
exchange Notes.
62
<PAGE>
Any holder who tenders in the exchange offer with the intention of
participating in any manner in a distribution of the exchange Notes:
o cannot rely on the position of the staff of the Commission enunciated in
"Exxon Capital Holdings Corporation" or similar interpretive letters; and
o must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction.
This prospectus may be used for an offer to resell, resale or other
retransfer of exchange Notes only as specifically set forth in this prospectus.
With regard to broker-dealers, only broker-dealers that acquired the outstanding
Notes as a result of market-making activities or other trading activities may
participate in the exchange offer. Each broker-dealer that receives exchange
Notes for its own account in exchange for outstanding Notes, where such
outstanding Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of the exchange Notes.
Please read the section captioned "Plan of Distribution" for more details
regarding the transfer of Exchange Notes.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept for exchange any outstanding
Notes properly tendered and not withdrawn prior to the expiration date. The
Issuer will issue $1,000 principal amount of exchange Notes in exchange for each
$1,000 principal amount of outstanding Notes surrendered under the exchange
offer. Outstanding Notes may be tendered only in integral multiples of $1,000.
The form and terms of the exchange Notes will be substantially identical to
the form and terms of the outstanding Notes except the exchange Notes will be
registered under the Securities Act, will not bear legends restricting their
transfer and will not provide for any additional interest upon failure of the
Issuer to fulfill its obligations under the registration rights agreement to
file, and cause to be effective, a registration statement. The exchange Notes
will evidence the same debt as the outstanding Notes. The exchange Notes will be
issued under and entitled to the benefits of the same indenture that authorized
the issuance of the outstanding Notes. Consequently, both series will be treated
as a single class of debt securities under that indenture. For a description of
the indenture, see "Description of Notes" below.
The exchange offer is not conditioned upon any minimum aggregate principal
amount of outstanding Notes being tendered for exchange.
As of the date of this prospectus, $300 million aggregate principal amount
of the outstanding Notes are outstanding. This prospectus and the letter of
transmittal are being sent to all registered holders of outstanding Notes. There
will be no fixed record date for determining registered holders of outstanding
Notes entitled to participate in the exchange offer.
The Issuer intends to conduct the exchange offer in accordance with the
provisions of the registration rights agreement, the applicable requirements of
the Securities Act and the Securities Exchange Act of 1934 and the rules and
regulations of the Commission. Outstanding Notes that are not tendered for
exchange in the exchange offer will remain outstanding and continue to accrue
interest and will be entitled to the rights and benefits such holders have under
the indenture relating to the outstanding Notes.
The Issuer will be deemed to have accepted for exchange properly tendered
outstanding Notes when it has given oral or written notice of the acceptance to
the exchange agent. The exchange agent will act as agent for the tendering
holders for the purposes of receiving the exchange Notes from us and delivering
the exchange Notes to such holders. Subject to the terms of the registration
rights agreement, the Issuer expressly reserves the right to amend or terminate
the exchange offer, and not to accept for exchange any outstanding Notes not
previously accepted for exchange, upon the occurrence of any of the conditions
specified below under the caption "--Certain Conditions to the Exchange Offer."
Holders who tender outstanding Notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
outstanding Notes. We will pay all charges and expenses, other than certain
applicable taxes
63
<PAGE>
described below, in connection with the exchange offer. It is important that you
read the section labeled "--Fees and Expenses" below for more details regarding
fees and expenses incurred in the exchange offer.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The exchange offer will expire at 5:00 p.m., New York City time on
, 1999, unless in its sole discretion, the Issuer extends it.
In order to extend the exchange offer, the Issuer will notify the exchange
agent orally or in writing of any extension. The Issuer will notify the
registered holders of outstanding Notes of the extension no later than 9:00
a.m., New York City time, on the business day after the previously scheduled
expiration date.
The Issuer reserves the right, in its sole discretion:
o to delay accepting for exchange any outstanding Notes;
o to extend the exchange offer or to terminate the exchange offer and to
refuse to accept outstanding Notes not previously accepted if any of the
conditions set forth below under "--Certain Conditions to the Exchange
Offer" have not been satisfied, by giving oral or written notice of such
delay, extension or termination to the exchange agent; or
o subject to the terms of the registration rights agreement, to amend the
terms of the exchange offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders of outstanding Notes. If the Issuer amends the exchange offer
in a manner that it determines to constitute a material change, the Issuer will
promptly disclose such amendment in a manner reasonably calculated to inform the
holders of outstanding Notes of such amendment.
Without limiting the manner in which it may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the exchange offer, the Issuer shall have no obligation to publish, advertise,
or otherwise communicate any such public announcement, other than by making a
timely release to a financial news service.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Despite any other term of the exchange offer, the Issuer will not be
required to accept for exchange, or exchange any exchange Notes for, any
outstanding Notes, and the Issuer may terminate the exchange offer as provided
in this prospectus before accepting any outstanding Notes for exchange if in the
Issuer's reasonable judgment:
o the exchange Notes to be received will not be tradeable by the holder,
without restriction under the Securities Act, the Securities Exchange Act
of 1934 and without material restrictions under the blue sky or
securities laws of substantially all of the states of the United States;
o the exchange offer, or the making any exchange by a holder of outstanding
Notes, would violate applicable law or any applicable interpretation of
the staff of the Commission; or
o any action or proceeding has been instituted or threatened in any court
or by or before any governmental agency with respect to the exchange
offer that, in our judgment, would reasonably be expected to impair the
ability of the Issuer to proceed with the exchange offer.
In addition, the Issuer will not be obligated to accept for exchange the
outstanding Notes of any holder that has not made to the Issuer:
o the representations described under "--Purpose and Effect of the Exchange
Offer," "--Procedures for Tendering" and "Plan of Distribution"; and
o such other representations as may be reasonably necessary under
applicable Commission rules, regulations or interpretations to make
available to the Issuer an appropriate form for registration of the
exchange Notes under the Securities Act.
64
<PAGE>
The Issuer expressly reserves the right, at any time or at various times,
to extend the period of time during which the exchange offer is open.
Consequently, the Issuer may delay acceptance of any outstanding Notes by giving
oral or written notice of such extension to their holders. During any such
extensions, all outstanding Notes previously tendered will remain subject to the
exchange offer, and the Issuer may accept them for exchange. The Issuer will
return any outstanding Notes that it does not accept for exchange for any reason
without expense to their tendering holder as promptly as practicable after the
expiration or termination of the exchange offer.
The Issuer expressly reserves the right to amend or terminate the exchange
offer, and to reject for exchange any outstanding Notes not previously accepted
for exchange, upon the occurrence of any of the conditions of the exchange offer
specified above. The Issuer will give oral or written notice of any extension,
amendment, non-acceptance or termination to the holders of the outstanding Notes
as promptly as practicable. In the case of any extension, such notice will be
issued no later than 9:00 a.m., New York City time, on the business day after
the previously scheduled expiration date.
These conditions are solely for the benefit of the Issuer and the Issuer
may assert them regardless of the circumstances that may give rise to them or
waive them in whole or in part at any or at various times in our sole
discretion. If the Issuer fails at any time to exercise any of the foregoing
rights, this failure will not constitute a waiver of such right. Each such right
will be deemed an ongoing right that we may assert at any time or at various
times.
In addition, the Issuer will not accept for exchange any outstanding Notes
tendered, and will not issue exchange Notes in exchange for any such outstanding
Notes, if at such time any stop order will be threatened or in effect with
respect to the registration statement of which this prospectus constitutes a
part or the qualification of the indenture under the Trust Indenture Act of
1939.
PROCEDURES FOR TENDERING
Only a holder of outstanding Notes may tender such outstanding Notes in the
exchange offer. To tender in the exchange offer, a holder must:
o complete, sign and date the letter of transmittal, or a facsimile of the
letter of transmittal; have the signature on the letter of transmittal
guaranteed if the letter of transmittal so requires; and mail or deliver
such letter of transmittal or facsimile to the exchange agent prior to
the expiration date; or
o comply with DTC's Automated Tender Offer Program procedures described
below.
In addition, either:
o the exchange agent must receive outstanding Notes along with the letter
of transmittal; or
o the exchange agent must receive, prior to the expiration date, a timely
confirmation of book-entry transfer of such outstanding Notes into the
exchange agent's account at DTC according to the procedure for book-
entry transfer described below or a properly transmitted agent's message;
or
o the holder must comply with the guaranteed delivery procedures described
below.
To be tendered effectively, the exchange agent must receive any physical
delivery of the letter of transmittal and other required documents at the
address set forth below under "--Exchange Agent" prior to the expiration date.
The tender by a holder that is not withdrawn prior to the expiration date
will constitute an agreement between such holder and the Issuer in accordance
with the terms and subject to the conditions set forth in this prospectus and in
the letter of transmittal.
The method of delivery of outstanding Notes, the letter of transmittal and
all other required documents to the exchange agent is at the holder's election
and risk. Rather than mail these items, the Issuer recommends that holders use
an overnight or hand delivery service. In all cases, holders should allow
sufficient time to assure delivery to the exchange agent before the expiration
date. Holders should not send the letter of transmittal or outstanding Notes to
us. Holders may request their respective brokers, dealers, commercial banks,
trust companies or other nominees to effect the above transactions for them.
65
<PAGE>
Any beneficial owner whose outstanding Notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct it to
tender on the owner's behalf. If such beneficial owner wishes to tender on its
own behalf, it must, prior to completing and executing the letter of transmittal
and delivering its outstanding Notes, either:
o make appropriate arrangements to register ownership of the outstanding
Notes in such owner's name; or
o obtain a properly completed bond power from the registered holder of
outstanding Notes.
The transfer of registered ownership may take considerable time any may not
be completed prior to the expiration date.
Signatures on a letter of transmittal or a notice of withdrawal described
below must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another "eligible institution" within the meaning of Rule 17Ad-15
under the Exchange Act, unless the outstanding Notes tendered pursuant thereto
are tendered:
o by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the letter
of transmittal; or
o for the account of an eligible institution.
If the letter of transmittal is signed by a person other than the
registered holder of any outstanding Notes listed on the outstanding Notes, such
outstanding Notes must be endorsed or accompanied by a properly completed bond
power. The bond power must be signed by the registered holder as the registered
holder's name appears on the outstanding Notes and an eligible institution must
guarantee the signature on the bond power.
If the letter of transmittal or any outstanding Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing. Unless waived by the
Issuer, they should also submit evidence satisfactory to the Issuer of their
authority to deliver the letter of transmittal.
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's Automated Tender Offer
Program to tender. Participants in the program may, instead of physically
completing and signing the letter of transmittal and delivering it to the
exchange agent, transmit their acceptance of the exchange offer electronically.
They may do so by causing DTC to transfer the outstanding Notes to the exchange
agent in accordance with its procedures for transfer. DTC will then send an
agent's message to the exchange agent. The term "agent's message" means a
message transmitted by DTC, received by the exchange agent and forming part of
the book-entry confirmation, to the effect that:
o DTC has received an express acknowledgment from a participant in its
Automated Tender Offer Program that is tendering outstanding Notes that
are the subject of such book-entry confirmation;
o such participant has received and agrees to be bound by the terms of the
letter of transmittal (or, in the case of an agent's message relating to
guaranteed delivery, that such participant has received and agrees to be
bound by the applicable notice of guaranteed delivery); and
o the agreement may be enforced against such participant.
The Issuer will determine in its sole discretion all questions as to the
validity, form, eligibility (including time of receipt), acceptance of tendered
outstanding Notes and withdrawal of tendered outstanding Notes. The Issuer's
determination will be final and binding. The Issuer reserves the absolute right
to reject any outstanding Notes not properly tendered or any outstanding Notes
the acceptance of which would, in the opinion of the Issuer's counsel, be
unlawful. The Issuer also reserves the right to waive any defects,
irregularities or conditions of tender as to particular outstanding Notes. The
Issuer's interpretation of the terms and conditions of the exchange offer
(including the instructions in the letter of transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of outstanding Notes must be cured within such time as
the Issuer shall determine. Although the Issuer intends to notify holders of
defects or irregularities with respect to tenders of outstanding Notes, neither
the Issuer, the exchange agent nor any other person will incur any liability for
failure to give such notification. Tenders of outstanding Notes will not be
deemed made
66
<PAGE>
until such defects or irregularities have been cured or waived. Any outstanding
Notes received by the exchange agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned to the exchange agent without cost to the tendering holder, unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
In all cases, the Issuer will issue exchange Notes for outstanding Notes
that we have accepted for exchange under the exchange offer only after the
exchange agent timely receives:
o outstanding Notes or a timely book-entry confirmation of such outstanding
Notes into the exchange agent's account at DTC; and
o a properly completed and duly executed letter of transmittal and all
other required documents or a properly transmitted agent's message.
By signing the letter of transmittal, each tendering holder of outstanding
Notes will represent to us that, among other things:
o any exchange Notes that the holder receives will be acquired in the
ordinary course of its business;
o the holder has no arrangement or understanding with any person or entity
to participate in the distribution of the exchange Notes;
o if the holder is not a broker-dealer, that it is not engaged in and does
not intend to engage in the distribution of the exchange Notes;
o if the holder is a broker-dealer that will receive exchange Notes for its
own account in exchange for outstanding Notes that were acquired as a
result of market-making activities or other trading activities, that it
will deliver a prospectus, as required by law, in connection with any
resale of such exchange Notes (see "Plan of Distribution"); and
o the holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, of American Axle & Manufacturing, Inc. or, if the holder
is an affiliate, it will comply with any applicable registration and
prospectus delivery requirements of the Securities Act.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the outstanding Notes at DTC for purposes of the exchange offer promptly
after the date of this prospectus; and any financial institution participating
in DTC's system may make book-entry delivery of outstanding Notes by causing DTC
to transfer such outstanding Notes into the exchange agent's account at DTC in
accordance with DTC's procedures for transfer. Holders of outstanding Notes who
are unable to deliver confirmation of the book-entry tender of their outstanding
Notes into the exchange agent's account at DTC or all other documents required
by the letter of transmittal to the exchange agent on or prior to the expiration
date must tender their outstanding Notes according to the guaranteed delivery
procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders wishing to tender their outstanding Notes but whose outstanding
Notes are not immediately available or who cannot deliver their outstanding
Notes, the letter of transmittal or any other required documents to the exchange
agent or comply with the applicable procedures under DTC's Automated Tender
Offer Program prior to the expiration date may tender if:
o the tender is made through an eligible institution;
o prior to the expiration date, the exchange agent receives from such
eligible institution either a properly completed and duly executed notice
of guaranteed delivery (by facsimile transmission, mail or hand delivery)
or a properly transmitted agent's message and notice of guaranteed
delivery:
o setting forth the name and address of the holder, the registered
number(s) of such outstanding Notes and the principal amount of
outstanding Notes tendered;
o stating that the tender is being made thereby; and
67
<PAGE>
o guaranteeing that, within three (3) New York Stock Exchange trading
days after the expiration date, the letter of transmittal (or
facsimile thereof) together with the outstanding Notes or a
book-entry confirmation, and any other documents required by the
letter of transmittal will be deposited by the Eligible Institution
with the exchange agent; and
o the exchange agent receives such properly completed and executed
letter of transmittal (or facsimile thereof), as well as all
tendered outstanding Notes in proper form for transfer or a
book-entry confirmation, and all other documents required by the
letter of transmittal, within three (3) New York State Exchange
trading days after the expiration date.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their outstanding Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, holders of outstanding
Notes may withdraw their tenders at any time prior to the expiration date.
For a withdrawal to be effective:
o the exchange agent must receive a written notice (which may be by
telegram, telex, facsimile transmission or letter) of withdrawal at one
of the addresses set forth below under "--Exchange Agent"; or
o holders must comply with the appropriate procedures of DTC's Automated
Tender Offer Program system.
Any such notice of withdrawal must:
o specify the name of the person who tendered the outstanding Notes to be
withdrawn;
o identify the outstanding Notes to be withdrawn (including the principal
amount of such outstanding Notes); and
o where certificates for outstanding Notes have been transmitted, specify
the name in which such outstanding Notes were registered, if different
from that of the withdrawing holder.
If certificates for outstanding Notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of such
certificates, the withdrawing holder must also submit:
o the serial numbers of the particular certificates to be withdrawn; and
o a signed notice of withdrawal with signatures guaranteed by an eligible
institution unless such holder is an eligible institution.
If outstanding Notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn
outstanding Notes and otherwise comply with the procedures of such facility. The
Issuer will determine all questions as to the validity, form and eligibility
(including time of receipt) of such notices, and our determination shall be
final and binding on all parties. The Issuer will deem any outstanding Notes so
withdrawn not to have validity tendered for exchange for purposes of the
exchange offer. Any outstanding Notes that have been tendered for exchange but
that are not exchanged for any reason will be returned to their holder without
cost to the holder (or, in the case of outstanding Notes tendered by book-entry
transfer into the exchange agent's account at DTC according to the procedures
described above, such outstanding Notes will be credited to an account
maintained with DTC for outstanding Notes) as soon as practicable after
withdrawal, rejection of tender or termination of the exchange offer. Properly
withdrawn outstanding Notes may be retendered by following one of the procedures
described under "--Procedures for Tendering" above at any time on or prior to
the expiration date.
68
<PAGE>
EXCHANGE AGENT
IBJ Whitehall Bank & Trust Company has been appointed as exchange agent for
the exchange offer. You should direct questions and requests for assistance,
requests for additional copies of this prospectus or of the letter of
transmittal and requests for the notice of guaranteed delivery to the exchange
agent addressed as follows:
<TABLE>
<S> <C>
For Delivery by Registered or Certified Mail: For Overnight Delivery Only or by Hand:
IBJ Whitehall Bank & Trust Company IBJ Whitehall Bank & Trust Company
P.O. Box 84 One State Street
Bowling Green Station New York, NY 10004
New York, NY 10274-0084 Attn: Securities Processing Window
Attn: Reorganization Operations Department Subcellar One, (SC-1)
</TABLE>
By Facsimile Transmission (for eligible institutions only):
IBJ Whitehall Bank & Trust Company
(212) 858-2611
Attn: Reorganization Operations Department
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Issuer will bear the expenses of soliciting tenders. The principal
solicitation is being made by mail; however, we may make additional solicitation
by telegraph, telephone or in person by our officers and regular employees and
those of our affiliates.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to broker-dealers or others soliciting
acceptances of the exchange offer. The Issuer will, however, pay the exchange
agent reasonable and customary fees for its services and reimburse it for its
related reasonable out-of-pocket expenses.
The Issuer will pay the cash expenses to be incurred in connection with the
exchange offer. The expenses are estimated in the aggregate to be approximately
$ . They include:
o Commission registration fees;
o fees and expenses of the exchange agent and trustee;
o accounting and legal fees and printing costs; and
o related fees and expenses.
TRANSFER TAXES
The Issuer will pay all transfer taxes, if any, applicable to the exchange
of outstanding Notes under the exchange offer. The tendering holder, however,
will be required to pay any transfer taxes (whether imposed on the registered
holder or any other person) if:
o certificates representing outstanding Notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of
outstanding Notes tendered;
o tendered outstanding Notes are registered in the name of any person other
than the person signing the letter of transmittal; or
o a transfer tax is imposed for any reason other than the exchange of
outstanding Notes under the exchange offer.
If satisfactory evidence of payment of such taxes is not submitted with the
letter of transmittal, the amount of such transfer taxes will be billed to that
tendering holder.
69
<PAGE>
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of outstanding Notes who do not exchange their outstanding Notes
for exchange Notes under the exchange offer will remain subject to the
restrictions on transfer of such outstanding Notes:
o as set forth in the legend printed on the outstanding Notes as a
consequence of the issuance of the outstanding Notes pursuant to the
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws;
and
o otherwise set forth in the offering memorandum distributed in connection
with the private offering of the outstanding Notes.
In general, you may not offer or sell the outstanding Notes unless they are
registered under the Securities Act, or if the offer or sale is exempt from
registration under the Securities Act and applicable state securities laws.
Except as required by the registration rights agreement, we do not intend to
register resales of the outstanding Notes under the Securities Act. Based on
interpretations of the Commission staff, exchange Notes issued pursuant to the
exchange offer may be offered for resale, resold or otherwise transferred by
their holders (other than any such holder that is our "affiliate" within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that the holders acquired the exchange Notes in the ordinary course of the
holders' business and the holders have no arrangement or understanding with
respect to the distribution of the exchange notes to be acquired in the exchange
offer. Any holder who tenders in the exchange offer for the purpose of
participating in a distribution of the exchange Notes:
o can not rely on the applicable interpretations of the Commission; and
o must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction.
ACCOUNTING TREATMENT
The Issuer will record the exchange Notes in its accounting records at the
same carrying value as the outstanding Notes, which is the aggregate principal
amount, as reflected in the Issuer's accounting records on the date of exchange.
Accordingly, the Issuer will not recognize any gain or loss for accounting
purposes in connection with the exchange offer. The Issuer will record the
expenses of the exchange offer as incurred.
OTHER
Participation in the exchange offer is voluntary, and you should carefully
consider whether to accept. You are urged to consult your financial and tax
advisors in making your own decision on what action to take.
The Issuer may in the future seek to acquire untendered outstanding Notes
in open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Issuer has no present plans to acquire any outstanding
Notes that are not tendered in the exchange offer or to file a registration
statement to permit resales of any untendered outstanding Notes.
70
<PAGE>
DESCRIPTION OF NOTES
GENERAL
The outstanding Notes were issued and the exchange Notes will be issued
under an Indenture, dated as of March 5, 1999, among the Issuer, Holdings and
IBJ Whitehall Bank & Trust Company, as Trustee (the "Trustee"), a copy of which
has been filed as an exhibit to the registration statement of which this
prospectus is a part. References to the "Notes" herein are references to both
the outstanding Notes and the exchange Notes.
The following summary of certain provisions of the Indenture and the Notes
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Indenture, including the
definitions of certain terms therein and those terms made a part thereof by the
Trust Indenture Act of 1939. Capitalized terms used in this "Description of
Notes" section and not otherwise defined have the meanings set forth in the
section "--Certain Definitions." As used in this "Description of Notes" section,
o the "Issuer" means American Axle & Manufacturing, Inc.; and
o "Holdings" means American Axle & Manufacturing Holdings, Inc.
The Indenture provides for the issuance of up to $100 million aggregate
principal amount of additional Notes having identical terms and conditions to
the Notes, subject to compliance with the covenants contained in the Indenture.
Any additional Notes will be part of the same issue as the Notes and will vote
on all matters with the Notes.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Issuer in the Borough of Manhattan, The City of New York (which initially shall
be the principal corporate trust office of the Trustee, at 1 State Street, 10th
Floor, New York, NY 10004), except that, at the option of the Issuer, payment of
interest may be made by check mailed to the Holders at their registered
addresses.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Issuer may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF THE NOTES
The Notes are unsecured senior subordinated obligations of the Issuer and
will mature on March 1, 2009. Each Note will bear interest at a rate per annum
shown on the front cover of this prospectus from March 5, 1999 or from the most
recent date to which interest has been paid or provided for, payable
semiannually to Holders of record at the close of business on the February 15 or
August 15 immediately preceding the interest payment date on March 1 and
September 1 of each year, commencing September 1, 1999.
Liquidated damages are payable with respect to the outstanding Notes if
certain conditions are not satisfied, all as further described under
"Registration Rights Agreement".
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Notes will not be
redeemable at the option of the Issuer prior to March 1, 2004. Thereafter, the
Notes will be redeemable, at the Issuer's option, in whole or in part upon not
less than 30 nor more than 60 days' prior notice mailed by first-class mail to
each Holder's registered address, at the following redemption prices (expressed
as a percentage of principal amount), plus accrued and unpaid interest and
liquidated damages, if any, to the redemption date (subject to the right of
Holders of record on
71
<PAGE>
the relevant record date to receive interest due on the relevant interest
payment date), if redeemed during the 12-month period commencing on March 1 of
the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
- ----------------------------------------------------------------------- ----------
<S> <C>
2004................................................................... 104.875%
2005................................................................... 103.250%
2006................................................................... 101.625%
2007 and thereafter.................................................... 100.000%
</TABLE>
In addition, at any time and from time to time prior to March 1, 2002, the
Issuer may redeem in the aggregate up to 35% of the original aggregate principal
amount of the Notes (calculated after giving effect to any issuance of
Additional Notes) with the net cash proceeds of one or more Equity Offerings (1)
by the Issuer or (2) by Holdings to the extent the net cash proceeds thereof are
contributed to the Issuer or used to purchase Capital Stock (other than
Disqualified Stock) of the Issuer from the Issuer, at a redemption price
(expressed as a percentage of principal amount thereof) of 109.75% plus accrued
and unpaid interest and liquidated damages, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date); provided, however,
that at least 65% of the original aggregate principal amount of the Notes
(calculated after giving effect to any issuance of Additional Notes) must remain
outstanding after each such redemption and provided further that such redemption
shall occur within 90 days after the date on which any such Equity Offering is
consummated upon not less than 30 nor more than 60 days' notice mailed to each
holder of Notes being redeemed and otherwise in accordance with the procedures
set forth in the Indenture.
SELECTION
In the case of any partial redemption, selection of the 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 so listed, on a pro rata basis, by lot or by
such other method as the Trustee shall deem fair and appropriate (and in such
manner as complies with applicable legal requirements); provided that no Notes
of $1,000 or less shall be redeemed in part. If any Note is to be redeemed in
part only, the notice of redemption relating to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in principal
amount equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Note. On and after the
redemption date, interest will cease to accrue on Notes or portions thereof
called for redemption so long as the Issuer has deposited with the Paying Agent
funds sufficient to pay the principal of, plus accrued and unpaid interest and
liquidated damages (if any) on, the Notes to be redeemed.
RANKING
The indebtedness evidenced by the Notes will be unsecured senior
subordinated indebtedness of the Issuer, will be subordinated in right of
payment, as set forth in the Indenture, to all existing and future Senior
Indebtedness of the Issuer, will rank pari passu in right of payment with all
future Pari Passu Indebtedness of the Issuer and will be senior in right of
payment to all future Subordinated Indebtedness of the Issuer. The Notes will
also be effectively subordinated to any Secured Indebtedness of the Issuer to
the extent of the value of the assets securing such Indebtedness. However,
payment from the money or the proceeds of U.S. Government Obligations held in
any defeasance trust described under "--Defeasance" below is not subordinated to
any Senior Indebtedness or subject to the restrictions described herein.
The indebtedness evidenced by the Guarantees will be unsecured senior
subordinated indebtedness of the applicable Guarantor, will be subordinated in
right of payment, as set forth in the Indenture, to all future Senior
Indebtedness of such Guarantor, will rank pari passu in right of payment with
all future Pari Passu Indebtedness of such Guarantor and will be senior in right
of payment to all existing and future Subordinated Indebtedness of such
Guarantor. The Guarantees will also be effectively subordinated to any Secured
Indebtedness of the applicable Guarantor to the extent of the value of the
assets securing such Indebtedness.
72
<PAGE>
As of December 31, 1998, on a pro forma basis after giving effect to the
IPO and the application of the net proceeds therefrom and the private placement
of the outstanding Notes and the application of the net proceeds therefrom (but
without giving effect to the borrowings to finance the acquisition of Colfor or
MSP):
o the Issuer would have had $407.4 million aggregate principal amount of
Senior Indebtedness outstanding (excluding unused commitments), all of
which would have been Secured Indebtedness;
o the Issuer would have had no Pari Passu Indebtedness outstanding other
than the Notes and no indebtedness that is subordinate or junior in right
of payment to the Notes, and
o the Issuer's subsidiaries would have had total liabilities (excluding
intercompany liabilities) of $56.5 million.
Although the Indenture will contain limitations on the amount of additional
Indebtedness which the Issuer and its subsidiaries may Incur, under certain
circumstances the amount of such Indebtedness could be substantial and, in any
case, such Indebtedness may be Senior Indebtedness. See "--Limitation on
Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred
Stock" below.
Certain of the operations of the Issuer are conducted through its
subsidiaries. Unless the subsidiary is a Guarantor, claims of creditors of such
subsidiaries, including trade creditors, and claims of preferred stockholders
(if any) of such subsidiaries generally will have priority with respect to the
assets and earnings of such subsidiaries over the claims of creditors of the
Issuer, including holders of the Notes. The Notes, therefore, will be
effectively subordinated to creditors (including trade creditors) and preferred
stockholders (if any) of subsidiaries of the Issuer that are not Guarantors.
None of the Issuer's subsidiaries will be Guarantors as of the Issue Date. At
December 31, 1998, the total liabilities (excluding intercompany liabilities) of
the Issuer's subsidiaries were approximately $119.5 million, including trade
payables. Although the Indenture will limit the Incurrence of Indebtedness by
and the issuance of Disqualified Stock and Preferred Stock of certain of the
Issuer's subsidiaries, such limitation is subject to a number of significant
qualifications.
"Senior Indebtedness" with respect to the Issuer or any Guarantor means:
o all Indebtedness and any Receivables Repurchase Obligation of the Issuer
or such Guarantor, including interest thereon (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Issuer or any Subsidiary of the Issuer at
the rate specified in the documentation with respect thereto whether or
not a claim for post-filing interest is allowed in such proceeding) and
other amounts (including fees, expenses, reimbursement obligations under
letters of credit and indemnities) owing in respect thereof, whether
outstanding on the Issue Date or thereafter Incurred, unless in the
instrument creating or evidencing the same or pursuant to which the same
is outstanding it is provided that such obligations are not superior, or
are subordinated, in right of payment to the Notes or such Guarantor's
Guarantee, as applicable;
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
shall not include:
o any obligation of the Issuer to any Subsidiary of the Issuer (other than
any Receivables Repurchase Obligation), or of such Guarantor to the
Issuer or any other Subsidiary of the Issuer;
o any liability for Federal, state, local or other taxes owed or owing by
the Issuer or such Guarantor;
o any accounts payable or other liability to trade creditors arising in the
ordinary course of business (including guarantees thereof or instruments
evidencing such liabilities);
o any Indebtedness or obligation of the Issuer or such Guarantor which is
subordinate or junior in any respect to any other Indebtedness or
obligation of the Issuer or such Guarantor, as applicable, including any
Pari Passu Indebtedness and any Subordinated Indebtedness;
o any obligations with respect to any Capital Stock;
o any Indebtedness Incurred in violation of the Indenture.
73
<PAGE>
If any Senior Indebtedness is disallowed, avoided or subordinated pursuant to
the provisions of Section 548 of Title 11 of the United States Code or any
applicable state fraudulent conveyance law, such Senior Indebtedness
nevertheless will constitute Senior Indebtedness.
Only Indebtedness of the Issuer or a Guarantor that is Senior Indebtedness
will rank senior to the Notes or the relevant Guarantee in accordance with the
provisions of the Indenture. The Notes and each Guarantee will in all respects
rank pari passu with all other Pari Passu Indebtedness of the Issuer and the
relevant Guarantor, respectively.
The Issuer may not pay principal of, premium (if any) or interest on, the
Notes or make any deposit pursuant to the provisions described under
"--Defeasance" below and may not otherwise purchase, redeem or otherwise retire
any Notes (except that Holders may receive and retain (a) Permitted Junior
Securities and (b) payments made from the trust described under "--Defeasance"
below) (collectively, "pay the Notes") if:
(1) a default in the payment of the principal of, premium, if any, or
interest on any Designated Senior Indebtedness occurs and is continuing or
any other amount owing in respect of any Designated Senior Indebtedness is
not paid when due, or
(2) any other default on Designated Senior Indebtedness occurs and the
maturity of such Designated Senior Indebtedness is accelerated in
accordance with its terms unless, in either case, the default has been
cured or waived and any such acceleration has been rescinded or such
Designated Senior Indebtedness has been paid in full in cash or Cash
Equivalents.
However, the Issuer may pay the Notes without regard to the foregoing if the
Issuer and the Trustee receive written notice approving such payment from the
Representative of the Designated Senior Indebtedness with respect to which
either of the events set forth in clause (1) or (2) of the immediately preceding
sentence has occurred and is continuing. During the continuance of any default
(other than a default described in clause (1) or (2) of the second preceding
sentence) with respect to any Designated Senior Indebtedness pursuant to which
the maturity thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such acceleration) or the
expiration of any applicable grace periods, the Issuer may not pay the Notes for
a period (a "Payment Blockage Period") commencing upon the receipt by the
Trustee (with a copy to the Issuer) of written notice (a "Blockage Notice") of
such default from the Representative of the Designated Senior Indebtedness
specifying an election to effect a Payment Blockage Period and ending 179 days
thereafter (or earlier if such Payment Blockage Period is terminated:
o by written notice to the Trustee and the Issuer from the Person or
Persons who gave such Blockage Notice;
o by repayment in full in cash or Cash Equivalents of such Designated
Senior Indebtedness; or
o because the default giving rise to such Blockage Notice is no longer
continuing).
Notwithstanding the provisions described in the immediately preceding sentence
(but subject to the provisions contained in the first sentence of this paragraph
and in the succeeding paragraph), unless the holders of such Designated Senior
Indebtedness or the Representative of such holders have accelerated the maturity
of such Designated Senior Indebtedness, the Issuer may resume payments on the
Notes after the end of such Payment Blockage Period. Not more than one Blockage
Notice may be given in any consecutive 360-day period, irrespective of the
number of defaults with respect to Designated Senior Indebtedness during such
period. However, if any Blockage Notice within such 360-day period is given by
or on behalf of any holders of Designated Senior Indebtedness other than the
Bank Indebtedness, the Representative of the Bank Indebtedness may give one
additional Blockage Notice within such period. In no event, however, may the
total number of days during which any Payment Blockage Period or Periods is in
effect exceed 179 days in the aggregate during any 360 consecutive day period.
For purposes of this paragraph, no default or event of default that existed or
was continuing on the date of the commencement of any Payment Blockage Period
with respect to the Designated Senior Indebtedness initiating such Payment
Blockage Period shall be, or be made, the basis of the commencement of a
subsequent Payment Blockage Period by the Representative of such Designated
Senior Indebtedness, whether or not within a period of 360 consecutive days,
unless such default or event of default shall have been cured or waived for a
period of not less than 90 consecutive days.
74
<PAGE>
Upon any payment or distribution of the assets of the Issuer upon a total
or partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Issuer or its property, the holders of Senior Indebtedness will
be entitled to receive payment in full in cash or Cash Equivalents of the Senior
Indebtedness (including interest accruing after, or which would accrue but for,
the commencement of any such proceeding at the rate specified in the applicable
Senior Indebtedness, whether or not a claim for such interest would be allowed)
before the Noteholders are entitled to receive any payment and until the Senior
Indebtedness is paid in full in cash or Cash Equivalents, any payment or
distribution to which Noteholders would be entitled but for the subordination
provisions of the Indenture will be made to holders of the Senior Indebtedness
as their interests may appear (except that Holders of Notes may receive and
retain (1) Permitted Junior Securities, and (2) payments made from the trust
described under "--Defeasance" 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 subordination provisions described herein). If a
distribution is made to Noteholders that due to the subordination provisions of
the Indenture should not have been made to them, such Noteholders are required
to hold it in trust for the holders of Senior Indebtedness and pay it over to
them as their interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Issuer or the Trustee shall promptly notify the holders of the Designated Senior
Indebtedness (or their Representative) of the acceleration. If any Designated
Senior Indebtedness is outstanding, the Issuer may not pay the Notes until five
Business Days after such holders or the Representative of the Designated Senior
Indebtedness receive notice of such acceleration and, thereafter, may pay the
Notes only if the subordination provisions of the Indenture otherwise permit
payment at that time.
By reason of such subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Issuer who are holders of Senior
Indebtedness may recover more, ratably, than the Noteholders, and creditors of
the Issuer who are not holders of Senior Indebtedness or of Pari Passu
Indebtedness (including the Notes) may recover less, ratably, than holders of
Senior Indebtedness and may recover more, ratably, than the holders of Pari
Passu Indebtedness.
The Indenture will contain substantially similar subordination provisions
relating to each Guarantor's obligations under its Guarantee.
GUARANTEES
Holdings and certain domestic Restricted Subsidiaries of the Issuer that
Incur or guarantee certain Indebtedness (as described below), as primary
obligors and not merely as sureties, will jointly and severally irrevocably and
unconditionally guarantee on an unsecured senior subordinated basis (in the same
manner and to the same extent that the Notes are subordinated to Senior
Indebtedness) the performance and punctual payment when due, whether at Stated
Maturity, by acceleration or otherwise, of all obligations of the Issuer under
the Indenture and the Notes, whether for payment of principal of, premium, if
any, or interest or liquidated damages on the Notes, expenses, indemnification
or otherwise (all such obligations guaranteed by such Guarantors being herein
called the "Guaranteed Obligations"). Such Guarantors will agree to pay, in
addition to the amount stated above, any and all expenses (including reasonable
counsel fees and expenses) Incurred by the Trustee or the Holders in enforcing
any rights under the Guarantees. Each Guarantee will be limited in amount to an
amount not to exceed the maximum amount that can be guaranteed by the applicable
Guarantor without rendering the Guarantee, as it relates to such Guarantor,
voidable under applicable law relating to fraudulent conveyance or fraudulent
transfer or similar laws affecting the rights of creditors generally. After the
Issue Date, the Issuer will cause each Restricted Subsidiary (unless such
Subsidiary is a Receivables Subsidiary) organized under the laws of the United
States of America or any state or territory thereof that Incurs or guarantees
certain Indebtedness or issues shares of Disqualified Stock or Preferred Stock
to execute and deliver to the Trustee a supplemental indenture pursuant to which
such Restricted Subsidiary will guarantee payment of the Notes on the same
unsecured senior subordinated basis. See "--Future Guarantors" below.
Each Guarantee is a continuing guarantee and shall:
o remain in full force and effect until payment in full of all the
Guaranteed Obligations;
o subject to the next succeeding paragraph, be binding upon each such
Guarantor and its successors; and
75
<PAGE>
o inure to the benefit of and be enforceable by the Trustee, the Holders
and their successors, transferees and assigns.
A Guarantee made by any Restricted Subsidiary will be automatically
released upon the sale (including through merger or consolidation) of the
Capital Stock, or all or substantially all the assets, of the applicable
Guarantor if:
o such sale is made in compliance with the covenant described under
"--Certain Covenants--Assets Sales;" and
o such Guarantor is released from its guarantees of, and all pledges and
security granted in connection with, the Credit Agreement and any other
Indebtedness of the Issuer or any Subsidiary of the Issuer.
A Guarantee also will be automatically released upon the applicable Subsidiary
ceasing to be a Subsidiary as a result of any foreclosure of any pledge or
security interest securing Bank Indebtedness or other exercise of remedies in
respect thereof if such Subsidiary is released from its guarantees of, and all
pledges and security interests granted in connection with, the Credit Agreement.
In addition, a Guarantee made by any Restricted Subsidiary will be automatically
released if the Issuer designates such Guarantor as an Unrestricted Subsidiary
and such designation complies with the other applicable provisions of the
Indenture.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each, a "Change of
Control"), each Holder will have the right to require the Issuer to repurchase
all or any part of such Holder's Notes at a purchase price in cash equal to 101%
of the principal amount thereof, plus accrued and unpaid interest, if any, to
the date of repurchase (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date):
(1) the sale, lease or transfer, in one or a series of related
transactions, of all or substantially all the assets of the Issuer and its
Subsidiaries, taken as a whole, to a Person other than the Permitted
Holders;
(2) (A) the Issuer becomes aware (by way of a report or any other
filing pursuant to Section 13(d) of the Exchange Act, proxy, vote,
written notice or otherwise) of the acquisition by any Person or group
(within the meaning of Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act, or any successor provision), including any group acting
for the purpose of acquiring, holding or disposing of securities (within
the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than the
Permitted Holders, in a single transaction or in a related series of
transactions, by way of merger, consolidation or other business
combination or purchase of beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act, or any successor provision), of 35%
or more of the total voting power of the Voting Stock of the Issuer or
Holdings; and
(B) the Permitted Holders beneficially own (as defined above),
directly or indirectly, in the aggregate a lesser percentage of the
total voting power of the Voting Stock of the Issuer or Holdings, as
applicable, than such other Person or group and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors; or
(3) during any one year period, individuals who at the beginning of
such period constituted the board of directors of the Issuer or Holdings
(together with any new directors whose election by such board of directors
or whose nomination for election by the shareholders of the Issuer or
Holdings, as applicable, was approved by a vote of a majority of the
directors of the Issuer or Holdings, as applicable, then still in office
who were either directors at the beginning of such period or whose election
or nomination for election was previously so approved) cease for any reason
to constitute a majority of the board of directors of the Issuer or
Holdings, as applicable, then in office.
In the event that at the time of such Change of Control the terms of the
Bank Indebtedness restrict or prohibit the repurchase of Notes pursuant to this
covenant, then prior to the mailing of the notice to Holders provided for in the
immediately following paragraph but in any event within 30 days following any
Change of Control, the Issuer shall:
76
<PAGE>
o repay in full all Bank Indebtedness or offer to repay in full all Bank
Indebtedness and repay the Bank Indebtedness of each lender who has
accepted such offer; or
o obtain the requisite consent under the agreements governing the Bank
Indebtedness to permit the repurchase of the Notes as provided for in the
immediately following paragraph.
Within 30 days following any Change of Control, unless the Issuer has
exercised its right to redeem the Notes as described under "--Optional
Redemption", the Issuer shall mail a notice (a "Change of Control Offer") to
each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such Holder has the
right to require the Issuer to purchase such Holder's Notes at a purchase
price in cash equal to 101% of the principal amount thereof, plus accrued
and unpaid interest and liquidated damages, if any, to the date of purchase
(subject to the right of Holders of record on a record date to receive
interest on the relevant interest payment date);
(2) the circumstances and relevant facts and financial information
regarding such Change of Control;
(3) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Issuer, consistent with this
covenant, that a Holder must follow in order to have its Notes purchased.
The Issuer will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Issuer and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
The Issuer will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of this covenant, the Issuer will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under this paragraph by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Issuer and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Issuer could decide to do so in the future. Subject to the limitations
discussed below, the Issuer could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the Indenture, but that
could increase the amount of indebtedness outstanding at such time or otherwise
affect the Issuer's capital structure or credit ratings.
The occurrence of events which would constitute a Change of Control would
constitute a default under the Credit Agreement. Future Senior Indebtedness of
the Issuer may contain prohibitions on certain events which would constitute a
Change of Control or require such Senior Indebtedness to be repurchased upon a
Change of Control. Moreover, the exercise by the Holders of their right to
require the Issuer to repurchase the Notes could cause a default under such
Senior Indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase on the Issuer. Finally, the Issuer's ability
to pay cash to the Holders upon a repurchase may be limited by the Issuer's then
existing financial resources. There can be no assurance that sufficient funds
will be available when necessary to make any required repurchases.
The definition of Change of Control includes a phrase relating to the sale,
lease or transfer of "all or substantially all" the assets of the Issuer and its
Subsidiaries taken as a whole. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
Holder of Notes to require the Issuer to repurchase such Notes as a result of a
sale, lease or transfer of less than all of the assets of the Issuer and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
77
<PAGE>
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock
and Preferred Stock. The Indenture provides that:
(1) the Issuer will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, Incur any Indebtedness (including
Acquired Indebtedness) or issue any shares of Disqualified Stock; and
(2) the Issuer will not permit any of its Restricted Subsidiaries to
issue any shares of Preferred Stock;
provided, however, that the Issuer and any Restricted Subsidiary that is a
Guarantor may Incur Indebtedness (including Acquired Indebtedness) or issue
shares of Disqualified Stock and any Restricted Subsidiary that is a Guarantor
may issue shares of Preferred Stock, in each case if the Fixed Charge Coverage
Ratio of the Issuer for the most recently ended four full fiscal quarters for
which internal financial statements are available immediately preceding the date
on which such additional Indebtedness is Incurred or such Disqualified Stock or
Preferred Stock is issued would have been at least 2.00 to 1.00 determined on a
pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been Incurred, or the
Disqualified Stock or Preferred Stock had been issued, as the case may be, and
the application of proceeds therefrom had occurred at the beginning of such
four-quarter period.
The foregoing limitations will not apply to:
(a) the Incurrence by the Issuer or its Restricted Subsidiaries of
Indebtedness under the Credit Agreement and the issuance and creation of
letters of credit and bankers' acceptances thereunder (with letters of
credit and bankers' acceptances being deemed to have a principal amount
equal to the face amount thereof) up to an aggregate principal amount of
$850.0 million outstanding at any one time;
(b) the Incurrence by the Issuer and the Guarantors of Indebtedness
represented by the Notes (not including any Additional Notes) and the
Guarantees, as applicable;
(c) Indebtedness existing on the Issue Date (other than Indebtedness
described in clauses (a) and (b));
(d) Indebtedness (including Capitalized Lease Obligations) Incurred by
the Issuer or any of its Restricted Subsidiaries to finance the purchase,
lease or improvement of property (real or personal) or equipment (whether
through the direct purchase of assets or the Capital Stock of any Person
owning such assets) in an aggregate principal amount which, when aggregated
with the principal amount of all other Indebtedness then outstanding and
Incurred pursuant to this clause (d), does not exceed 5.0% of Total Assets
at the time of Incurrence;
(e) Indebtedness Incurred by the Issuer or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters
of credit issued in the ordinary course of business, including without
limitation letters of credit in respect of workers' compensation claims,
health, disability or other employee benefits or property, casualty or
liability insurance or self-insurance, or other Indebtedness with respect
to reimbursement type obligations regarding workers' compensation claims;
provided, however, that upon the drawing of such letters of credit, such
obligations are reimbursed within 30 days following such drawing;
(f) Indebtedness arising from agreements of the Issuer or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, Incurred in connection with the
disposition of any business, assets or a Subsidiary of the Issuer in
accordance with the terms of the Indenture, other than guarantees of
Indebtedness Incurred by any Person acquiring all or any portion of such
business, assets or Subsidiary for the purpose of financing such
acquisition;
(g) Indebtedness of the Issuer to a Restricted Subsidiary of the
Issuer; provided that any such Indebtedness is subordinated in right of
payment to the Notes; provided further that any subsequent issuance or
transfer of any Capital Stock or any other event which results in any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary of the Issuer
or any other subsequent transfer of any such Indebtedness (except to the
Issuer or another Restricted Subsidiary) shall be deemed, in each case to
be an Incurrence of such Indebtedness;
78
<PAGE>
(h) shares of Preferred Stock of a Restricted Subsidiary issued to the
Issuer or another Restricted Subsidiary of the Issuer; provided that any
subsequent issuance or transfer of any Capital Stock or any other event
which results in any such Restricted Subsidiary ceasing to be a Restricted
Subsidiary or any other subsequent transfer of any such shares of Preferred
Stock (except to the Issuer or another Restricted Subsidiary of the Issuer)
shall be deemed, in each case, to be an issuance of shares of Preferred
Stock;
(i) Indebtedness of a Restricted Subsidiary to the Issuer or another
Restricted Subsidiary of the Issuer; provided that:
(A) any such Indebtedness is made pursuant to an intercompany note;
and
(B) if a Guarantor incurs such Indebtedness to a Restricted
Subsidiary that is not a Guarantor such Indebtedness is subordinated in
right of payment to the Guarantee of such Guarantor; provided further
that any subsequent issuance or transfer of any Capital Stock or any
other event which results in any Restricted Subsidiary lending such
Indebtedness ceasing to be a Restricted Subsidiary or any other
subsequent transfer of any such Indebtedness (except to the Issuer or
another Restricted Subsidiary of the Issuer) shall be deemed, in each
case, to be an Incurrence of such Indebtedness;
(j) Hedging Obligations that are Incurred in the ordinary course of
business:
(1) for the purpose of fixing or hedging interest rate risk with
respect to any Indebtedness that is permitted by the terms of the
Indenture to be outstanding:
(2) for the purpose of fixing or hedging currency exchange rate
risk with respect to any currency exchanges or
(3) for the purpose of fixing or hedging commodity price risk with
respect to any commodity purchases;
(k) obligations in respect of performance, bid and surety bonds and
completion guarantees provided by the Issuer or any Restricted Subsidiary
in the ordinary course of business;
(l) Indebtedness or Disqualified Stock of the Issuer or any Restricted
Subsidiary not otherwise permitted hereunder in an aggregate principal
amount, which when aggregated with the principal amount or liquidation
preference of all other Indebtedness and Disqualified Stock then
outstanding and Incurred pursuant to this clause (l), does not exceed
$125.0 million at any one time outstanding (it being understood that any
Indebtedness Incurred under this clause (l) shall cease to be deemed
Incurred or outstanding for purposes of this clause (l) but shall be deemed
Incurred for purposes of the first paragraph of this covenant from and
after the first date on which the Issuer could have Incurred such
Indebtedness under the first paragraph of this covenant without reliance
upon this clause (l));
(m) any guarantee by the Issuer or a Guarantor of Indebtedness or
other obligations of the Issuer or any of its Restricted Subsidiaries so
long as the Incurrence of such Indebtedness Incurred by the Issuer or such
Restricted Subsidiary is permitted under the terms of the Indenture;
provided that if such Indebtedness is by its express terms subordinated in
right of payment to the Notes or the Guarantee of such Restricted
Subsidiary, as applicable, any such guarantee of such Guarantor with
respect to such Indebtedness shall be subordinated in right of payment to
such Guarantor's Guarantee with respect to the Notes substantially to the
same extent as such Indebtedness is subordinated to the Notes or the
Guarantee of such Restricted Subsidiary, as applicable;
(n) the Incurrence by the Issuer or any of its Restricted Subsidiaries
of Indebtedness which serves to refund or refinance any Indebtedness
Incurred as permitted under the first paragraph of this covenant and
clauses (b), (c), (d) and (o) of this paragraph or any Indebtedness issued
to so refund or refinance such Indebtedness (subject to the following
proviso, "Refinancing Indebtedness") prior to its respective maturity;
provided, however, that such Refinancing Indebtedness:
(i) has a Weighted Average Life to Maturity at the time such
Refinancing Indebtedness is Incurred which is not less than the
remaining Weighted Average Life to Maturity of the Indebtedness being
refunded or refinanced;
79
<PAGE>
(ii) has a Stated Maturity which is no earlier than the Stated
Maturity of the Indebtedness being refunded or refinanced:
(iii) to the extent such Refinancing Indebtedness refinances
Indebtedness pari passu with the Notes or the Guarantee of such
Restricted Subsidiary, as applicable, is pari passu with the Notes or
the Guarantee of such Restricted Subsidiary, as applicable;
(iv) is Incurred in an aggregate principal amount (or if issued
with original issue discount, an aggregate issue price) that is equal to
or less than the aggregate principal amount (or if issued with original
issue discount, the aggregate accreted value) then outstanding of the
Indebtedness being refinanced plus premium and fees Incurred in
connection with such refinancing; and
(v) shall not include:
(x) Indebtedness of a Restricted Subsidiary that is not a
Guarantor that refinances Indebtedness of the Issuer; or
(y) Indebtedness of the Issuer or a Restricted Subsidiary that
refinances Indebtedness of an Unrestricted Subsidiary;
and provided further that subclauses (i) and (ii) of this clause (n) will
not apply to any refunding or refinancing of any Senior Indebtedness;
(o) Indebtedness or Disqualified Stock of Persons that are acquired by
the Issuer or any of its Restricted Subsidiaries or merged into a
Restricted Subsidiary in accordance with the terms of the Indenture;
provided, however, that such Indebtedness or Disqualified Stock is not
Incurred in contemplation of such acquisition or merger or to provide all
or a portion of the funds or credit support required to consummate such
acquisition or merger; provided further, however, that after giving effect
to such acquisition and the Incurrence of such Indebtedness either:
(i) the Issuer would be permitted to Incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
set forth in the first sentence of this covenant: or
(ii) the Fixed Charge Coverage Ratio would be greater than
immediately prior to such acquisition;
(p) Indebtedness Incurred by a Receivables Subsidiary in a Qualified
Receivables Financing that is not recourse to the Issuer or any Restricted
Subsidiary of the Issuer (except for Standard Securitization Undertakings);
(q) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument drawn against
insufficient funds in the ordinary course of business, provided that such
Indebtedness is extinguished within two Business Days of its Incurrence;
(r) Indebtedness of the Issuer or any Restricted Subsidiary of the
Issuer supported by a letter of credit issued pursuant to the Credit
Agreement, in a principal amount not in excess of the stated amount of such
letter of credit; and
(s) Contribution Indebtedness.
Notwithstanding the foregoing, neither the Issuer nor any Guarantor may
Incur any Indebtedness pursuant to the immediately preceding paragraph if the
proceeds thereof are used, directly or indirectly, to repay, prepay, redeem,
defease, retire, refund or refinance any Subordinated Indebtedness unless such
Indebtedness will be subordinated to the Notes or such Guarantor's Guarantee, as
applicable, to at least the same extent as such Subordinated Indebtedness. For
purposes of determining compliance with this covenant, in the event that an item
of Indebtedness meets the criteria of more than one of the categories of
permitted Indebtedness described in clauses (a) through (s) above or is entitled
to be Incurred pursuant to the first paragraph of this covenant, the Issuer
shall, in its sole discretion, classify or reclassify such item of Indebtedness
in any manner that complies with this covenant and such item of Indebtedness
will be treated as having been Incurred pursuant to only one of such clauses or
pursuant to the first paragraph hereof. Accrual of interest, the accretion of
accreted value and the payment of interest in the form of additional
Indebtedness will not be deemed to be an Incurrence of Indebtedness for purposes
of this covenant.
80
<PAGE>
Limitation on Restricted Payments. The Indenture provides that the Issuer
will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly:
(i) declare or pay any dividend or make any distribution on account of
the Issuer's or any of its Restricted Subsidiaries' Equity Interests,
including any payment made in connection with any merger or consolidation
involving the Issuer (other than:
(A) dividends or distributions by the Issuer payable solely in
Equity Interests (other than Disqualified Stock) of the Issuer; or
(B) dividends or distributions by a Restricted Subsidiary so long
as, in the case of any dividend or distribution payable on or in respect
of any class or series of securities issued by a Restricted Subsidiary
other than a Wholly Owned Restricted Subsidiary, the Issuer or a
Restricted Subsidiary receives at least its pro rata share of such
dividend or distribution in accordance with its Equity Interests in such
class or series of securities);
(ii) purchase or otherwise acquire or retire for value any Equity
Interests of Holdings or the Issuer;
(iii) make any principal payment on, or redeem, repurchase, defease or
otherwise acquire or retire for value, in each case prior to any scheduled
repayment or scheduled maturity, any Subordinated Indebtedness (other than
the payment, redemption, repurchase, defeasance, acquisition or retirement
of:
(A) Subordinated Indebtedness in anticipation of satisfying a
sinking fund obligation, principal installment or final maturity, in
each case due within one year of the date of such payment, redemption,
repurchase, defeasance, acquisition or retirement and
(B) Indebtedness permitted under clauses (g) and (i) of the second
paragraph of the covenant described under "--Limitation on Incurrence of
Indebtedness and Issuance of Disqualified Stock and Preferred Stock");
or
(iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of such
Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) immediately after giving effect to such transaction on a pro
forma basis, the Issuer could Incur $1.00 of additional Indebtedness
under the provisions of the first paragraph of "--Limitation on
Incurrence of Indebtedness and Issuance of Disqualified Stock and
Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Issuer and its Restricted
Subsidiaries after the Issue Date (including Restricted Payments
permitted by clauses (i), (iv) (only to the extent of one-half of the
amounts paid pursuant to such clause), (vi) and (viii) of the next
succeeding paragraph, but excluding all other Restricted Payments
permitted by the next succeeding paragraph), is less than the sum of,
without duplication,
(i) 50% of the Consolidated Net Income of the Issuer for the
period (taken as one accounting period) from January 1, 1999 to the
end of the Issuer's most recently ended fiscal quarter for which
internal financial statements are available at the time of such
Restricted Payment (or, in the case such Consolidated Net Income for
such period is a deficit, minus 100% of such deficit), plus
(ii) 100% of the aggregate net proceeds, including cash and the
Fair Market Value (as determined in accordance with the next
succeeding sentence) of property other than cash, received by the
Issuer since the Issue Date from the issue or sale of Equity
Interests of the Issuer (excluding Refunding Capital Stock (as
defined below), Designated Preferred Stock, Excluded Contributions
and Disqualified Stock), including Equity Interests issued upon
conversion of Indebtedness or upon exercise of warrants or options
(other than an issuance or sale to a Subsidiary of the Issuer or an
employee stock ownership plan or trust established by the Issuer or
any of its Subsidiaries), plus
81
<PAGE>
(iii) 100% of the aggregate amount of contributions to the
capital of the Issuer received in cash and the Fair Market Value (as
determined in accordance with the next succeeding sentence) of
property other than cash since the Issue Date (other than Excluded
Contributions, Refunding Capital Stock, Designated Preferred Stock,
Disqualified Stock and the Cash Contribution Amount), plus
(iv) 100% of the aggregate amount received in cash and the Fair
Market Value (as determined in accordance with the next succeeding
sentence) of property (other than cash) received from:
(A) the sale or other disposition (other than to the Issuer
or a Restricted Subsidiary) of Restricted Investments made by the
Issuer and its Restricted Subsidiaries and from repurchases and
redemptions of such Restricted Investments from the Issuer and
its Restricted Subsidiaries by any Person (other than the Issuer
or any of its Subsidiaries) and from repayments of loans or
advances which constituted Restricted Investments,
(B) the sale (other than to the Issuer or a Restricted
Subsidiary) of the Capital Stock of an Unrestricted Subsidiary or
(C) a distribution or dividend from an Unrestricted
Subsidiary, plus
(v) in the event any Unrestricted Subsidiary has been
redesignated as a Restricted Subsidiary or has been merged,
consolidated or amalgamated with or into, or transfers or conveys its
assets to, or is liquidated into, the Issuer or a Restricted
Subsidiary, the Fair Market Value (as determined in good faith by the
Issuer) of the Investment of the Issuer in such Unrestricted
Subsidiary at the time of such redesignation, combination or transfer
(or of the assets transferred or conveyed, as applicable), after
deducting any Indebtedness associated with the Unrestricted
Subsidiary so designated or combined or any Indebtedness associated
with the assets so transferred or conveyed.
The Fair Market Value of property other than cash covered by clauses (c)(ii),
(iii), (iv) and (v) above shall be determined in good faith by the Issuer and
(A) in the event of property with a Fair Market Value in excess of
$5.0 million, shall be set forth in an Officers' Certificate or (B) in the event
of property with a Fair Market Value in excess of $10.0 million, shall be set
forth in a resolution approved by at least a majority of the Board of Directors.
The foregoing provisions will not prohibit:
(i) the payment of any dividend or distribution within 60 days after
the date of declaration thereof, if at the date of declaration such payment
would have complied with the provisions of the Indenture;
(ii) (a) the repurchase, retirement or other acquisition of any Equity
Interests ("Retired Capital Stock") or Subordinated Indebtedness of the
Issuer or Holdings in exchange for, or out of the proceeds of the
substantially concurrent sale of, Equity Interests of the Issuer or
contributions to the equity capital of the Issuer (other than any
Disqualified Stock or any Equity Interests sold to a Subsidiary of the
Issuer or to an employee stock ownership plan or any trust established
by the Issuer or any of its Subsidiaries) (collectively, including any
such contributions, "Refunding Capital Stock") and
(b) the declaration and payment of accrued dividends on the Retired
Capital Stock out of the proceeds of the substantially concurrent sale
(other than to a Subsidiary of the Issuer or to an employee stock
ownership plan or any trust established by the Issuer or any of its
Subsidiaries) of Refunding Capital Stock;
(iii) the redemption, repurchase or other acquisition or retirement of
Subordinated Indebtedness of the Issuer made by exchange for, or out of the
proceeds of the substantially concurrent sale of, new Indebtedness of the
Issuer which is Incurred in accordance with the covenant described under
"--Limitation on Incurrence of Indebtedness and Issuance of Disqualified
Stock and Preferred Stock" so long as
(A) the principal amount of such new Indebtedness does not exceed
the principal amount of the Subordinated Indebtedness being so redeemed,
repurchased, acquired or retired for value (plus the
82
<PAGE>
amount of any premium required to be paid under the terms of the
instrument governing the Subordinated Indebtedness being so redeemed,
repurchased, acquired or retired),
(B) such Indebtedness is subordinated to Senior Indebtedness and
the Notes at least to the same extent as such Subordinated Indebtedness
so purchased, exchanged, redeemed, repurchased, acquired or retired for
value,
(C) such Indebtedness has a final scheduled maturity date equal to
or later than the final scheduled maturity date of the Subordinated
Indebtedness being so redeemed, repurchased, acquired or retired, and
(D) such Indebtedness has a Weighted Average Life to Maturity equal
to or greater than the remaining Weighted Average Life to Maturity of
the Subordinated Indebtedness being so redeemed, repurchased, acquired
or retired;
(iv) the repurchase, retirement or other acquisition (or dividends to
Holdings to finance any such repurchase, retirement or other acquisition)
for value of Equity Interests of the Issuer or Holdings held by any future,
present or former employee, director or consultant of the Issuer, Holdings
or any Subsidiary of the Issuer pursuant to any management equity plan or
stock option plan or any other management or employee benefit plan or
agreement; provided, however, that the aggregate amounts paid under this
clause (iv) do not exceed $10.0 million in any calendar year (with unused
amounts in any calendar year being permitted to be carried over for the two
succeeding calendar years); provided further, however, that such amount in
any calendar year may be increased by an amount not to exceed:
(I) the cash proceeds received by the Issuer or any of its
Restricted Subsidiaries from the sale of Equity Interests (other than
Disqualified Stock) of the Issuer or Holdings (to the extent contributed
to the Issuer) to members of management, directors or consultants of the
Issuer and its Restricted Subsidiaries or Holdings that occurs after the
Issue Date (provided that the amount of such cash proceeds utilized for
any such repurchase, retirement, other acquisition or dividend will not
increase the amount available for Restricted Payments under clause
(c) of the immediately preceding paragraph) plus
(II) the cash proceeds of key man life insurance policies received
by the Issuer and its Restricted Subsidiaries after the Issue Date
(provided that the Issuer may elect to apply all or any portion of the
aggregate increase contemplated by clauses (I) and (II) above in any
single calendar year);
(v) the declaration and payment of dividends or distributions to
holders of any class or series of Disqualified Stock of the Issuer or any
of its Restricted Subsidiaries issued or incurred in accordance with the
covenant entitled "--Limitation on Incurrence of Indebtedness and Issuance
of Disqualified Stock and Preferred Stock";
(vi) the declaration and payment of dividends or distributions to
holders of any class or series of Designated Preferred Stock (other than
Disqualified Stock) issued after the Issue Date and the declaration and
payment of dividends to Holdings, the proceeds of which will be used to
fund the payment of dividends to holders of any class or series of
Designated Preferred Stock (other than Disqualified Stock) of Holdings
issued after the Issue Date; provided, however, that
(A) for the most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the
date of issuance of such Designated Preferred Stock, after giving effect
to such issuance (and the payment of dividends or distributions) on a
pro forma basis, the Issuer would have had a Fixed Charge Coverage Ratio
of at least 2.25 to 1.00 and
(B) the aggregate amount of dividends declared and paid pursuant to
this clause (vi) does not exceed the net cash proceeds actually received
by the Issuer either directly or as a contribution from Holdings from
any such sale of Designated Preferred Stock (other than Disqualified
Stock) issued after the Issue Date;
(vii) Investments in Unrestricted Subsidiaries having an aggregate
Fair Market Value, taken together with all other Investments made pursuant
to this clause (vii) that are at that time outstanding, not to exceed
83
<PAGE>
$25.0 million at the time of such Investment (with the Fair Market Value of
each Investment being measured at the time made and without giving effect
to subsequent changes in value);
(viii) the payment of dividends on the Issuer's common stock (or the
payment of dividends to Holdings to fund the payment by Holdings of
dividends on Holdings' common stock) of up to 6.0% per annum of the net
proceeds received by the Issuer from any past or future public offering of
common stock or contributed to the Issuer by Holdings from any public
offering of common stock;
(ix) Investments that are made with Excluded Contributions;
(x) other Restricted Payments in an aggregate amount not to exceed
$25.0 million;
(xi) the distribution, as a dividend or otherwise, of shares of
Capital Stock of, or Indebtedness owed to the Issuer or a Restricted
Subsidiary of the Issuer by, Unrestricted Subsidiaries;
(xii) the payment of dividends, other distributions or other amounts
by the Issuer:
(A) to Holdings in amounts equal to the amounts required for
Holdings to pay fees and expenses required to maintain its corporate
existence, customary salary, bonus and other benefits payable to
officers and employees of Holdings and general corporate overhead
expenses of Holdings, in each case to the extent such fees and expenses
are attributable to the ownership or operation of the Issuer and its
Subsidiaries, or
(B) to Holdings in amounts equal to amounts required for Holdings
to pay franchise taxes and Federal, state and local income taxes to the
extent such income taxes are attributable to the income of the Issuer
and its Restricted Subsidiaries (and, to the extent of amounts actually
received from its Unrestricted Subsidiaries, in amounts required to pay
such taxes to the extent attributable to the income of such Unrestricted
Subsidiaries);
(xiii) cash dividends or other distributions on the Issuer's Capital
Stock used to, or the making of loans to Holdings the proceeds of which
will be used to, fund the payment of fees and expenses incurred in
connection with the Offering or owed to Affiliates, in each case to the
extent permitted by the covenant described under "--Transactions with
Affiliates";
(xiv) repurchases of Equity Interests deemed to occur upon exercise of
stock options if such Equity Interests represent a portion of the exercise
price of such options; and
(xv) purchases of receivables pursuant to a Receivables Purchase
Obligation in connection with a Qualified Receivables Financing; provided,
however, that at the time of, and after giving effect to, any Restricted
Payment permitted under clauses (vi), (vii), (x) and (xi), no Default or
Event of Default shall have occurred and be continuing or would occur as a
consequence thereof.
As of the Issue Date, all of the Issuer's Subsidiaries will be Restricted
Subsidiaries. The Issuer will not permit any Unrestricted Subsidiary to become a
Restricted Subsidiary except pursuant to the definition of "Unrestricted
Subsidiary." For purposes of designating any Restricted Subsidiary as an
Unrestricted Subsidiary, all outstanding Investments by the Issuer and its
Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so
designated will be deemed to be Restricted Payments in an amount determined as
set forth in the last sentence of the definition of "Investments." Such
designation will only be permitted if a Restricted Payment in such amount would
be permitted at such time and if such Subsidiary otherwise meets the definition
of an Unrestricted Subsidiary.
Dividend and Other Payment Restrictions Affecting Subsidiaries. The
Indenture provides that the Issuer will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or consensual
restriction on the ability of any Restricted Subsidiary to:
(a) (i) pay dividends or make any other distributions to the Issuer or
any of its Restricted Subsidiaries:
(1) on its Capital Stock; or
(2) with respect to any other interest or participation in, or
measured by, its profits; or
84
<PAGE>
(ii) pay any Indebtedness owed to the Issuer or any of its
Restricted Subsidiaries;
(b) make loans or advances to the Issuer or any of its Restricted
Subsidiaries; or
(c) sell, lease or transfer any of its properties or assets to the
Issuer or any of its Restricted Subsidiaries except in each case for such
encumbrances or restrictions existing under or by reason of:
(1) contractual encumbrances or restrictions in effect on the Issue
Date, including pursuant to the Credit Agreement and the other Senior
Credit Documents;
(2) the Indenture and the Notes;
(3) applicable law or any applicable rule, regulation or order;
(4) any agreement or other instrument relating to Indebtedness of a
Person acquired by the Issuer or any Restricted Subsidiary which was in
existence at the time of such acquisition (but not created in
contemplation thereof or to provide all or any portion of the funds or
credit support utilized to consummate such acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired;
(5) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all
or substantially all the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition;
(6) Secured Indebtedness otherwise permitted to be Incurred
pursuant to the covenants described under "--Limitation on Incurrence of
Indebtedness and Issuance of Disqualified Stock and Preferred Stock" and
"--Liens" that limit the right of the debtor to dispose of the assets
securing such Indebtedness;
(7) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business;
(8) customary provisions in joint venture agreements and other
similar agreements entered into in the ordinary course of business;
(9) customary provisions contained in leases and other similar
agreements entered into in the ordinary course of business that impose
restrictions of the type described in clause (c) above;
(10) any encumbrance or restriction of a Receivables Subsidiary
effected in connection with a Qualified Receivables Financing; provided,
however, that such restrictions apply only to such Receivables
Subsidiary;
(11) other Indebtedness of Restricted Subsidiaries
(i) that are Guarantors that is Incurred subsequent to the Issue
Date pursuant to the covenant described under "--Limitation on
Incurrence of Indebtedness and Issuance of Disqualified Stock and
Preferred Stock" or
(ii) that is Incurred subsequent to the Issue Date pursuant to
clauses (d) or (l) of the second paragraph of the covenant described
under "--Limitation on Incurrence of Indebtedness and Issuance of
Disqualified Stock and Preferred Stock"; or
(12) any encumbrances or restrictions of the type referred to in
clauses (a), (b) and (c) above imposed by any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements
or refinancings of the contracts, instruments or obligations referred to
in clauses (1) through (11) above; provided that such amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are, in the good faith judgment
of the Issuer, no more restrictive with respect to such dividend and
other payment restrictions than those contained in the dividend or other
payment restrictions prior to such amendment, modification, restatement,
renewal, increase, supplement, refunding, replacement or refinancing.
85
<PAGE>
Asset Sales. The Indenture provides that the Issuer will not, and will not
permit any of its Restricted Subsidiaries to, cause or make an Asset Sale,
unless:
(x) the Issuer, or its Restricted Subsidiaries, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the
Fair Market Value (as determined in good faith by the Issuer) of the assets
sold or otherwise disposed of and
(y) at least 75% of the consideration therefor received by the Issuer,
or such Restricted Subsidiary, as the case may be, is in the form of Cash
Equivalents; provided that the amount of:
(a) any liabilities (as shown on the Issuer's or such Restricted
Subsidiary's most recent balance sheet or in the notes thereto) of the
Issuer or any Restricted Subsidiary (other than liabilities that are by
their terms subordinated to the Notes) that are assumed by the
transferee of any such assets,
(b) any notes or other obligations or other securities received by
the Issuer or such Restricted Subsidiary from such transferee that are
converted by the Issuer or such Restricted Subsidiary into cash within
180 days of the receipt thereof (to the extent of the cash received),
and
(c) any Designated Noncash Consideration received by the Issuer or
any of its Restricted Subsidiaries in such Asset Sale having an
aggregate Fair Market Value, taken together with all other Designated
Noncash Consideration received pursuant to this clause (c) that is at
that time outstanding, not to exceed the greater of 5.0% of Total Assets
or $100.0 million at the time of the receipt of such Designated Noncash
Consideration (with the Fair Market Value of each item of Designated
Noncash Consideration being measured at the time received and without
giving effect to subsequent changes in value) shall be deemed to be Cash
Equivalents for the purposes of this provision.
Within 365 days after the Issuer's or any Restricted Subsidiary's receipt
of the Net Proceeds of any Asset Sale, the Issuer or such Restricted Subsidiary
may apply the Net Proceeds from such Asset Sale, at its option:
(i) to permanently reduce Obligations under the Credit Agreement (and,
in the case of revolving Obligations, to correspondingly reduce commitments
with respect thereto) or other Senior Indebtedness or Pari Passu
Indebtedness (provided that if the Issuer shall so reduce Obligations under
Pari Passu Indebtedness, it will equally and ratably reduce Obligations
under the Notes by making an offer (in accordance with the procedures set
forth below for an Asset Sale Offer) to all Holders to purchase at a
purchase price equal to 100% of the principal amount thereof, plus accrued
and unpaid interest and liquidated damages, if any, the pro rata principal
amount of Notes) or Indebtedness of a Restricted Subsidiary, in each case
other than Indebtedness owed to the Issuer or an Affiliate of the Issuer,
(ii) to an investment in any one or more businesses (provided that
such investment in any business may be in the form of the acquisition of
Capital Stock so long as it results in the Issuer or a Restricted
Subsidiary, as the case may be, owning substantially all the Capital Stock
of such business), capital expenditures or acquisitions of other assets in
each case used or useful in a Similar Business, and/or
(iii) to make an investment in any one or more businesses (provided
that such investment in any business may be in the form of the acquisition
of Capital Stock so long as it results in the Issuer or a Restricted
Subsidiary, as the case may be, owning substantially all the Capital Stock
of such business), properties or assets that replace the properties and
assets that are the subject of such Asset Sale.
Pending the final application of any such Net Proceeds, the Issuer or such
Restricted Subsidiary may temporarily reduce Indebtedness under a revolving
credit facility, if any, or otherwise invest such Net Proceeds in Cash
Equivalents or Investment Grade Securities. The Indenture provides that any Net
Proceeds from any Asset Sale that are not applied as provided and within the
time period set forth in the first sentence of this paragraph (it being
understood that any portion of such Net Proceeds used to make an offer to
purchase Notes, as described in clause (i) above, shall be deemed to have been
invested whether or not such offer is accepted) will be deemed to constitute
"Excess Proceeds". When the aggregate amount of Excess Proceeds exceeds $20.0
million, the Issuer shall make an offer to all Holders of Notes (an "Asset Sale
Offer") to purchase the maximum principal amount of Notes, that is an integral
multiple of $1,000, that may be purchased out of the Excess Proceeds at an offer
price in cash in an amount equal to 100% of the principal amount thereof, plus
accrued and unpaid interest and liquidated damages, if any, to the date fixed
for the closing of such offer, in accordance with the procedures set
86
<PAGE>
forth in the Indenture. The Issuer will commence an Asset Sale Offer with
respect to Excess Proceeds within ten Business Days after the date that Excess
Proceeds exceeds $20.0 million by mailing the notice required pursuant to the
terms of the Indenture, with a copy to the Trustee. To the extent that the
aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, the Issuer may use any remaining Excess Proceeds for
general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased in the manner described below.
Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds
shall be reset at zero.
The Issuer will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations to the extent such
laws or regulations are applicable in connection with the repurchase of the
Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of the Indenture,
the Issuer will comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations described in the Indenture
by virtue thereof.
If more Notes are tendered pursuant to an Asset Sale Offer than the Issuer
is required to purchase, selection of such Notes for purchase 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 so listed, on a pro rata basis, by lot or by such other method as the
Trustee shall deem fair and appropriate (and in such manner as complies with
applicable legal requirements); provided that no Notes of $1,000 or less shall
be purchased in part.
Notices of an Asset Sale Offer shall be mailed by first class mail, postage
prepaid, at least 30 but not more than 60 days before the purchase date to each
Holder of Notes at such Holder's registered address. If any Note is to be
purchased in part only, any notice of purchase that relates to such Note shall
state the portion of the principal amount thereof that has been or is to be
purchased.
A new Note in principal amount equal to the unpurchased portion of any Note
purchased in part will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the purchase date unless the
Issuer defaults in payment of the purchase price, interest shall cease to accrue
on Notes or portions thereof purchased.
Transactions with Affiliates. The Indenture provides that the Issuer will
not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, make any payment to, or sell, lease, transfer or otherwise dispose
of any of its properties or assets to, or purchase any property or assets from,
or enter into or make or amend any transaction or series of transactions,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate of the Issuer (each of the foregoing, an "Affiliate
Transaction") involving aggregate consideration in excess of $5.0 million,
unless:
(a) such Affiliate Transaction is on terms that are not materially
less favorable to the Issuer or the relevant Restricted Subsidiary than
those that could have been obtained in a comparable transaction by the
Issuer or such Restricted Subsidiary with an unrelated Person; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, the Issuer delivers to the Trustee a resolution adopted by
the majority of the Board of Directors of the Issuer, approving such
Affiliate Transaction and set forth in an Officers' Certificate certifying
that such Affiliate Transaction complies with clause (a) above.
The foregoing provisions will not apply to the following:
(i) Subsidiaries;
(ii) Permitted Investments and Restricted Payments permitted by the
provisions of the Indenture described above under the covenant
"--Limitation on Restricted Payments";
(iii) the payment of annual management, consulting, monitoring and
advisory fees to Blackstone in an amount in any fiscal year not to exceed
the greater of:
(A) $3.0 million and
87
<PAGE>
(B) an amount equal to 1.0% of EBITDA (without giving effect to
clause (vii) of the definition thereof) for the prior fiscal year;
(iv) the payment of reasonable and customary fees paid to, and
indemnity provided on behalf of, officers, directors, employees or
consultants of the Issuer, Holdings or any Restricted Subsidiary;
(v) payments by the Issuer or any of its Restricted Subsidiaries to
Blackstone made for any financial advisory, financing, underwriting or
placement services or in respect of other investment banking activities,
including, without limitation, in connection with acquisitions or
divestitures, which payments are approved by a majority of the Board of
Directors of the Issuer in good faith;
(vi) transactions in which the Issuer or any of its Restricted
Subsidiaries, as the case may be, delivers to the Trustee a letter from an
Independent Financial Advisor stating that such transaction is fair to the
Issuer or such Restricted Subsidiary from a financial point of view or
meets the requirements of clause (a) of the preceding paragraph;
(vii) payments or loans to employees or consultants in the ordinary
course of business which are approved by a majority of the Board of
Directors of the Issuer in good faith;
(viii) any agreement as in effect as of the Issue Date or any
amendment thereto (so long as any such amendment is not disadvantageous to
the holders of the Notes in any material respect) or any transaction
contemplated thereby;
(ix) the existence of, or the performance by the Issuer or any of its
Restricted Subsidiaries of its obligations under the terms of, any
stockholders agreement (including any registration rights agreement or
purchase agreement related thereto) to which it is a party as of the Issue
Date and any similar agreements which it may enter into thereafter;
provided, however, that the existence of, or the performance by the Issuer
or any of its Restricted Subsidiaries of its obligations under any future
amendment to any such existing agreement or under any similar agreement
entered into after the Issue Date shall only be permitted by this clause
(ix) to the extent that the terms of any such amendment or new agreement
are not otherwise disadvantageous to the Holders of the Notes in any
material respect;
(x) the payment of all fees and expenses related to the Offering,
including fees to Blackstone, which are described in this prospectus;
(xi) 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 terms of the Indenture, which
are fair to the Issuer and its Restricted Subsidiaries in the reasonable
determination of the Board of Directors or the senior management of the
Issuer, and are on terms at least as favorable as might reasonably have
been obtained at such time from an unaffiliated party;
(xii) any transaction effected as part of a Qualified Receivables
Financing; and
(xiii) the issuance of Equity Interests (other than Disqualified
Stock) of the Issuer or Holdings to any Permitted Holder.
Liens. The Indenture provides that the Issuer will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create,
Incur or suffer to exist any Lien on any asset or property of the Issuer or such
Restricted Subsidiary, or any income or profits therefrom, or assign or convey
any right to receive income therefrom, that secures any obligations of the
Issuer or any of its Subsidiaries (other than Senior Indebtedness) unless the
Notes are equally and ratably secured with (or on a senior basis to, in the case
of obligations subordinated in right of payment to the Notes) the obligations so
secured or until such time as such obligations are no longer secured by a Lien.
The preceding sentence will not require the Issuer or any Restricted Subsidiary
to secure the Notes if the Lien consists of a Permitted Lien.
The Indenture provides that no Restricted Subsidiary that is a Guarantor
will directly or indirectly create, Incur or suffer to exist any Lien on any
asset or property of such Guarantor or any income or profits therefrom, or
assign or convey any right to receive income therefrom, that secures any
obligation of such Guarantor (other than Senior Indebtedness of such Guarantor)
unless the Guarantee of such Guarantor is equally and ratably secured with (or
on a senior basis to, in the case of obligations subordinated on right of
payment to such Guarantor's Guarantee) the obligations so secured or until such
time as such obligations are no longer secured by a Lien. The
88
<PAGE>
preceding sentence will not require any Restricted Subsidiary that is a
Guarantor to secure its Guarantee if the Lien consists of a Permitted Lien.
Limitation on Other Pari Passu Indebtedness. The Indenture provides that
the Issuer will not, and will not permit any Restricted Subsidiary that is a
Guarantor to, directly or indirectly, Incur any Indebtedness (including Acquired
Indebtedness) that is subordinate in right of payment to any Indebtedness of the
Issuer or any Indebtedness of any such Guarantor, as the case may be, unless
such Indebtedness is either:
(i) pari passu in right of payment with the Notes or such Guarantor's
Guarantee, as the case may be, or
(ii) subordinate in right of payment to the Notes or such Guarantor's
Guarantee, as the case may be.
Reports and Other Information. The Indenture provides that notwithstanding
that the Issuer may not be subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act or otherwise report on an annual and quarterly
basis on forms provided for such annual and quarterly reporting pursuant to
rules and regulations promulgated by the SEC, the Issuer will file with the SEC
(and provide the Trustee and Holders with copies thereof, without cost to each
Holder, within 15 days after it files them with the SEC),
(i) within 90 days after the end of each fiscal year, annual reports
on Form 10-K (or any successor or comparable form) containing the
information required to be contained therein (or required in such successor
or comparable form),
(ii) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year, reports on Form 10-Q (or any successor or
comparable form),
(iii) promptly from time to time after the occurrence of an event
required to be therein reported, such other reports on Form 8-K (or any
successor or comparable form), and
(iv) any other information, documents and other reports which the
Issuer would be required to file with the SEC if it were subject to
Section 13 or 15(d) of the Exchange Act;
provided, however, the Issuer shall not be so obligated to file such reports
with the SEC if the SEC does not permit such filing, in which event the Issuer
will make available such information to prospective purchasers of Notes, in
addition to providing such information to the Trustee and the Holders, in each
case within 15 days after the time the Issuer would be required to file such
information with the SEC if it were subject to Section 13 or 15(d) of the
Exchange Act. Notwithstanding the foregoing, such requirements shall be deemed
satisfied prior to the commencement of the Exchange Offer (as defined) or the
effectiveness of the Shelf Registration Statement (as defined) by the filing
with the SEC of the Exchange Offer Registration Statement (as defined) and/or
Shelf Registration Statement, and any amendments thereto, with such financial
information that satisfies Regulation S-X of the Securities Act. In the event
that:
(i) the rules and regulations of the SEC permit the Issuer and
Holdings to report at the Holdings' level on a consolidated basis and
(ii) Holdings is not engaged in any business in any material respect
other than incidental to its ownership of the capital stock of the Issuer,
such consolidated reporting at the Holdings' level in a manner consistent with
that described in this covenant for the Issuer will satisfy this covenant.
Future Guarantors. The Indenture provides that the Issuer will cause each
Restricted Subsidiary (unless such Subsidiary is a Receivables Subsidiary)
organized under the laws of the United States of America or any state or
territory thereof that:
(a) guarantees any Indebtedness of Holdings, the Issuer or any of its
Restricted Subsidiaries (other than any Senior Indebtedness) or
(b) Incurs any Indebtedness (other than Senior Indebtedness) or issues
any shares of Disqualified Stock or Preferred Stock permitted to be
Incurred or issued pursuant to the first paragraph of the covenant
described under "--Limitation on Incurrence of Indebtedness and Issuance of
Disqualified Stock and Preferred Stock" or clauses (l) or (s) of the second
paragraph thereof or not permitted to be Incurred by such covenant,
89
<PAGE>
to execute and deliver to the Trustee a supplemental indenture pursuant to which
such Subsidiary will Guarantee payment of the Notes. Each Guarantee will be
limited to an amount not to exceed the maximum amount that can be guaranteed by
that Restricted Subsidiary without rendering the Guarantee, as it relates to
such Restricted Subsidiary, voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally.
MERGER, CONSOLIDATION, OR SALE OF ALL OR SUBSTANTIALLY ALL ASSETS
The Indenture provides that the Issuer may not consolidate or merge with or
into or wind up into (whether or not the Issuer is the surviving corporation),
or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions, to any Person unless:
(i) the Issuer is the surviving corporation or the Person formed by or
surviving any such consolidation or merger (if other than the Issuer) or to
which such sale, assignment, transfer, lease, conveyance or other
disposition will have been made is a corporation, partnership or limited
liability company organized or existing under the laws of the United
States, any state thereof, the District of Columbia, or any territory
thereof (the Issuer or such Person, as the case may be, being herein called
the "Successor Issuer");
(ii) the Successor Issuer (if other than the Issuer) expressly assumes
all the obligations of the Issuer under the Indenture and the Notes
pursuant to a supplemental indenture or other documents or instruments in
form reasonably satisfactory to the Trustee;
(iii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Issuer or any of its Restricted Subsidiaries as a result of such
transaction as having been Incurred by the Successor Issuer or such
Restricted Subsidiary at the time of such transaction) no Default or Event
of Default shall have occurred and be continuing;
(iv) immediately after giving pro forma effect to such transaction, as
if such transaction had occurred at the beginning of the applicable
four-quarter period, either
(A) the Successor Issuer would be permitted to Incur at least $1.00
of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first sentence of the covenant described under
"--Limitation on Incurrence of Indebtedness and Issuance of Disqualified
Stock and Preferred Stock" or
(B) the Fixed Charge Coverage Ratio for the Successor Issuer and
its Restricted Subsidiaries would be greater than such ratio for the
Issuer and its Restricted Subsidiaries immediately prior to such
transaction;
(v) each Guarantor, unless it is the other party to the transactions
described above, shall have by supplemental indenture confirmed that its
Guarantee shall apply to such Person's obligations under the Indenture and
the Notes; and
(vi) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the Indenture.
The Successor Issuer will succeed to, and be substituted for, the Issuer under
the Indenture and the Notes. Notwithstanding the foregoing clauses (iii) and
(iv),
(a) any Restricted Subsidiary may consolidate with, merge into or
transfer all or part of its properties and assets to the Issuer or to
another Restricted Subsidiary, and
(b) the Issuer may merge with an Affiliate incorporated solely for the
purpose of reincorporating the Issuer in another state of the United States
so long as the amount of Indebtedness of the Issuer and its Restricted
Subsidiaries is not increased thereby.
90
<PAGE>
The Indenture further provides that subject to certain limitations in the
Indenture governing release of a Guarantee upon the sale or disposition of a
Restricted Subsidiary that is a Guarantor, each such Guarantor will not, and the
Issuer will not permit such a Guarantor to, consolidate or merge with or into or
wind up into (whether or not such Guarantor is the surviving corporation), or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions to, any Person unless:
(i) such Guarantor is the surviving corporation or the Person formed
by or surviving any such consolidation or merger (if other than such
Guarantor) or to which such sale, assignment, transfer, lease, conveyance
or other disposition will have been made is a corporation, partnership or
limited liability company organized or existing under the laws of the
United States, any state thereof, the District of Columbia, or any
territory thereof (such Guarantor or such Person, as the case may be, being
herein called the "Successor Guarantor");
(ii) the Successor Guarantor (if other than such Guarantor) expressly
assumes all the obligations of such Guarantor under the Indenture and such
Guarantors's Guarantee pursuant to a supplemental indenture or other
documents or instruments in form reasonably satisfactory to the Trustee;
(iii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Guarantor or any of its Subsidiaries as a result of such transaction as
having been Incurred by the Successor Guarantor or such Subsidiary at the
time of such transaction) no Default or Event of Default shall have
occurred and be continuing; and
(iv) such Guarantor shall have delivered or caused to be delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Indenture.
Subject to certain limitations described in the Indenture, the Successor
Guarantor will succeed to, and be substituted for, such Guarantor under the
Indenture and such Guarantor's Guarantee. Notwithstanding the foregoing clause
(iii), a Guarantor may merge with an Affiliate incorporated solely for the
purpose of reincorporating such Guarantor in another state of the United States
so long as the amount of Indebtedness of the Guarantor is not increased thereby.
DEFAULTS
An Event of Default is defined in the Indenture as:
(i) a default in any payment of interest on any Note when due, whether
or not prohibited by the provisions described under "--Ranking" above,
continued for 30 days,
(ii) a default in the payment of principal or premium, if any, of any
Note when due at its Stated Maturity, upon optional redemption, upon
required repurchase, upon declaration or otherwise, whether or not such
payment is prohibited by the provisions described under "--Ranking" above,
(iii) the failure by the Issuer to comply with its obligations under
the covenant described under "--Merger, Consolidation or Sale of All or
Substantially All Assets" above,
(iv) the failure by the Issuer to comply for 30 days after notice with
any of its obligations under the covenants described under "--Change of
Control" or "--Certain Covenants" above (in each case, other than a failure
to purchase Notes),
(v) the failure by the Issuer to comply for 60 days after notice with
its other agreements contained in the Notes or the Indenture,
(vi) the failure by the Issuer or any Significant Subsidiary to pay
any Indebtedness (other than Indebtedness owing to the Issuer or a
Restricted Subsidiary) within any applicable grace period after final
maturity or the acceleration of any such Indebtedness by the holders
thereof because of a default if the total amount of such Indebtedness
unpaid or accelerated exceeds $25.0 million or its foreign currency
equivalent (the "cross acceleration provision"),
91
<PAGE>
(vii) certain events of bankruptcy, insolvency or reorganization of
the Issuer or a Significant Subsidiary (the "bankruptcy provisions"),
(viii) the rendering of any judgment or decree for the payment of
money (other than judgments which are covered by enforceable insurance
policies issued by solvent carriers) in excess of $25.0 million or its
foreign currency equivalent against the Issuer or a Significant Subsidiary
if:
(A) an enforcement proceeding thereon is commenced, or
(B) such judgment or decree remains outstanding for a period of
60 days following such judgment and is not discharged, waived or stayed
(the "judgment default provision"), or
(ix) any Guarantee ceases to be in full force and effect (except as
contemplated by the terms thereof) or any Guarantor denies or disaffirms
its obligations under the Indenture or any Guarantee and such Default
continues for 10 days.
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
However, a default under clause (iv) or (v) will not constitute an Event of
Default until the Trustee or the Holders of 25% in principal amount of the
outstanding Notes notify the Issuer of the default and the Issuer does not cure
such default within the time specified in clauses (iv) and (v) hereof after
receipt of such notice.
If an Event of Default (other than a Default relating to certain events of
bankruptcy, insolvency or reorganization of the Issuer) occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the outstanding Notes by notice to the Issuer may declare the principal of,
premium, if any, and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest will be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Issuer occurs, the principal of,
premium, if any, and interest on all the Notes will become immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holders. Under certain circumstances, the Holders of a majority in principal
amount of the outstanding Notes may rescind any such acceleration with respect
to the Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Notes unless:
(i) such Holder has previously given the Trustee notice that an Event
of Default is continuing,
(ii) Holders of at least 25% in principal amount of the outstanding
Notes have requested the Trustee to pursue the remedy,
(iii) such Holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense,
(iv) the Trustee has not complied with such request within 60 days
after the receipt of the request and the offer of security or indemnity,
and
(v) the Holders of a majority in principal amount of the outstanding
Notes have not given the Trustee a direction inconsistent with such request
within such 60-day period.
Subject to certain restrictions, the Holders of a majority in principal amount
of the outstanding Notes are given the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Holder or that would involve the Trustee in personal liability. Prior to taking
any action under
92
<PAGE>
the Indenture, the Trustee will be entitled to indemnification satisfactory to
it in its sole discretion against all losses and expenses caused by taking or
not taking such action.
The Indenture provides that if a Default occurs and is continuing and is
actually known to the Trustee, the Trustee must mail to each Holder notice of
the Default within the earlier of 90 days after it occurs or 30 days after it is
actually known to a Trust Officer or written notice of it is received by the
Trustee. Except in the case of a Default in the payment of principal of, premium
(if any) or interest on any Note, the Trustee may withhold notice if and so long
as a committee of its Trust Officers in good faith determines that withholding
notice is in the interests of the Noteholders. In addition, the Issuer is
required to deliver to the Trustee, within 120 days after the end of each fiscal
year, a certificate indicating whether the signers thereof know of any Default
that occurred during the previous year. The Issuer also is required to deliver
to the Trustee, within 30 days after the occurrence thereof, written notice of
any event which would constitute certain Defaults, their status and what action
the Issuer is taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding and any past default or compliance with any provisions may be waived
with the consent of the Holders of a majority in principal amount of the Notes
then outstanding. However, without the consent of each Holder of an outstanding
Note affected, no amendment may, among other things:
(i) reduce the amount of Notes whose Holders must consent to an
amendment,
(ii) reduce the rate of or extend the time for payment of interest on
any Note,
(iii) reduce the principal of or extend the Stated Maturity of any
Note,
(iv) reduce the premium payable upon the redemption of any Note or
change the time at which any Note may be redeemed as described under
"Optional Redemption" above,
(v) make any Note payable in money other than that stated in the Note,
(vi) make any change to the subordination provisions of the Indenture
that adversely affects the rights of any Holder,
(vii) impair the right of any Holder to receive payment of principal
of, premium, if any, and interest on such Holder's Notes on or after the
due dates therefor or to institute suit for the enforcement of any payment
on or with respect to such Holder's Notes,
(viii) make any change in the amendment provisions which require each
Holder's consent or in the waiver provisions, or
(ix) modify the Guarantees in any manner adverse to the Holders.
Without the consent of any Holder, the Issuer and Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation, partnership or limited liability
company of the obligations of the Issuer under the Indenture, to provide for
uncertificated Notes in addition to or in place of certificated Notes (provided
that the uncertificated Notes are issued in registered form for purposes of
Section 163(f) of the Code, or in a manner such that the uncertificated Notes
are described in Section 163(f)(2)(B) of the Code), to add Guarantees with
respect to the Notes, to secure the Notes, to add to the covenants of the Issuer
for the benefit of the Holders or to surrender any right or power conferred upon
the Issuer, to make any change that does not adversely affect the rights of any
Holder, to comply with any requirement of the SEC in connection with the
qualification of the Indenture under the TIA or to make certain changes to the
Indenture to provide for the issuance of Additional Notes. However, no amendment
may be made to the subordination provisions of the Indenture that adversely
affects the rights of any holder of Senior Indebtedness then outstanding unless
the holders of such Senior Indebtedness (or any group or representative thereof
authorized to give a consent) consent to such change.
93
<PAGE>
The consent of the Noteholders is not necessary under the Indenture to
approve the particular form of any proposed amendment. It is sufficient if such
consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Issuer is
required to mail to Noteholders a notice briefly describing such amendment.
However, the failure to give such notice to all Noteholders, or any defect
therein, will not impair or affect the validity of the amendment.
TRANSFER AND EXCHANGE
A Noteholder may transfer or exchange Notes in accordance with the
Indenture. Upon any transfer or exchange, the registrar and the Trustee may
require a Noteholder, among other things, to furnish appropriate endorsements
and transfer documents and the Issuer may require a Noteholder to pay any taxes
required by law or permitted by the Indenture. The Issuer is not required to
transfer or exchange any Note selected for redemption or to transfer or exchange
any Note for a period of 15 days prior to a selection of Notes to be redeemed.
The Notes will be issued in registered form and the registered Holder of a Note
will be treated as the owner of such Note for all purposes.
DEFEASANCE
The Issuer at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Issuer at any time may terminate its obligations under the covenants
described under "Certain Covenants," the operation of the cross acceleration
provision, the bankruptcy provisions with respect to Subsidiaries and the
judgment default provision described under "--Defaults" above and the
limitations contained under "Merger, Consolidation or Sale of All or
Substantially All Assets" above ("covenant defeasance"). If the Issuer exercises
its legal defeasance option or its covenant defeasance option, each Guarantor
will be released from all of its obligations with respect to its Guarantee.
The Issuer may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Issuer exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Issuer exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iii), (iv), (vi), (vii) with respect only
to Significant Subsidiaries, (viii) with respect only to Significant
Subsidiaries or (ix) under "--Defaults" above or because of the failure of the
Issuer to comply with "--Merger, Consolidation or Sale of All or Substantially
All Assets" above.
In order to exercise either defeasance option, the Issuer must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of an
Opinion of Counsel to the effect that holders of the Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amount and
in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or change in applicable Federal income tax law).
CONCERNING THE TRUSTEE
IBJ Whitehall Bank & Trust Company is the Trustee under the Indenture and
has been appointed by the Issuer as Registrar and Paying Agent with regard to
the Notes.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York.
94
<PAGE>
CERTAIN DEFINITIONS
"Acquired Indebtedness" means, with respect to any specified Person:
(i) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Restricted Subsidiary of such
specified Person, and
(ii) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person,
in each case, other than Indebtedness Incurred as consideration in, in
contemplation of, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was otherwise acquired by such Person, or such asset was acquired
by such person, as applicable.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"Asset Sale" means:
(i) the sale, conveyance, transfer or other disposition (whether in a
single transaction or a series of related transactions) of property or
assets (including by way of a Sale/Leaseback Transaction) of the Issuer or
any Restricted Subsidiary (each referred to in this definition as a
"disposition") or
(ii) the issuance or sale of Equity Interests of any Restricted
Subsidiary (other than to the Issuer or another Restricted Subsidiary)
(whether in a single transaction or a series of related transactions),
in each case other than:
(a) a disposition of Cash Equivalents or Investment Grade
Securities or obsolete or worn out equipment in the ordinary course of
business;
(b) the disposition of all or substantially all of the assets of
the Issuer in a manner permitted pursuant to the provisions described
above under "--Merger, Consolidation or Sale of All or Substantially All
Assets" or any disposition that constitutes a Change of Control;
(c) any Restricted Payment or Permitted Investment that is
permitted to be made, and is made, under the covenant described above
under "--Limitation on Restricted Payments";
(d) any disposition of assets or issuance or sale of Equity
Interests of any Restricted Subsidiary with an aggregate Fair Market
Value of less than $5.0 million;
(e) any disposition of property or assets by a Restricted
Subsidiary to the Issuer or by the Issuer or a Restricted Subsidiary to
a Restricted Subsidiary;
(f) any exchange of like property pursuant to Section 1031 of the
Internal Revenue Code of 1986, as amended, for use in a Similar
Business;
(g) sales of assets received by the Issuer upon the foreclosure on
a Lien;
(h) any sale of Equity Interests in, or Indebtedness or other
securities of, an Unrestricted Subsidiary;
(i) sales of inventory in the ordinary course of business;
(j) the lease, assignment or sub-lease of any real or personal
property in the ordinary course of business;
(k) a sale of accounts receivable and related assets of the type
specified in the definition of "Receivables Financing" to a Receivables
Subsidiary in a Qualified Receivables Financing; and
95
<PAGE>
(l) a transfer of accounts receivable and related assets of the
type specified in the definition of "Receivables Financing" (or a
fractional undivided interest therein) by a Receivables Subsidiary in a
Qualified Receivables Financing.
"Bank Indebtedness" means any and all amounts payable under or in respect
of the Credit Agreement, the other Senior Credit Documents and any Refinancing
Indebtedness with respect thereto, as amended from time to time, including
principal, premium (if any), interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Issuer whether or not a claim for post-filing interest is allowed in such
proceedings), fees, charges, expenses, reimbursement obligations, guarantees and
all other amounts payable thereunder or in respect thereof.
"Blackstone" means Blackstone Capital Partners II Merchant Banking Fund
L.P. and its Affiliates.
"Board of Directors" means the Board of Directors of the Issuer or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means a day other than a Saturday, Sunday or other day on
which banking institutions in New York State are authorized or required by law
to close.
"Capitalized Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized and reflected as a liability on
a balance sheet (excluding the footnotes thereto) in accordance with GAAP.
"Capital Stock" means:
(i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock,
(iii) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited), and
(iv) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Contribution Amount" means the aggregate amount of cash contributions
made to the capital of the Issuer described in the definition of "Contribution
Indebtedness."
"Cash Equivalents" means:
(i) U.S. dollars and foreign currency exchanged into U.S. dollars
within 180 days,
(ii) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof,
(iii) certificates of deposit, time deposits and eurodollar time
deposits with maturities of one year or less from the date of acquisition,
bankers' acceptances with maturities not exceeding one year and overnight
bank deposits, in each case with any commercial bank having capital and
surplus in excess of $500.0 million and whose long-term debt is rated "A"
or the equivalent thereof by Moody's or S&P,
(iv) repurchase obligations for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above,
(v) commercial paper issued by a corporation (other than an Affiliate
of the Issuer) rated at least "A-2" or the equivalent thereof by Moody's or
S&P and in each case maturing within one year after the date of
acquisition,
(vi) investment funds investing at least 95% of their assets in
securities of the types described in clauses (i) through (v) above,
96
<PAGE>
(vii) readily marketable direct obligations issued by any state of the
United States of America or any political subdivision thereof having one of
the two highest rating categories obtainable from either Moody's or S&P,
and
(viii) Indebtedness or preferred stock issued by Persons (other than
Blackstone or its Affiliates) with a rating of "A" or higher from S&P or
"A-2" or higher from Moody's.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Depreciation and Amortization Expense" means with respect to
any Person for any period, the total amount of depreciation and amortization
expense of such Person and its Restricted Subsidiaries for such period on a
consolidated basis and otherwise determined in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum, without duplication, of:
(i) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, to the extent such expense was deducted in
computing Consolidated Net Income (including amortization of original issue
discount, the interest component of Capitalized Lease Obligations, and net
payments and receipts (if any) pursuant to Hedging Obligations and
excluding amortization of deferred financing fees),
(ii) consolidated capitalized interest of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued,
(iii) one-third of the obligations of such Person and its Restricted
Subsidiaries for rental payments under operating leases as part of
Sale/Leaseback Transactions made during such period, and
(iv) commissions, discounts, yield and other fees and charges Incurred
in connection with any Receivables Financing which are payable to Persons
other than the Issuer and its Restricted Subsidiaries.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis; provided, however, that:
(i) any net after-tax extraordinary gains or losses (less all fees and
expenses relating thereto) shall be excluded,
(ii) any increase in amortization or depreciation resulting from
purchase accounting in relation to any acquisition that is consummated
after the Issue Date, net of taxes, shall be excluded,
(iii) the Net Income for such period shall not include the cumulative
effect of a change in accounting principles during such period,
(iv) any net after-tax income or loss from discontinued operations and
any net after-tax gains or losses on disposal of discontinued operations
shall be excluded,
(v) any net after-tax gains or losses (less all fees and expenses
relating thereto) attributable to asset dispositions other than in the
ordinary course of business (as determined in good faith by the Board of
Directors) shall be excluded,
(vi) the Net Income for such period of any Person that is not a
Subsidiary of such Person, or is an Unrestricted Subsidiary, or that is
accounted for by the equity method of accounting, shall be included only to
the extent of the amount of dividends or distributions or other payments
paid in cash (or to the extent converted into cash) to the referent Person
or a Restricted Subsidiary thereof in respect of such period,
(vii) the Net Income of any Person acquired in a pooling of interests
transaction shall not be included for any period prior to the date of such
acquisition, and
(viii) the Net Income for such period of any Restricted Subsidiary
shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by such Restricted Subsidiary of its Net
Income is not at the date of determination permitted without any prior
governmental approval (which has not been obtained) or, directly or
indirectly, by the operation of the terms of its charter or any agreement,
97
<PAGE>
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders,
unless such restrictions with respect to the payment of dividends or
similar distributions have been legally waived; provided that the net loss
of any such Restricted Subsidiary shall be included.
Notwithstanding the foregoing, for the purpose of the covenant described under
"--Limitation on Restricted Payments" only, there shall be excluded from
Consolidated Net Income any dividends, repayments of loans or advances or other
transfers of assets from Unrestricted Subsidiaries to the Issuer or a Restricted
Subsidiary to the extent such dividends, repayments or transfers increase the
amount of Restricted Payments permitted under such covenant pursuant to clauses
(c)(iv) and (v) of the first paragraph thereof.
"Contingent Obligations" means, with respect to any Person, any obligation
of such Person guaranteeing any leases, dividends or other obligations that do
not constitute Indebtedness ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent:
(i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor,
(ii) to advance or supply funds:
(A) for the purchase or payment of any such primary obligation or
(B) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of the
primary obligor, or
(iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation against
loss in respect thereof.
"Contribution Indebtedness" means Indebtedness of the Issuer in an
aggregate principal amount not greater than twice the aggregate amount of cash
contributions (other than Excluded Contributions) made to the capital of the
Issuer, provided that:
(i) if the aggregate principal amount of such Contribution
Indebtedness is greater than one times such cash contributions to the
capital of the Issuer, the amount in excess shall be Pari Passu
Indebtedness or Subordinated Indebtedness with a Stated Maturity later than
the Stated Maturity of the Notes, and
(ii) such Contribution Indebtedness:
(I) is Incurred within 180 days after the making of such cash
contributions and
(II) is so designated as Contribution Indebtedness pursuant to an
Officers' Certificate on the Incurrence date thereof.
"Credit Agreement" means the credit agreement dated as of October 27, 1997,
as amended, restated, supplemented, waived, replaced, restructured, repaid,
refunded, refinanced or otherwise modified from time to time, including any
agreement extending the maturity thereof or otherwise restructuring all or any
portion of the Indebtedness under such agreement or increasing the amount loaned
thereunder or altering the maturity thereof (except to the extent that any such
amendment, restatement, supplement, waiver, replacement, refunding, refinancing
or other modification thereto would be prohibited by the terms of the Indenture,
unless otherwise agreed to by the Holders of at least a majority in aggregate
principal amount of Notes at the time outstanding), among the Issuer, Holdings,
the financial institutions named therein, The Chase Manhattan Bank, as
Administrative Agent and Collateral Agent and Chase Manhattan Bank Delaware, as
Issuing Bank.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Noncash Consideration" means the Fair Market Value of noncash
consideration received by the Issuer or one of its Restricted Subsidiaries in
connection with an Asset Sale that is so designated as Designated Noncash
Consideration pursuant to an Officers' Certificate, setting forth the basis of
such valuation,
98
<PAGE>
less the amount of Cash Equivalents received in connection with a subsequent
sale of such Designated Noncash Consideration.
"Designated Preferred Stock" means Preferred Stock of the Issuer or
Holdings (other than Disqualified Stock) that is issued for cash (other than to
the Issuer, a Subsidiary of the Issuer or an employee stock ownership plan or
trust established by the Issuer or any of its Subsidiaries) and is so designated
as Designated Preferred Stock, pursuant to an Officers' Certificate, on the
issuance date thereof, the cash proceeds of which are excluded from the
calculation set forth in clause (c) of the covenant described under
"--Limitation on Restricted Payments."
"Designated Senior Indebtedness" means, with respect to the Issuer or a
Guarantor:
(i) the Bank Indebtedness and
(ii) any other Senior Indebtedness of the Issuer or such Guarantor
which, at the date of determination, has an aggregate principal amount
outstanding of, or under which, at the date of determination, the holders
thereof, are committed to lend up to, at least $15.0 million and is
specifically designated by the Issuer or such Guarantor in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
of such Person which, by its terms (or by the terms of any security into which
it is convertible or for which it is redeemable or exchangeable), or upon the
happening of any event:
(i) matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise (other than as a result of a change of control or
asset sale),
(ii) is convertible or exchangeable for Indebtedness or Disqualified
Stock, or
(iii) is redeemable at the option of the holder thereof, in whole or
in part, in each case prior to 91 days after the maturity date of the
Notes;
provided, however, that only the portion of Capital Stock which so matures or is
mandatorily redeemable, is so convertible or exchangeable or is so redeemable at
the option of the holder thereof prior to such date shall be deemed to be
Disqualified Stock; provided further, however, that if such Capital Stock is
issued to any employee or to any plan for the benefit of employees of the Issuer
or its Subsidiaries or by any such plan to such employees, such Capital Stock
shall not constitute Disqualified Stock solely because it may be required to be
repurchased by the Issuer in order to satisfy applicable statutory or regulatory
obligations or as a result of such employee's termination, death or disability.
"EBITDA" means, with respect to any Person for any period, the Consolidated
Net Income of such Person for such period plus, without duplication:
(i) provision for taxes based on income or profits of such Person for
such period deducted in computing Consolidated Net Income, plus
(ii) Consolidated Interest Expense of such Person for such period to
the extent the same was deducted in computing Consolidated Net Income, plus
(iii) Consolidated Depreciation and Amortization Expense of such
Person for such period to the extent such Consolidated Depreciation and
Amortization Expense was deducted in computing Consolidated Net Income,
plus
(iv) any non-recurring fees, expenses or charges related to any Equity
Offering, Permitted Investment, acquisition or Indebtedness permitted to be
Incurred by the Indenture (in each case, whether or not successful),
including any such fees, expenses or charges related to the Offering and
Holdings' initial public offering of common stock, deducted in such period
in computing Consolidated Net Income, plus
(v) any non-recurring charges related to one-time severance costs
incurred in connection with acquisitions consummated after the Issue Date
deducted in such period in computing Consolidated Net Income, plus
99
<PAGE>
(vi) any other noncash charges reducing Consolidated Net Income for
such period (excluding any such charge which consists of or requires an
accrual of, or cash reserve for, anticipated cash charges for any future
period), plus
(vii) the amount of management, monitoring, consulting and advisory
fees and related expenses paid to Blackstone during such period, provided
that such amount shall not exceed the greater of:
(a) $3.0 million, and
(b) an amount equal to 1.0% of EBITDA for the most recently
completed four-fiscal-quarter period (excluding from the computation
thereof any amounts that would otherwise be included under this clause
(vii)), less, without duplication,
(viii) noncash items increasing Consolidated Net Income of such Person
for such period (excluding any items which represent the reversal of any
accrual of, or cash reserve for, anticipated cash charges in any prior
period).
In addition, with respect to the Issuer for the second and/or the third quarters
of fiscal year 1998, there shall be added to EBITDA the Issuer's good faith
estimate of the amount of EBITDA that the Issuer would have generated during
such quarter in excess of that actually generated if the General Motors
Corporation work stoppage that occurred in June and July of 1998 (and the
related start-up inefficiencies in the Issuer's operations in August 1998) had
not occurred. Notwithstanding the foregoing, the provision for taxes based on
the income or profits of, and the depreciation and amortization of, a Subsidiary
of the Issuer shall be added to Consolidated Net Income to compute EBITDA only
to the extent (and in the same proportion) that the Net Income of such
Subsidiary was included in calculating Consolidated Net Income and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Issuer by such Subsidiary without prior approval (that has not
been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to such Subsidiary or its stockholders.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means any public or private sale of common stock or
Preferred Stock of the Issuer or Holdings (other than Disqualified Stock), other
than:
(i) public offerings with respect to the Issuer's common stock
registered on Form S-8; and
(ii) any such public or private sale that constitutes an Excluded
Contribution.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Excluded Contributions" means the net cash proceeds received by the Issuer
after the Issue Date from:
(i) contributions to its common equity capital, and
(ii) the sale (other than to a Subsidiary of the Issuer or to any
Issuer or Subsidiary management equity plan or stock option plan or any
other management or employee benefit plan or agreement) of Capital Stock
(other than Disqualified Stock and Designated Preferred Stock) of the
Issuer,
in each case designated as Excluded Contributions pursuant to an Officers'
Certificate executed by an Officer of the Issuer, the cash proceeds of which are
excluded from the calculation set forth in clause (c) of the first paragraph of
the "--Limitation on Restricted Payments" covenant.
"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.
"Fixed Charge Coverage Ratio" means, with respect to any Person for any
period, the ratio of EBITDA of such Person for such period to the Fixed Charges
of such Person for such period. In the event that the Issuer or any of its
Restricted Subsidiaries Incurs or redeems any Indebtedness (other than in the
case of revolving credit borrowings, in which case interest expense shall be
computed based upon the average daily balance of such
100
<PAGE>
Indebtedness during the applicable period) or issues or redeems Preferred Stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the event for which the calculation of
the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect to such
Incurrence or redemption of Indebtedness, or such issuance or redemption of
Preferred Stock, as if the same had occurred at the beginning of the applicable
four-quarter period.
For purposes of making the computation referred to above, Investments,
acquisitions, dispositions, mergers, consolidations and discontinued operations
(as determined in accordance with GAAP), in each case with respect to an
operating unit of a business, that have been made by the Issuer or any of its
Restricted Subsidiaries during the four-quarter reference period or subsequent
to such reference period and on or prior to or simultaneously with the
Calculation Date shall be calculated on a pro forma basis assuming that all such
Investments, acquisitions, dispositions, discontinued operations, mergers and
consolidations (and the reduction of any associated fixed charge obligations and
the change in EBITDA resulting therefrom) had occurred on the first day of the
four-quarter reference period. If since the beginning of such period any Person
(that subsequently became a Restricted Subsidiary or was merged with or into the
Issuer or any Restricted Subsidiary since the beginning of such period) shall
have made any Investment, acquisition, disposition, discontinued operation,
merger or consolidation, in each case with respect to an operating unit of a
business, that would have required adjustment pursuant to this definition, then
the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
thereto for such period as if such Investment, acquisition, disposition,
discontinued operation, merger or consolidation had occurred at the beginning of
the applicable four-quarter period.
For purposes of this definition, whenever pro forma effect is to be given
to any transaction, the pro forma calculations shall be made in good faith by a
responsible financial or accounting officer of the Issuer. If any Indebtedness
bears a floating rate of interest and is being given pro forma effect, the
interest on such Indebtedness shall be calculated as if the rate in effect on
the Calculation Date had been the applicable rate for the entire period (taking
into account any Hedging Obligations applicable to such Indebtedness if such
Hedging Obligation has a remaining term in excess of 12 months). Interest on a
Capitalized Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined by a responsible financial or accounting officer of the
Issuer to be the rate of interest implicit in such Capitalized Lease Obligation
in accordance with GAAP. For purposes of making the computation referred to
above, interest on any Indebtedness under a revolving credit facility computed
on a pro forma basis shall be computed based upon the average daily balance of
such Indebtedness during the applicable period. Interest on Indebtedness that
may optionally be determined at an interest rate based upon a factor of a prime
or similar rate, a eurocurrency interbank offered rate, or other rate, shall be
deemed to have been based upon the rate actually chosen, or, if none, then based
upon such optional rate chosen as the Issuer may designate.
Any such pro forma calculation may include adjustments appropriate, in the
reasonable determination of the Issuer as set forth in an Officers' Certificate,
to reflect operating expense reductions reasonably expected to result from any
acquisition or merger. Notwithstanding the foregoing, for the purposes of the
first paragraph of the covenant described under "--Limitation on Incurrence of
Indebtedness and Issuance of Disqualified Stock and Preferred Stock" and clause
(ix) of the definition of "Permitted Investments", in the event that a General
Motors Corporation work stoppage has occurred during the applicable four-quarter
period but is no longer continuing as of the Calculation Date, in calculating
the Fixed Charge Coverage Ratio for the applicable four-quarter period the
Issuer may exclude from the calculation the results of the Issuer and its
Restricted Subsidiaries for up to two quarters of such four-quarter period
during which such work stoppage occurred or was continuing and substitute in
place thereof the results of the Issuer and its Restricted Subsidiaries for the
one or two quarters, as applicable, immediately preceding the applicable
four-quarter period; provided that the Issuer may only make such exclusion and
substitution on one occasion in calculating the Fixed Charge Coverage Ratio;
provided further, however, that, for the purposes of the first paragraph of the
covenant described under "--Limitation on Incurrence of Indebtedness and
Issuance of Disqualified Stock and Preferred Stock," such exclusion and
substitution may not be made unless the proceeds of the Indebtedness which is
being Incurred are used either to make an Investment in a Person permitted by
clause (ix) of the definition of "Permitted Investment" or to finance an
acquisition of an operating unit of a business or of a Person that becomes a
Restricted Subsidiary.
"Fixed Charges" means, with respect to any Person for any period, the sum
of:
101
<PAGE>
(i) Consolidated Interest Expense of such Person for such period, and
(ii) all cash dividend payments (excluding items eliminated in
consolidation) on any series of Preferred Stock or Disqualified Stock of
such Person and its Subsidiaries.
"Foreign Subsidiary" means a Restricted Subsidiary not organized or
existing under the laws of the United States of America or any state or
territory thereof.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date. For the purposes of the
Indenture, the term "consolidated" with respect to any Person shall mean such
Person consolidated with its Restricted Subsidiaries, and shall not include any
Unrestricted Subsidiary, but the interest of such Person in an Unrestricted
Subsidiary will be accounted for as an Investment.
"Government Securities" means securities that are:
(i) direct obligations of the United States of America for the timely
payment of which its full faith and credit is pledged, or
(ii) obligations of a Person controlled or supervised by and acting as
an agency or instrumentality of the United States of America the timely
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America,
which, in each case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank (as
defined in Section 3(a)(2) of the Securities Act), as custodian with respect to
any such Government Securities or a specific payment of principal of or interest
on any such Government Securities held by such custodian for the account of the
holder of such depository receipt; provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Securities or the specific payment of
principal of or interest on the Government Securities evidenced by such
depository receipt.
"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" means any guarantee of the obligations of the Issuer under the
Indenture and the Notes by any Person in accordance with the provisions of the
Indenture.
"Guarantor" means any Person that Incurs a Guarantee; provided that upon
the release or discharge of such Person from its Guarantee in accordance with
the Indenture, such Person ceases to be a Guarantor.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under:
(i) currency exchange, interest rate or commodity swap agreements,
currency exchange, interest rate or commodity cap agreements and currency
exchange, interest rate or commodity collar agreements; and
(ii) other agreements or arrangements designed to protect such Person
against fluctuations in currency exchange, interest rates or commodity
prices.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Incur" means issue, assume, guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
person at the time it becomes a Subsidiary.
"Indebtedness" means, with respect to any Person:
(i) the principal and premium (if any) of any indebtedness of such
Person, whether or not contingent,
102
<PAGE>
(a) in respect of borrowed money,
(b) evidenced by bonds, notes, debentures or similar instruments or
letters of credit or bankers' acceptances (or, without duplication,
reimbursement agreements in respect thereof),
(c) representing the deferred and unpaid purchase price of any
property, except any such balance that constitutes a trade payable or
similar obligation to a trade creditor due within six months from the
date on which it is Incurred, in each case Incurred in the ordinary
course of business, which purchase price is due more than six months
after the date of placing the property in service or taking delivery and
title thereto,
(d) in respect of Capitalized Lease Obligations, or
(e) representing any Hedging Obligations, if and to the extent that
any of the foregoing Indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability on a balance sheet
(excluding the footnotes thereto) of such Person prepared in accordance
with GAAP,
(ii) to the extent not otherwise included, any obligation of such
Person to be liable for, or to pay, as obligor, guarantor or otherwise, on
the Indebtedness of another Person (other than by endorsement of negotiable
instruments for collection in the ordinary course of business),
(iii) to the extent not otherwise included, Indebtedness of another
Person secured by a Lien on any asset owned by such Person (whether or not
such Indebtedness is assumed by such Person); provided, however, that the
amount of such Indebtedness will be the lesser of:
(a) the Fair Market Value of such asset at such date of
determination, and
(b) the amount of such Indebtedness of such other Person; provided,
further, that Contingent Obligations incurred in the ordinary course of
business shall be deemed not to constitute Indebtedness, and
(iv) to the extent not otherwise included, with respect to the Issuer
and its Restricted Subsidiaries, the amount then outstanding (i.e.,
advanced, and received by, and available for use by, the Issuer or any of
its Restricted Subsidiaries) under any Receivables Financing (as set forth
in the books and records of the Issuer or any Restricted Subsidiary and
confirmed by the agent, trustee or other representative of the institution
or group providing such Receivables Financing).
"Independent Financial Advisor" means an accounting, appraisal or
investment banking firm or consultant to Persons engaged in a Similar Business,
in each case of nationally recognized standing that is, in the good faith
determination of the Issuer, qualified to perform the task for which it has been
engaged.
"Initial Purchasers" means Chase Securities Inc., Donaldson, Lufkin &
Jenrette Securities Corporation and Morgan Stanley & Co. Incorporated.
"Investment Grade Securities" means:
(i) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof
(other than Cash Equivalents),
(ii) debt securities or debt instruments (other than those issued by
Blackstone or its Affiliates) with a rating of BBB- or higher by S&P or
Baa3 or higher by Moody's or the equivalent of such rating by such rating
organization, or if no rating of S&P or Moody's then exists, the equivalent
of such rating by any other nationally recognized securities rating agency,
but excluding any debt securities or instruments constituting loans or
advances among the Issuer and its Subsidiaries, and
(iii) investments in any fund that invests exclusively in investments
of the type described in clauses (i) and (ii) which fund may also hold
immaterial amounts of cash pending investment and/or distribution.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of loans (including
guarantees), advances or capital contributions (excluding accounts receivable,
trade credit and advances to customers and commission, travel and similar
advances to officers, employees and consultants made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities issued by any other Person and investments
that are required by GAAP to be classified on the balance sheet of the Issuer in
the same manner as the other
103
<PAGE>
investments included in this definition to the extent such transactions involve
the transfer of cash or other property. For purposes of the definition of
"Unrestricted Subsidiary" and the covenant described under "--Limitation on
Restricted Payments,":
(i) "Investments" shall include the portion (proportionate to the
Issuer's equity interest in such Subsidiary) of the Fair Market Value of
the net assets of a Subsidiary of the Issuer at the time that such
Subsidiary is designated an Unrestricted Subsidiary; provided, however,
that upon a redesignation of such Subsidiary as a Restricted Subsidiary,
the Issuer shall be deemed to continue to have a permanent "Investment" in
an Unrestricted Subsidiary equal to an amount (if positive) equal to:
(x) the Issuer's "Investment" in such Subsidiary at the time of
such redesignation less
(y) the portion (proportionate to the Issuer's equity interest in
such Subsidiary) of the Fair Market Value of the net assets of such
Subsidiary at the time of such redesignation; and
(ii) any property transferred to or from an Unrestricted Subsidiary
shall be valued at its Fair Market Value at the time of such transfer, in
each case as determined in good faith by the Board of Directors.
"Issue Date" means the date on which the outstanding Notes were originally
issued.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction);
provided that in no event shall an operating lease be deemed to constitute a
Lien.
"Management Group" means the group consisting of the directors, executive
officers and other management personnel of the Issuer and Holdings on the Issue
Date.
"Moody's" means Moody's Investors Service, Inc.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of Preferred Stock dividends.
"Net Proceeds" means the aggregate cash proceeds received by the Issuer or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received in respect of or upon the sale or other
disposition of any Designated Noncash Consideration received in any Asset Sale
and any cash payments received by way of deferred payment of principal pursuant
to a note or installment receivable or otherwise, but only as and when received,
but excluding the assumption by the acquiring person of Indebtedness relating to
the disposed assets or other considerations received in any other noncash form),
net of the direct costs relating to such Asset Sale and the sale or disposition
of such Designated Noncash Consideration (including, without limitation, legal,
accounting and investment banking fees, and brokerage and sales commissions),
and any relocation expenses Incurred as a result thereof, taxes paid or payable
as a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements related thereto), amounts required
to be applied to the repayment of principal, premium (if any) and interest on
Indebtedness required (other than pursuant to the second paragraph of the
covenant described under "--Asset Sales") to be paid as a result of such
transaction, and any deduction of appropriate amounts to be provided by the
Issuer as a reserve in accordance with GAAP against any liabilities associated
with the asset disposed of in such transaction and retained by the Issuer after
such sale or other disposition thereof, including, without limitation, pension
and other post-employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with
such transaction.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements (including, without limitation, reimbursement
obligations with respect to letters of credit and bankers' acceptances), damages
and other liabilities payable under the documentation governing any
Indebtedness; provided that Obligations with respect to the Notes shall not
include fees or indemnifications in favor of the Trustee and other third parties
other than the Holders of the Notes.
"Officer" means the Chairman of the Board, Chief Executive Officer,
President, any Executive Vice President, Senior Vice President or Vice
President, the Treasurer or the Secretary of the Issuer.
104
<PAGE>
"Officers' Certificate" means a certificate signed on behalf of the Issuer
by two Officers of the Issuer, one of whom must be the principal executive
officer, the principal financial officer, the treasurer or the principal
accounting officer of the Issuer that meets the requirements set forth in the
Indenture.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Issuer or the Trustee.
"Pari Passu Indebtedness" means:
(i) with respect to the Issuer, the Notes and any Indebtedness which
ranks pari passu in right of payment to the Notes and
(ii) with respect to any Guarantor that is a Subsidiary of the Issuer,
its Guarantee and any Indebtedness which ranks pari passu in right of
payment to such Guarantor's Guarantee.
"Permitted Holders" means Blackstone and the Management Group. Any person
or group whose acquisition of beneficial ownership constitutes a Change of
Control in respect of which a Change of Control Offer is made in accordance with
the requirements of the Indenture will thereafter, together with its Affiliates,
constitute an additional Permitted Holder.
"Permitted Investments" means:
(i) any Investment in the Issuer or any Restricted Subsidiary;
(ii) any Investment in Cash Equivalents or Investment Grade
Securities;
(iii) any Investment by the Issuer or any Restricted Subsidiary of the
Issuer in a Person that is primarily engaged in a Similar Business if as a
result of such Investment:
(a) such Person becomes a Restricted Subsidiary, or
(b) such Person, in one transaction or a series of related
transactions, is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, the Issuer or a Restricted Subsidiary;
(iv) any Investment in securities or other assets not constituting
Cash Equivalents and received in connection with an Asset Sale made
pursuant to the provisions of "--Asset Sales" or any other disposition of
assets not constituting an Asset Sale;
(v) any Investment existing on the Issue Date;
(vi) advances to employees not in excess of $25.0 million outstanding
at any one time in the aggregate;
(vii) any Investment acquired by the Issuer or any of its Restricted
Subsidiaries:
(a) in exchange for any other Investment or accounts receivable
held by the Issuer or any such Restricted Subsidiary in connection with
or as a result of a bankruptcy, workout, reorganization or
recapitalization of the issuer of such other Investment or accounts
receivable, or
(b) as a result of a foreclosure by the Issuer or any of its
Restricted Subsidiaries with respect to any secured Investment or other
transfer of title with respect to any secured Investment in default;
(viii) Hedging Obligations permitted under clause (j) of the
"--Limitation of Incurrence of Indebtedness and Issuance of Disqualified
Stock and Preferred Stock" covenant;
(ix) any Investment in a Similar Business (other than an Investment in
an Unrestricted Subsidiary) having an aggregate Fair Market Value, taken
together with all other Investments made pursuant to this clause (ix), not
to exceed $175.0 million at the time of such Investment (with the Fair
Market Value of each Investment being measured at the time made and without
giving effect to subsequent changes in value); provided, however, that,
after giving pro forma effect to any such Investment (including the
Incurrence or assumption of any Indebtedness in connection therewith) as if
such Investment (and the Incurrence or assumption of any such Indebtedness)
had occurred on the first day of the most recently completed four fiscal
quarter period (subject to the last sentence of the definition of "Fixed
Charge Coverage Ratio") for which internal financial statements are
available, the Fixed Charge Coverage Ratio of the Issuer for such period
(subject to the last sentence of the definition of "Fixed Charge Coverage
Ratio") would have been at least 2.75 to 1.00; provided further, however,
that if any Investment pursuant to this clause (ix) is made in
105
<PAGE>
any Person that is not a Restricted Subsidiary of the Company at the date
of the making of such Investment and such Person becomes a Restricted
Subsidiary after such date, such Investment shall thereafter be deemed to
have been made pursuant to clause (i) above and shall cease to have been
made pursuant to this clause (ix) for so long as such Person continues to
be a Restricted Subsidiary;
(x) additional Investments having an aggregate Fair Market Value,
taken together with all other Investments made pursuant to this clause (x),
not to exceed 10.0% of Total Assets at the time of such Investment (with
the Fair Market Value of each Investment being measured at the time made
and without giving effect to subsequent changes in value);
(xi) loans and advances to officers, directors and employees for
business-related travel expenses, moving expenses and other similar
expenses, in each case Incurred in the ordinary course of business;
(xii) Investments the payment for which consists of Equity Interests
of the Issuer (other than Disqualified Stock) or of Holdings; provided,
however, that such Equity Interests will not increase the amount available
for Restricted Payments under clause (c) of the first paragraph of the
"--Limitation on Restricted Payments" covenant;
(xiii) any transaction to the extent it constitutes an Investment that
is permitted by and made in accordance with the provisions of the second
paragraph of the covenant described under "--Transactions with Affiliates"
(except transactions described in clauses (ii), (vi) and (vii) of such
paragraph);
(xiv) Investments consisting of the licensing or contribution of
intellectual property pursuant to joint marketing arrangements with other
Persons;
(xv) Guarantees issued in accordance with "Limitation of Incurrence of
Indebtedness and Issuance of Disqualified Stock and Preferred Stock" and
"--Future Guarantors";
(xvi) any Investment by Restricted Subsidiaries in other Restricted
Subsidiaries and Investments by Subsidiaries that are not Restricted
Subsidiaries in other Subsidiaries that are not Restricted Subsidiaries;
(xvii) Investments consisting of purchases and acquisitions of
inventory, supplies, materials and equipment or purchases of contract
rights or licenses or leases of intellectual property, in each case in the
ordinary course of business; and
(xviii) any Investment in a Receivables Subsidiary or any Investment
by a Receivables Subsidiary in any other Person in connection with a
Qualified Receivables Financing, including Investments of funds held in
accounts permitted or required by the arrangements governing such Qualified
Receivables Financing or any related Indebtedness; provided, however, that
any Investment in a Receivables Subsidiary is in the form of a Purchase
Money Note, contribution of additional receivables or an equity interest.
"Permitted Junior Securities" shall mean debt or equity securities of the
Issuer or any successor corporation issued pursuant to a plan of reorganization
or readjustment of the Issuer that are subordinated to the payment of all
then-outstanding Senior Indebtedness of the Issuer at least to the same extent
that the Notes are subordinated to the payment of all Senior Indebtedness of the
Issuer on the Issue Date, so long as to the extent that any Senior Indebtedness
of the Issuer outstanding on the date of consummation of any such plan of
reorganization or readjustment is not paid in full in cash or Cash Equivalents
on such date, the holders of any such Senior Indebtedness not so paid in full in
cash have consented to the terms of such plan of reorganization or readjustment.
"Permitted Liens" means, with respect to any Person:
(a) pledges or deposits by such Person under workmen's compensation
laws, unemployment insurance laws or similar legislation, or good faith
deposits in connection with bids, tenders, contracts (other than for the
payment of Indebtedness) or leases to which such Person is a party, or
deposits to secure public or statutory obligations of such Person or
deposits of cash or United States government bonds to secure surety or
appeal bonds to which such Person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent, in each case
Incurred in the ordinary course of business;
(b) Liens imposed by law, such as carriers', warehousemen's and
mechanics' Liens, in each case for sums not yet due or being contested in
good faith by appropriate proceedings or other Liens arising out of
106
<PAGE>
judgments or awards against such Person with respect to which such Person
shall then be proceeding with an appeal or other proceedings for review;
(c) Liens for taxes, assessments or other governmental charges not yet
due or payable or subject to penalties for nonpayment or which are being
contested in good faith by appropriate proceedings;
(d) Liens in favor of issuers of performance and surety bonds or bid
bonds or with respect to other regulatory requirements or letters of credit
issued pursuant to the request of and for the account of such Person in the
ordinary course of its business;
(e) minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of others for, licenses, rights-of-way, sewers,
electric lines, telegraph and telephone lines and other similar purposes,
or zoning or other restrictions as to the use of real properties or Liens
incidental to the conduct of the business of such Person or to the
ownership of its properties which were not Incurred in connection with
Indebtedness and which do not in the aggregate materially adversely affect
the value of said properties or materially impair their use in the
operation of the business of such Person;
(f) Liens securing Indebtedness permitted to be incurred pursuant to
clause (d) of the second paragraph of the covenant described under
"--Limitation on Incurrence of Indebtedness and Issuance of Disqualified
Stock and Preferred Stock";
(g) Liens existing on the Issue Date;
(h) Liens on property or shares of stock of a Person at the time such
Person becomes a Subsidiary; provided, however, such Liens are not created
or Incurred in connection with, or in contemplation of, such other Person
becoming such a Subsidiary; provided further, however, that such Liens may
not extend to any other property owned by the Issuer or any Restricted
Subsidiary;
(i) Liens on property at the time the Issuer or a Restricted
Subsidiary acquired the property, including any acquisition by means of a
merger or consolidation with or into the Issuer or any Restricted
Subsidiary; provided, however, that such Liens are not created or Incurred
in connection with, or in contemplation of, such acquisition; provided
further, however, that the Liens may not extend to any other property owned
by the Issuer or any Restricted Subsidiary;
(j) Liens securing Indebtedness or other obligations of a Restricted
Subsidiary owing to the Issuer or another Restricted Subsidiary permitted
to be Incurred in accordance with the covenant described under
"--Limitation on Incurrence of Indebtedness and Issuance of Disqualified
Stock and Preferred Stock";
(k) Liens securing Hedging Obligations so long as the related
Indebtedness is, and is permitted to be under the Indenture, secured by a
Lien on the same property securing such Hedging Obligations;
(l) Liens on 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;
(m) leases and subleases of real property which do not materially
interfere with the ordinary conduct of the business of the Issuer or any of
its Restricted Subsidiaries;
(n) Liens arising from Uniform Commercial Code financing statement
filings regarding operating leases entered into by the Issuer and its
Restricted Subsidiaries in the ordinary course of business;
(o) Liens in favor the Issuer;
(p) Liens on equipment of the Issuer granted in the ordinary course of
business to the Issuer's client at which such equipment is located;
(q) Liens on accounts receivable and related assets of the type
specified in the definition of "Receivables Financing" Incurred in
connection with a Qualified Receivables Financing; and
(r) Liens to secure any refinancing, refunding, extension, renewal or
replacement (or successive refinancings, refundings, extensions, renewals
or replacements) as a whole, or in part, of any Indebtedness secured by any
Lien referred to in the foregoing clauses (f), (g), (h), (i), (j), (k) and
(o); provided, however, that:
107
<PAGE>
(x) such new Lien shall be limited to all or part of the same
property that secured the original Lien (plus improvements on such
property), and
(y) the Indebtedness secured by such Lien at such time is not
increased to any amount greater than the sum of:
(A) the outstanding principal amount or, if greater, committed
amount of the Indebtedness described under clauses (f), (g), (h),
(i), (j), (k) or (o) at the time the original Lien became a Permitted
Lien under the Indenture, and
(B) an amount necessary to pay any fees and expenses, including
premiums, related to such refinancing, refunding, extension, renewal
or replacement.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock" means any Equity Interest with preferential right of
payment of dividends or upon liquidation, dissolution, or winding up.
"Purchase Money Note" means a promissory note of a Receivables Subsidiary
evidencing a line of credit, which may be irrevocable, from the Issuer or any
Subsidiary of the Issuer to a Receivables Subsidiary in connection with a
Qualified Receivables Financing, which note:
(a) shall be repaid from cash available to the Receivables Subsidiary,
other than:
(i) amounts required to be established as reserves,
(ii) amounts paid to investors in respect of interest,
(iii) principal and other amounts owing to such investors and
(iv) amounts paid in connection with the purchase of newly
generated receivables and (b) may be subordinated to the payments
described in clause (a).
"Qualified Receivables Financing" means any Receivables Financing of a
Receivables Subsidiary that meets the following conditions:
(i) the Board of Directors shall have determined in good faith that
such Qualified Receivables Financing (including financing terms, covenants,
termination events and other provisions) is in the aggregate economically
fair and reasonable to the Issuer and the Receivables Subsidiary,
(ii) all sales of accounts receivable and related assets to the
Receivables Subsidiary are made at Fair Market Value (as determined in good
faith by the Issuer), and
(iii) the financing terms, covenants, termination events and other
provisions thereof shall be market terms (as determined in good faith by
the Issuer) and may include Standard Securitization Undertakings.
The grant of a security interest in any accounts receivable of the Issuer or any
of its Restricted Subsidiaries (other than a Receivables Subsidiary) to secure
Bank Indebtedness shall not be deemed a Qualified Receivables Financing. For
purposes of the Indenture, the receivables facility in existence on the Issue
Date (and the initial replacement thereof with substantially similar terms in
the aggregate) shall be deemed to be a Qualified Receivables Financing that is
not recourse to the Issuer (except for Standard Securitization Undertakings).
"Receivables Financing" means any transaction or series of transactions
that may be entered into by the Issuer or any of its Subsidiaries pursuant to
which the Issuer or any of its Subsidiaries may sell, convey or otherwise
transfer to:
(a) a Receivables Subsidiary (in the case of a transfer by the Issuer
or any of its Subsidiaries), and
(b) any other Person (in the case of a transfer by a Receivables
Subsidiary),
or may grant a security interest in, any accounts receivable (whether now
existing or arising in the future) of the Issuer or any of its Subsidiaries, and
any assets related thereto including, without limitation, all collateral
securing such accounts receivable, all contracts and all Guarantees or other
obligations in respect of such accounts receivable, proceeds of such accounts
receivable and other assets which are customarily transferred or in
108
<PAGE>
respect of which security interests are customarily granted in connection with
asset securitization transactions involving accounts receivable.
"Receivables Repurchase Obligation" means any obligation of a seller of
receivables in a Qualified Receivables Financing to repurchase receivables
arising as a result of a breach of a representation, warranty or covenant or
otherwise, including as a result of a receivable or portion thereof becoming
subject to any asserted defense, dispute, off-set or counterclaim of any kind as
a result of any action taken by, any failure to take action by or any other
event relating to the seller.
"Receivables Subsidiary" means a Wholly Owned Restricted Subsidiary of the
Issuer (or another Person formed for the purposes of engaging in a Qualified
Receivables Financing with the Issuer in which the Issuer or any Subsidiary of
the Issuer makes an Investment and to which the Issuer or any Subsidiary of the
Issuer transfers accounts receivable and related assets) which engages in no
activities other than in connection with the financing of accounts receivable of
the Issuer and its Subsidiaries, all proceeds thereof and all rights
(contractual or other), collateral and other assets relating thereto, and any
business or activities incidental or related to such business, and which is
designated by the Board of Directors (as provided below) as a Receivables
Subsidiary and:
(a) no portion of the Indebtedness or any other obligations
(contingent or otherwise) of which:
(i) is guaranteed by the Issuer or any other Subsidiary of the
Issuer (excluding guarantees of obligations (other than the principal
of, and interest on, Indebtedness) pursuant to Standard Securitization
Undertakings),
(ii) is recourse to or obligates the Issuer or any other Subsidiary
of the Issuer in any way other than pursuant to Standard Securitization
Undertakings, or
(iii) subjects any property or asset of the Issuer or any other
Subsidiary of the Issuer, directly or indirectly, contingently or
otherwise, to the satisfaction thereof, other than pursuant to Standard
Securitization Undertakings,
(b) with which neither the Issuer nor any other Subsidiary of the
Issuer has any material contract, agreement, arrangement or understanding
other than on terms which the Issuer reasonably believes to be no less
favorable to the Issuer or such Subsidiary than those that might be
obtained at the time from Persons that are not Affiliates of the Issuer,
and
(c) to which neither the Issuer nor any other Subsidiary of the Issuer
has any obligation to maintain or preserve such entity's financial
condition or cause such entity to achieve certain levels of operating
results. Any such designation by the Board of Directors shall be evidenced
to the Trustee by filing with the Trustee a certified copy of the
resolution of the Board of Directors giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions.
"Representative" means the trustee, agent or representative (if any) for an
issue of Senior Indebtedness.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of the Issuer other than an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired by the Issuer or a Restricted Subsidiary whereby the
Issuer or a Restricted Subsidiary transfers such property to a Person and the
Issuer or such Restricted Subsidiary leases it from such Person, other than
leases between the Issuer and a Restricted Subsidiary or between Restricted
Subsidiaries.
"S&P" means Standard and Poor's Ratings Group.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Issuer secured by a
Lien.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Senior Credit Documents" means the collective reference to the Credit
Agreement, the notes issued pursuant thereto and the guarantees thereof, and the
collateral documents relating thereto.
"Senior Credit Facilities" means the term loan facilities and revolving
credit facility created and in effect pursuant to the Credit Agreement.
109
<PAGE>
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Issuer within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Similar Business" means a business, the majority of whose revenues are
derived from the design and/or manufacture of driveline systems and/or component
parts for such systems, or the activities of the Issuer and its Subsidiaries as
of the Issue Date or any business or activity that is reasonably similar thereto
or a reasonable extension, development or expansion thereof or ancillary
thereto.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Issuer or any Subsidiary of the
Issuer which the Issuer has determined in good faith to be customary in a
Receivables Financing including, without limitation, those relating to the
servicing of the assets of a Receivables Subsidiary, it being understood that
any Receivables Repurchase Obligation shall be deemed to be a Standard
Securitization Undertaking.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Indebtedness" means:
(a) with respect to the Issuer, any Indebtedness of the Issuer which
is by its terms subordinated in right of payment to the Notes, and
(b) with respect to any Guarantor, any Indebtedness of such Guarantor
which is by its terms subordinated in right of payment to its Guarantee.
"Subsidiary" means, with respect to any Person:
(i) any corporation, association or other business entity (other than
a partnership, joint venture or limited liability company) of which more
than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time of
determination owned or controlled, directly or indirectly, by such Person
or one or more of the other Subsidiaries of that Person or a combination
thereof, and
(ii) any partnership, joint venture or limited liability company of
which:
(x) more than 50% of the capital accounts, distribution rights,
total equity and voting interests or general and limited partnership
interests, as applicable, are owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of
that Person or a combination thereof, whether in the form of membership,
general, special or limited partnership interests or otherwise, and
(y) such Person or any Restricted Subsidiary of such Person is a
controlling general partner or otherwise controls such entity.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Section 77aaa-77bbbb) as in effect on the date of the Indenture.
"Total Assets" means the total consolidated assets of the Issuer and its
Restricted Subsidiaries, as shown on the most recent balance sheet of the
Issuer.
"Trustee" means the party named as such in the Indenture until a successor
replaces it and, thereafter, means the successor.
"Trust Officer" means:
(i) any officer within the corporate trust department of the Trustee,
including any vice president, assistant vice president, assistant
secretary, assistant treasurer, trust officer or any other officer of the
Trustee who customarily performs functions similar to those performed by
the Persons who at the time shall be such officers, respectively, or to
whom any corporate trust matter is referred because of such person's
knowledge of and familiarity with the particular subject, and
(ii) who shall have direct responsibility for the administration of
the Indenture.
"Unrestricted Subsidiary" means:
110
<PAGE>
(i) any Subsidiary of the Issuer that at the time of determination
shall be designated an Unrestricted Subsidiary by the Board of Directors in
the manner provided below and
(ii) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary of the Issuer (including any
newly acquired or newly formed Subsidiary of the Issuer) to be an Unrestricted
Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity
Interests or Indebtedness of, or owns or holds any Lien on any property of, the
Issuer or any other Subsidiary of the Issuer that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, that the Subsidiary to be so
designated and its Subsidiaries do not at the time of designation have and do
not thereafter Incur any Indebtedness pursuant to which the lender has recourse
to any of the assets of the Issuer or any of its Restricted Subsidiaries;
provided further, however, that either:
(a) the Subsidiary to be so designated has total consolidated
assets of $1,000 or less or
(b) if such Subsidiary has consolidated assets greater than $1,000,
then such designation would be permitted under the covenant entitled
"--Limitation on Restricted Payments."
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, however, that immediately after giving effect
to such designation:
(x) (1) the Issuer could Incur $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test
described under "--Limitation on Incurrence of Indebtedness and
Issuance of Disqualified Stock and Preferred Stock," or
(2) the Fixed Charge Coverage Ratio for the Issuer and its Restricted
Subsidiaries would be greater than such ratio for the Issuer and
its Restricted Subsidiaries immediately prior to such
designation, in each case on a pro forma basis taking into
account such designation, and
(y) no 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 resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
or Disqualified Stock, as the case may be, at any date, the quotient obtained by
dividing (i) the sum of the products of the number of years from the date of
determination to the date of each successive scheduled principal payment of such
Indebtedness or redemption or similar payment with respect to such Disqualified
Stock multiplied by the amount of such payment, by (ii) the sum of all such
payments.
"Wholly Owned Restricted Subsidiary" is any Wholly Owned Subsidiary that is
a Restricted Subsidiary.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
100% of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
111
<PAGE>
REGISTRATION RIGHTS AGREEMENT
Holdings, the Issuer and the initial purchasers entered into the exchange
and registration rights agreement on March 5, 1999. Pursuant to the exchange and
registration rights agreement, the Issuer and Holdings agreed to:
(i) file with the Commission on or prior to 90 days after the date of
issuance of the outstanding Notes a registration statement on Form S-1 or
Form S-4, if the use of such form is then available relating to a
registered exchange offer for the outstanding Notes under the Securities
Act; and
(ii) use their reasonable best efforts to cause the exchange offer
registration statement to be declared effective under the Securities Act
within 180 days after the issuance of the outstanding Notes.
As soon as practicable after the effectiveness of the exchange offer
registration statement, the Issuer will offer to the holders of Transfer
Restricted Securities (as defined below) who are not prohibited by any law or
policy of the Commission from participating in the exchange offer the
opportunity to exchange their Transfer Restricted Securities for an issue of a
second series of Notes that are identical in all material respects to the
outstanding Notes (except that the exchange Notes will not contain terms with
respect to transfer restrictions) and that would be registered under the
Securities Act. The Issuer and Holdings will keep the exchange offer open 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 of the
outstanding Notes.
If: (i) because of any change in law or applicable interpretations
thereof by the staff of the Commission, the Issuer and Holdings are not
permitted to effect the exchange offer as contemplated hereby,
(ii) any outstanding Notes validly tendered pursuant to the exchange
offer are not exchanged for exchange Notes within 210 days after the
issuance of the outstanding Notes,
(iii) any initial purchaser so requests with respect to outstanding
Notes not eligible to be exchanged for exchange notes in the exchange
offer,
(iv) any applicable law or interpretations do not permit any holder of
outstanding Notes to participate in the exchange offer,
(v) any holder of outstanding Notes that participates in the exchange
offer does not receive freely transferable exchange notes in exchange for
tendered outstanding Notes, or
(vi) the Issuer so elects,
then the Issuer and Holdings will file with the Commission a shelf registration
statement to cover resales of Transfer Restricted Securities by such holders who
satisfy certain conditions relating to the provision of information in
connection with the shelf registration statement. For purposes of the foregoing,
"Transfer Restricted Securities" means each outstanding Note until:
(i) the date on which such outstanding Note has been exchanged for a
freely transferable exchange note in the exchange offer;
(ii) the date on which such outstanding Note has been effectively
registered under the Securities Act and disposed of in accordance with the
shelf registration statement; or
(iii) the date on which such outstanding Note is distributed to the
public pursuant to Rule 144 under the Securities Act or is salable pursuant
to Rule 144(k) under the Securities Act.
The Issuer and Holdings will use their reasonable best efforts to have the
exchange offer registration statement or, if applicable, the shelf registration
statement declared effective by the Commission as promptly as practicable after
the filing thereof. Unless the exchange offer would not be permitted by a policy
of the Commission, the Issuer will commence the exchange offer and will use its
reasonable best efforts to consummate the exchange offer as promptly as
practicable, but in any event prior to 210 days after the Issue Date. If
applicable, the Issuer and Holdings will use their reasonable best efforts to
keep the shelf registration statement effective for a period of until two years
after the Issue Date or such shorter period when all outstanding Notes covered
by the shelf registration statement have been sold in the manner set forth above
and as contemplated in
112
<PAGE>
the shelf registration statement or when the outstanding Notes become eligible
for resale pursuant to Rule 144 under the Securities Act without volume
restrictions, if any.
If: (i) the applicable registration statement is not filed with the
Commission on or prior to 90 days after the issuance of the outstanding
Notes (or, in the case of a shelf registration statement required to be
filed in response to a change in law or applicable interpretations of the
Staff of the Commission, if later, within 45 days after publication of such
change in law or interpretation, but in no event before 90 days after the
issuance of the outstanding Notes);
(ii) the exchange offer registration statement or the shelf
registration statement, as the case may be, is not declared effective
within 180 days after the issuance of the outstanding Notes (or, in the
case of a shelf registration statement required to be filed in response to
a change in law or applicable interpretations of the Staff of the
Commission, if later, within 60 days after publication of such change in
law or interpretation, but in no event before 180 days after the issuance
of the outstanding Notes);
(iii) the exchange offer is not consummated on or prior to 210 days
after the issuance of the outstanding Notes (other than in the event we
file a shelf registration statement); or
(iv) the shelf registration statement is filed and declared effective
within the time periods specified in clause (ii) above but shall thereafter
cease to be effective (at any time that the Issuer and Holdings are
obligated to maintain the effectiveness thereof) without being succeeded
within 30 days by an additional registration statement filed and declared
effective;
(each such event referred to in clauses (i) through (iv), a "Registration
Default"), the Issuer and Holdings will be obligated to pay liquidated damages
to each holder of Transfer Restricted Securities, during the period of one or
more such Registration Defaults, with respect to the first 90-day period
immediately following the occurrence of the first Registration Default in an
amount equal to one-quarter of one percent per annum (which rate will be
increased by an additional one-quarter of one percent per annum for each
subsequent 90-day period that any liquidated damages continue to accrue,
provided that the rate at which liquidated damages accrue may in no event exceed
1.0% per annum) in respect of the outstanding Notes constituting Transfer
Restricted Securities held by such holder until the applicable registration
statement is filed, the exchange offer registration statement is declared
effective and the exchange offer is consummated or the shelf registration
statement is declared effective or again becomes effective, as the case may be.
All accrued liquidated damages shall be paid to holders in the same manner as
interest payments on the Notes on semi-annual payment dates which correspond to
interest payment dates for the Notes. Following the cure of all Registration
Defaults, the accrual of liquidated damages will cease.
Notwithstanding the foregoing, we may issue a notice that the shelf
registration statement is unusable pending the announcement of a material
corporate transaction and may issue any notice suspending use of the shelf
registration statement required under applicable securities laws to be issued
and, in the event that the aggregate number of days in any consecutive
twelve-month period for which all such notices are issued and effective exceeds
60 days in the aggregate, then we will be obligated to pay liquidated damages to
each holder of Transfer Restricted Securities in an amount equal to one-quarter
of one percent per annum (which rate will be increased by an additional
one-quarter of one percent per annum for each subsequent 90-day period that
liquidated damages continue to accrue, provided that the rate at which
liquidated damages accrue may in no event exceed 1.0% per annum) in respect of
the Notes constituting Transfer Restricted Securities. Upon our declaring that
the shelf registration statement is usable after the period of time described in
the preceding sentence, the accrual of liquidated damages will cease.
The exchange and registration rights agreement also will provide that the
Issuer and Holdings:
(i) shall make available for a period of 90 days after the
consummation of the exchange offer a prospectus meeting the requirements of
the Securities Act to any broker-dealer for use in connection with any
resale of any such Exchange Notes; and
(ii) shall pay all expenses incident to the exchange offer and will
indemnify certain holders of the Notes (including any broker-dealer)
against certain liabilities, including liabilities under the Securities
Act. A broker-dealer which delivers such a prospectus to purchasers in
connection with such resales will be subject
113
<PAGE>
to certain of the civil liability provisions under the Securities Act and
will be bound by the provisions of the exchange and registration rights
agreement (including certain indemnification rights and obligations).
Each holder of outstanding Notes who wishes to exchange such outstanding
Notes for exchange Notes in the exchange offer will be required to make certain
representations, including representations that:
(i) any exchange Notes to be received by it will be acquired in the
ordinary course of its business;
(ii) it has no arrangement or understanding with any person to
participate in the distribution of the exchange Notes; and
(iii) it is not an "affiliate" (as defined in Rule 405 under the
Securities Act) of the Issuer, or if it is an affiliate, that it will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
exchange Notes. If the holder is a broker-dealer that will receive exchange
Notes for its own account in exchange for Notes that were acquired as a result
of market-making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such exchange Notes.
Holders of the Notes will be required to make certain representations to
the Issuer (as described above) in order to participate in the exchange offer
and will be required to deliver information to be used in connection with the
shelf registration statement in order to have their Notes included in the shelf
registration statement and benefit from the provisions regarding liquidated
damages set forth in the preceding paragraphs. A holder who sells Notes pursuant
to the shelf registration statement generally 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 exchange and registration rights agreement which are
applicable to such a holder (including certain indemnification obligations).
For so long as the Notes are outstanding, the Issuer will continue to
provide to holders of the Notes and to prospective purchasers of the Notes the
information required by Rule 144A(d)(4) under the Securities Act.
The foregoing description of the exchange and registration rights agreement
is a summary only, does not purport to be complete and is qualified in its
entirety by reference to all provisions of the exchange and registration rights
agreement. The exchange and registration rights agreement has been filed as an
exhibit to the registration statement of which this prospectus is a part.
BOOK-ENTRY; DELIVERY AND FORM
The exchange Notes will initially be represented by one or more permanent
global notes in definitive, fully registered book-entry form, without interest
coupons (the "Global Notes") that will be deposited with, or on behalf of, DTC
and registered in the name of Cede & Co., as nominee of DTC, on behalf of the
acquirors of exchange Notes represented thereby for credit to the respective
accounts of the acquirors (or to such other accounts as they may direct) at DTC,
or Morgan Guaranty Trust Company of New York, Brussels Office, as operator of
the Euroclear System, or Cedel Bank, societe anonyme. See "The Exchange
Offer--Book Entry Transfer."
The Global Notes may be transferred, in whole and not in part, solely to
another nominee of DTC or to a successor of DTC or its nominee. Beneficial
interests in the Global Notes may not be exchanged for Notes in physical,
certificated form ("Certificated Notes") except in the limited circumstances
described below.
All interests in the Global Notes, including those held through Euroclear
or Cedel, may be subject to the procedures and requirements of DTC. Those
interests held through Euroclear or Cedel may also be subject to the procedures
and requirements of such systems.
114
<PAGE>
CERTAIN BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTES
The descriptions of the operations and procedures of DTC, Euroclear and
Cedel set forth below are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to change by them from time to time. We take
no responsibility for these operations or procedures, and investors are urged to
contact the relevant system or its participants directly to discuss these
matters.
DTC has advised us that it is:
(i) a limited purpose trust company organized under the laws of the
State of New York,
(ii) a "banking organization" within the meaning of the New York
Banking Law,
(iii) a member of the Federal Reserve System,
(iv) a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and
(v) a "clearing agency" registered pursuant to Section 17A of the
Exchange Act.
DTC was created to hold securities for its participants (collectively, the
"Participants") and facilitates the clearance and settlement of securities
transactions between Participants through electronic book-entry changes to the
accounts of its Participants, thereby eliminating the need for physical transfer
and delivery of certificates. DTC's Participants include securities brokers and
dealers (including the Initial Purchasers), banks and trust companies, clearing
corporations and certain other organizations. Indirect access to DTC's system is
also available to other entities such as banks, brokers, dealers and trust
companies (collectively, the "Indirect Participants") that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly. Investors who are not Participants may beneficially own securities
held by or on behalf of DTC only through Participants or Indirect Participants.
We expect that pursuant to procedures established by DTC ownership of the
Notes will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by DTC (with respect to the interests of
Participants) and the records of Participants and the Indirect Participants
(with respect to the interests of persons other than Participants).
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form.
Accordingly, the ability to transfer interests in the Notes represented by a
Global Note to such persons may be limited. In addition, because DTC can act
only on behalf of its Participants, who in turn act on behalf of persons who
hold interests through Participants, the ability of a person having an interest
in Notes represented by a Global Note to pledge or transfer such interest to
persons or entities that do not participate in DTC's system, or to otherwise
take actions in respect of such interest, may be affected by the lack of a
physical definitive security in respect of such interest.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or such nominee, as the case may be, will be considered the sole owner or holder
of the Notes represented by the Global Note for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a Global
Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of Certificated Notes, and will not be considered the owners or holders
thereof under the Indenture for any purpose, including with respect to the
giving of any direction, instruction or approval to the Trustee thereunder.
Accordingly, each holder owning a beneficial interest in a Global Note must rely
on the procedures of DTC and, if such holder is not a Participant or an Indirect
Participant, on the procedures of the Participant through which such holder owns
its interest, to exercise any rights of a holder of Notes under the Indenture or
such Global Note. The Issuer understands that under existing industry practice,
in the event that the Issuer requests any action of holders of Notes, or a
holder that is an owner of a beneficial interest in a Global Note desires to
take any action that DTC, as the holder of such Global Note, is entitled to
take, DTC would authorize the Participants to take such action and the
Participants would authorize holders owning through such Participants to take
such action or would otherwise act upon the instruction of such holders. Neither
the Issuer nor the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made
115
<PAGE>
on account of Notes by DTC, or for maintaining, supervising or reviewing any
records of DTC relating to such Notes.
Payments with respect to the principal of, and premium, if any, Liquidated
Damages, if any, and interest on, any Notes represented by a Global Note
registered in the name of DTC or its nominee on the applicable record date will
be payable by the Trustee to or at the direction of DTC or its nominee in its
capacity as the registered holder of the Global Note representing such Notes
under the Indenture. Under the terms of the Indenture, the Issuer and the
Trustee may treat the persons in whose names the Notes, including the Global
Notes, are registered as the owners thereof for the purpose of receiving payment
thereon and for any and all other purposes whatsoever. Accordingly, neither the
Issuer nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to owners of beneficial interests in a Global Note
(including principal, premium, if any, Liquidated Damages, if any, and
interest). Payments by the Participants and the Indirect Participants to the
owners of beneficial interests in a Global Note will be governed by standing
instructions and customary industry practice and will be the responsibility of
the Participants or the Indirect Participants and DTC.
DTC management is aware that some computer applications, systems, and the
like for processing data ("Systems") that are dependent upon calendar dates,
including dates before, on, and after January 1, 2000, may encounter "Year 2000
problems". DTC has informed its Participants and other members of the financial
community that it has developed and is implementing a program so that its
Systems, as the same relate to the timely payment of distributions (including
principal and income payments) to securityholders, book-entry deliveries, and
settlement of trades within DTC ("DTC Services"), continue to function
appropriately. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service providers,
among others. DTC has informed the industry that it is contacting (and will
continue to contact) third party vendors from whom DTC acquires services to:
(i) impress upon them the importance of such services being Year 2000
compliant; and
(ii) determine the extent of their efforts for Year 2000 remediation
(and, as appropriate, testing) of their services.
In addition, DTC is in the process of developing such contingency plans as
it deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the industry for informational purposes only and is not intended to
serve as a representation, warranty, or contract modification of any kind.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Notes, cross-market transfers between the Participants in DTC, on the one hand,
and Euroclear or Cedel participants, on the other hand, will be effected through
DTC in accordance with DTC's rules on behalf of Euroclear or Cedel, as the case
may be, by its respective depositary; however, such cross-market transactions
will require delivery of instructions to Euroclear or Cedel, as the case may be,
by the counterparty in such system in accordance with the rules and procedures
and within the established deadlines (Brussels time) of such system. Euroclear
or Cedel, as the case may be, will, if the transaction meets its settlement
requirements, deliver instructions to its respective depositary to take action
to effect final settlement on its behalf by delivering or receiving interests in
the relevant Global Notes in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Euroclear participants and Cedel participants may not deliver instructions
directly to the depositaries for Euroclear or Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a Participant in
DTC will be credited, and any such crediting will be reported to
116
<PAGE>
the relevant Euroclear or Cedel participant, during the securities settlement
processing day (which must be a business day for Euroclear and Cedel)
immediately following the settlement date of DTC. Cash received in Euroclear or
Cedel as a result of sales of interest in a Global Security by or through a
Euroclear or Cedel participant to a Participant in DTC will be received with
value on the settlement date of DTC but will be available in the relevant
Euroclear or Cedel cash account only as of the business day for Euroclear or
Cedel following DTC's settlement date.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures
to facilitate transfers of interests in the Global Notes among participants in
DTC, Euroclear and Cedel, they are under no obligation to perform or to continue
to perform such procedures, and such procedures may be discontinued at any time.
Neither the Issuer nor the Trustee will have any responsibility for the
performance by DTC, Euroclear or Cedel or their respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
CERTIFICATED NOTES
If:
(i) the Issuer notifies the Trustee in writing that DTC is no longer
willing or able to act as a depositary or DTC ceases to be registered as a
clearing agency under the Exchange Act and a successor depositary is not
appointed within 90 days of such notice or cessation,
(ii) the Issuer, at its option, notifies the Trustee in writing that
it elects to cause the issuance of Notes in definitive form under the
Indenture, or
(iii) upon the occurrence of certain other events as provided in the
Indenture,
then, upon surrender by DTC of the Global Notes, Certificated Notes will be
issued to each person that DTC identifies as the beneficial owner of the Notes
represented by the Global Notes. Upon any such issuance, the Trustee is required
to register such Certificated Notes in the name of such person or persons (or
the nominee of any thereof) and cause the same to be delivered thereto.
Neither the Issuer nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners of
the related Notes and each such person may conclusively rely on, and shall be
protected in relying on, instructions from DTC for all purposes (including with
respect to the registration and delivery, and the respective principal amounts,
of the Notes to be issued).
117
<PAGE>
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER
EXCHANGE OF NOTES
The following summary describes the material United States federal income
tax consequences of the exchange offer. The exchange of outstanding Notes for
exchange Notes in the exchange offer will not constitute a taxable event to
holders. Consequently, no gain or loss will be recognized by a holder upon
receipt of an exchange Note, the holding period of the exchange Note will
include the holding period the outstanding Note and the basis of the exchange
Note will be the same as the basis of the outstanding Note immediately before
the exchange.
IN ANY EVENT, PERSONS CONSIDERING THE EXCHANGE OF OUTSTANDING NOTES FOR
EXCHANGE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS
AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING
JURISDICTION.
OTHER TAX CONSIDERATIONS
The following summary describes the material United States federal income
tax consequences of the ownership of Notes as of the date hereof by a Non-U.S.
Holder (as defined below). Except where noted, this summary deals only with
Notes held as capital assets by Non-U.S. Holders. As used herein the term
"Non-U.S. Holder" means any person or entity that is not a United States Holder
("U.S. Holder"). A U.S. Holder is any beneficial owner of a Note that is:
(i) a citizen or resident of the United States;
(ii) a corporation or partnership created or organized in or under the
laws of the United States or any political subdivision thereof;
(iii) an estate the income of which is subject to U.S. federal income
taxation regardless of its source; or
(iv) a trust which is:
(x) subject to the supervision of a court within the United States
and the control of a United States person as described in
section 7701(a)(30) of the Code, or
(y) that has a valid election in effect under applicable U.S.
Treasury regulations to be treated as a United States person.
The discussion below is based upon the provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), and regulations, rulings and judicial
decisions thereunder as of the date hereof, and such authorities may be
repealed, revoked or modified so as to result in United States federal income
tax consequences different from those discussed below. PERSONS CONSIDERING THE
PURCHASE, OWNERSHIP OR DISPOSITION OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IN LIGHT
OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE
LAWS OF ANY OTHER TAXING JURISDICTION.
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) no withholding of United States federal income tax will be
required with respect to the payment by the Issuer or any paying agent of
principal or interest of a Note owned by a Non-U.S. Holder, provided:
(i) that the beneficial owner does not actually or constructively
own 10% or more of the total combined voting power of all classes of
stock of the Issuer entitled to vote within the meaning of
section 871(h)(3) of the Code and the regulations thereunder,
(ii) the beneficial owner is not a controlled foreign corporation
that is related to the Issuer through stock ownership,
118
<PAGE>
(iii) the beneficial owner is not a bank whose receipt of interest
on a Note is described in section 881(c)(3)(A) of the Code and
(iv) the beneficial owner satisfies the statement requirement
(described generally below) set forth in section 871(h) and
section 881(c) of the Code and the regulations thereunder;
(b) no withholding of United States federal income tax will be
required with respect to any gain or income realized by a Non-U.S. Holder
upon the sale, exchange, retirement or other disposition of a Note; and
(c) a Note beneficially owned by an individual who at the time of
death is a Non-U.S. Holder will not be subject to United States federal
estate tax as a result of such individual's death, provided that such
individual does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Issuer entitled to
vote within the meaning of section 871(h)(3) of the Code and provided that
the interest payments with respect to such Note would not have been, if
received at the time of such individual's death, effectively connected with
the conduct of a United States trade or business by such individual.
It is unclear whether the payment of liquidated damages would be subject to
withholding of U.S. federal income tax.
To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of such Note, or a financial institution holding the Note on behalf of
such owner, must provide, in accordance with specified procedures, a paying
agent of the Issuer with a statement to the effect that the beneficial owner is
not a U.S. Holder. Currently, these requirements will be met if:
(1) the beneficial owner provides his name and address, and certifies,
under penalties of perjury, that he is not a U.S. Holder (which
certification may be made on an Internal Revenue Service Form ("IRS") W-8
(or successor form)); or
(2) a financial institution holding the Note on behalf of the
beneficial owner certifies, under penalties of perjury, that such statement
has been received by it and furnishes a paying agent with a copy thereof.
Under final Treasury regulations (the "Final Regulations"), the statement
requirement referred to in (a)(iv) above may also be satisfied with other
documentary evidence for interest paid after December 31, 1999 with respect to
an offshore account or through certain foreign intermediaries.
If a Non-U.S. Holder cannot satisfy the requirements of the "portfolio
interest" exception described in (a) above, payments of interest made to such
Non-U.S. Holder will be subject to a 30% withholding tax unless the beneficial
owner of the Note provides the Issuer or its paying agent, as the case may be,
with a properly executed:
(1) IRS Form 1001 (or successor form) claiming an exemption from or
reduction of withholding under the benefit of a tax treaty, or
(2) IRS Form 4224 (or successor form) stating that interest paid on
the Note is not subject to withholding tax because it is effectively
connected with the beneficial owner's conduct of a trade or business in the
United States.
Under the Final Regulations, Non-U.S. Holders will generally be required to
provide IRS Form W-8 in lieu of the IRS Form 1001 and IRS Form 4224, although
alternative documentation may be applicable in certain situations.
If a Non-U.S. Holder is engaged in a trade or business in the United States
and interest on the Note is effectively connected with the conduct of such trade
or business, the Non-U.S. Holder, although exempt from the withholding tax
discussed above, will be subject to United States federal income tax on such
interest on a net income basis in the same manner as if it were a U.S. Holder.
In addition, if such holder is a foreign corporation, it may be subject to a
branch profits tax equal to 30% (or lower applicable treaty rate) of its
effectively connected earnings and profits for the taxable year, subject to
adjustments. For this purpose, interest on a Note will be included in such
foreign corporation's earnings and profits.
Any gain or income realized upon the sale, exchange, retirement or other
disposition of a Note generally will not be subject to United States federal
income tax unless (i) such gain or income is effectively connected with the
119
<PAGE>
conduct of a trade or business in the United States by the Non-U.S. Holder or
(ii) in the case of a Non-U.S. Holder who is an individual, such individual is
present in the United States for 183 days or more in the taxable year of such
sale, exchange, retirement or other disposition, and certain other conditions
are met.
Special rules may apply to certain Non-U.S. Holders, such as "controlled
foreign corporations", "passive foreign investment companies" and "foreign
personal holding companies", that are subject to special treatment under the
Code. Such entities should consult their own tax advisors to determine the U.S.
federal, state, local and other tax consequences that may be relevant to them.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, no information reporting or backup withholding will be required
with respect to payments made by the Issuer or any paying agent to Non-U.S.
Holders if a statement described in (a)(iv) above has been received (and the
payor does not have actual knowledge that the beneficial owner is a U.S.
Holder).
In addition, backup withholding and information reporting will not apply if
payments of the principal and interest on a Note are paid or collected by a
foreign office of a custodian, nominee or other foreign agent on behalf of the
beneficial owner of such Note, or if a foreign office of a broker (as defined in
applicable Treasury regulations) pays the proceeds of the sale of a Note to the
owner thereof. If, however, such nominee, custodian, agent or broker is, for
United States federal income tax purposes, a U.S. Holder, a controlled foreign
corporation or a foreign person that derives 50% or more of its gross income for
certain periods from the conduct of a trade or business in the United States,
or, for taxable years beginning after December 31, 1999, a foreign partnership
in which one or more U.S. Holders, in the aggregate, own more than 50% of the
income or capital interests in the partnership or a foreign partnership which is
engaged in a trade or business in the United States, such payments will not be
subject to backup withholding but will be subject to information reporting,
unless (1) such custodian, nominee, agent or broker has documentary evidence in
its records that the beneficial owner is not a U.S. Holder and certain other
conditions are met or (2) the beneficial owner otherwise establishes an
exemption.
Payments of principal and interest on a Note paid to the beneficial owner
of a Note by a United States office of a custodian, nominee or agent, or the
payment by the United States office of a broker of the proceeds of sale of a
Note, will be subject to both backup withholding and information reporting
unless the beneficial owner provides the statement referred to in (a)(iv) above
and the payor does not have actual knowledge that the beneficial owner is a U.S.
Holder or otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
PLAN OF DISTRIBUTION
Until , 1999 90 days after the date of this prospectus, all
dealers effecting transactions in the exchange Notes, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
Each broker-dealer that receives exchange Notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange Notes. This
prospectus, as it may be amended or supplemented, may be used by a broker-dealer
in connection with resales of exchange Notes received in exchange for
outstanding Notes only where such outstanding Notes were acquired as a result of
market-making activities or other trading activities. We have agreed that we
will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale for a period of
90 days from the date on which the exchange offer is consummated, or such
shorter period as will terminate when all outstanding Notes acquired by
broker-dealers for their own accounts as a result of market-making activities or
other trading activities have been exchanged for exchange Notes and such
exchange Notes have been resold by such broker-dealers.
We will not receive any proceeds from any sale of exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in
120
<PAGE>
one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or 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 or the purchasers of any exchange Notes.
Any broker-dealer that resells exchange Notes that were received by it for its
own account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The letter of transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period of 90 days from the date on which the exchange offer is
consummated, or such shorter period as will terminate when all outstanding Notes
acquired by broker-dealers for their own accounts as a result of market-making
activities or other trading activities have been exchanged for exchange Notes
and such exchange Notes have been resold by such broker-dealers, we will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal. We have agreed to pay all expenses incident to the
exchange offer other than commissions or concessions of any brokers or dealers
and the fees of any counsel or other advisors or experts retained by the holders
of outstanding Notes, except as expressly set forth in the registration rights
agreement, and will indemnify the holders of outstanding Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the exchange Notes offered hereby will be passed upon for
us by Simpson Thacher & Bartlett, New York, New York.
EXPERTS
The financial statements included in this prospectus and the related
financial statement schedule (as of and for the year ended December 31, 1998)
included elsewhere in the registration statement have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report appearing herein and
elsewhere in the registration statement, and are included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
Our consolidated financial statements at December 31, 1997 and for each of
the two years in the period ended December 31, 1997 appearing in this prospectus
and registration statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein and
are included in reliance upon such report given upon the authority of the firm
as experts in accounting and auditing.
AVAILABLE INFORMATION
We have filed with the Commission a registration statement on Form S-4
under the Securities Act with respect to the exchange Notes being offered
hereby. This prospectus, which forms a part of the registration statement, does
not contain all of the information set forth in the registration statement. You
should refer to the registration statement for further information. Statements
contained in this prospectus as to the contents of any contract or other
document are not necessarily complete, and, where such contract or other
document is an exhibit to the registration statement, each such statement is
qualified by the provision in such exhibit to which reference is hereby made.
The Company has recently become subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, will file annual, quarterly and special
reports, proxy statements and other information with the Securities and Exchange
121
<PAGE>
Commission (the "Commission"). The Company's first Quarterly Report on Form 10-Q
will be filed for the quarter ended March 31, 1999. This registration statement,
such other reports, proxy statements and other information may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices in New York (Seven World Trade Center, 13th
Floor, New York, New York 10048), and Chicago (Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661). Copies of such materials,
including copies of all or any portion of the registration statement, may be
obtained from the Public Reference Section of the Commission 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. In addition, the Commission
maintains a web site at "http://www.sec.gov." Furthermore, we agree that, even
if we are not required to file periodic reports and information with the
Commission, for so long as any exchange Note remains outstanding we will furnish
to you the information that would be required to be furnished by us under
Section 13 of the Securities Exchange Act of 1934. Any such request and requests
for agreements summarized herein should be directed to: American Axle &
Manufacturing, Inc., 1840 Holbrook Avenue, Detroit, Michigan 48212, telephone
number (313) 974-2000, Attention: Investor Relations.
122
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Consolidated Financial Statements:
<S> <C>
Independent Auditors' Report............................................................................. F-2
Consolidated Balance Sheets at December 31, 1998 and 1997................................................ F-4
Consolidated Statements of Income for the years ended December 31, 1998, 1997 and 1996................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996............... F-6
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1998, 1997
and 1996.............................................................................................. F-7
Notes to Consolidated Financial Statements............................................................... F-8
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
American Axle & Manufacturing Holdings, Inc.
We have audited the accompanying consolidated balance sheet of American Axle &
Manufacturing Holdings, Inc. and its subsidiaries (the "Company") as of
December 31, 1998, and the related consolidated statements of income,
stockholders' equity, and cash flows for the year then ended. Our audit also
included the financial statement schedule (as of and for the year ended
December 31, 1998) listed in the index at Item 21. These financial statements
and the financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and the financial statement schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such 1998 consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December 31,
1998 and the results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles. Also, in our
opinion, such financial statement schedule (as of and for the year ended
December 31, 1998) when considered in relation to the basic financial statements
taken as a whole presents fairly in all material respects the information set
forth therein.
/s/ Deloitte & Touche LLP
Detroit, Michigan
February 5, 1999
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
American Axle & Manufacturing of Michigan, Inc.
We have audited the accompanying consolidated balance sheet of American Axle &
Manufacturing of Michigan, Inc. and subsidiaries as of December 31, 1997, and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the two years in the period ended December 31, 1997. Our audit
also included the financial statement schedule (as of and for the years ended
December 31, 1997 and 1996) listed in Item 21. These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
American Axle & Manufacturing of Michigan, Inc. and subsidiaries at
December 31, 1997, and the consolidated results of their operations and their
cash flows for each of the two years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule (as of and for the years ended December
31, 1997 and 1996), when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects, the
information set forth therein.
/s/ Ernst & Young LLP
Detroit, Michigan
May 15, 1998, except as to the Note 16 thereto, as to which the date is
January 22, 1999.
F-3
<PAGE>
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents................................................................ $ 4,547 $ 17,285
Accounts receivable, net of allowance of $2,986 in 1998 and $3,247 in 1997.......... 123,787 166,459
Inventories......................................................................... 137,066 96,636
Prepaid expenses and other.......................................................... 14,524 3,184
Deferred income taxes............................................................... 14,093 5,608
---------- ----------
Total current assets.................................................................. 294,017 289,172
Property, plant and equipment, net.................................................... 829,301 649,780
Deferred income taxes................................................................. 62,194 53,959
Other assets and deferred charges..................................................... 40,720 24,742
---------- ----------
Total assets.......................................................................... $1,226,232 $1,017,653
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................... $ 232,781 $ 227,826
Accrued compensation and benefits................................................... 105,355 135,513
Other accrued expenses.............................................................. 24,750 22,659
---------- ----------
Total current liabilities............................................................. 362,886 385,998
Long-term debt and capital lease obligations.......................................... 693,368 507,043
Postretirement benefits and other long-term liabilities............................... 129,510 87,381
---------- ----------
Total liabilities..................................................................... 1,185,764 980,422
Stockholders' equity:
Common stock, par value $.01 a share;
shares authorized--150,000,000;
shares issued--32,456,107 in 1998 and 32,385,097 in 1997......................... 1 1
Paid-in capital..................................................................... 92,527 92,225
Accumulated deficit................................................................. (51,467) (54,995)
Cumulative translation adjustment................................................... (593) --
---------- ----------
Total stockholders' equity............................................................ 40,468 37,231
---------- ----------
Total liabilities and stockholders' equity............................................ $1,226,232 $1,017,653
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1998 1997 1996
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales............................................................... $2,040,578 $2,147,451 $2,022,272
Cost of goods sold...................................................... 1,884,197 1,927,364 1,845,722
---------- ---------- ----------
Gross profit............................................................ 156,381 220,087 176,550
Selling, general and administrative expenses............................ 106,191 103,954 83,072
---------- ---------- ----------
Operating income........................................................ 50,190 116,133 93,478
Net interest (expense) income........................................... (44,337) (1,846) 9,412
Recapitalization expenses............................................... -- (15,929) --
Other (expense), net.................................................... (251) (4,161) (4,566)
---------- ---------- ----------
Income before income taxes.............................................. 5,602 94,197 98,324
Income taxes............................................................ 2,074 38,933 36,600
---------- ---------- ----------
Net income.............................................................. 3,528 55,264 61,724
Preferred dividends..................................................... -- (29,915) (13,642)
Excess of the carrying amount over the fair value
of the consideration transferred to the holders of
Class A Preferred Stock............................................... -- 29,814 --
---------- ---------- ----------
Net income available for common stockholders............................ $ 3,528 $ 55,163 $ 48,082
---------- ---------- ----------
---------- ---------- ----------
Basic earnings per share................................................ $ .11 $ .74 $ .58
---------- ---------- ----------
---------- ---------- ----------
Diluted earnings per share.............................................. $ .08 $ .43 $ .43
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1998 1997 1996
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating activities
Net income............................................................... $ 3,528 $ 55,264 $ 61,724
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization....................................... 71,730 50,177 36,076
Deferred income taxes............................................... 2,556 (9,651) (7,549)
Stock option compensation expense................................... -- 6,870 --
Pensions and other postretirement benefits, net of contributions.... 20,073 30,701 22,050
Loss on disposal of equipment....................................... 271 4,161 4,566
Changes in operating assets and liabilities:
Accounts receivable.............................................. 59,232 (75,322) 2,529
Inventories...................................................... (26,981) 10,803 2,255
Accounts payable and accrued expenses............................ (34,841) 141,521 (68,963)
Long-term liabilities............................................ (1,518) (9,916) 6,049
Other assets and deferred charges................................ (12,697) (3,778) 6,950
--------- --------- ---------
Net cash provided by operating activities.................................. 81,353 200,830 65,687
Investing activities
Purchases of property and equipment, net................................. (209,993) (282,625) (162,317)
Acquisition, net of cash acquired........................................ (41,498) -- --
Proceeds from sale-leaseback of equipment................................ -- -- 31,085
--------- --------- ---------
Net cash used in investing activities...................................... (251,491) (282,625) (131,232)
Financing activities
Borrowings under Revolving Credit and Receivables facilities, net........ 156,000 130,000 --
Proceeds from issuance of long-term debt................................. 1,943 375,000 2,420
Payments on long-term debt............................................... (743) (325) (1,052)
Debt issuance costs...................................................... (102) (18,567) --
Payment of dividends..................................................... -- (34,538) (17,434)
Recapitalization payments................................................ -- (478,928) --
Proceeds from issuance of common stock................................... 302 404 --
Payments from stockholder of preferred stock............................. -- -- 37,306
--------- --------- ---------
Net cash provided by (used in) financing activities........................ 157,400 (26,954) 21,240
--------- --------- ---------
Net decrease in cash and equivalents....................................... (12,738) (108,749) (44,305)
Cash and equivalents at beginning of year.................................. 17,285 126,034 170,339
--------- --------- ---------
Cash and equivalents at end of year........................................ $ 4,547 $ 17,285 $ 126,034
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
RECEIVABLE
RETAINED FROM
EARNINGS STOCKHOLDER CUMULATIVE
COMMON PAID-IN (ACCUMULATED OF PREFERRED TRANSLATION COMPREHENSIVE
STOCK CAPITAL DEFICIT) STOCK ADJUSTMENT INCOME
------ -------- ------------ ------------ ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996.................. $ 1 $ 94,499 $115,672 $(41,600) $ 0
Net income and comprehensive income......... 61,724 $61,724
-------
-------
Cash dividends:
Preferred stock--$1,023 per share......... (13,642)
Common stock--$.0456 per share............ (3,792)
Payment received from stockholder of
preferred stock........................... 37,306
Discount for prepayment of receivable from
stockholder of preferred stock............ (4,294) 4,294
------ -------- -------- -------- ------
Balance at December 31, 1996................ 1 90,205 159,962 0 0
Net income and comprehensive income......... 55,264 $55,264
-------
-------
Cash dividends:
Preferred stock--$2,243 per share......... (29,915)
Common stock--$.0558 per share............ (4,623)
Recapitalization of common stock............ (12,867) (203,450)
Recapitalization of preferred stock......... 29,814
Recapitalization tax payment to Jupiter
Capital Corporation....................... (74,200)
Recapitalization costs paid to or on behalf
of stockholders........................... (18,225)
Recapitalization deferred taxes............. 30,378
Issuance of common stock.................... 404
Stock option grants......................... 14,483
------ -------- -------- -------- ------
Balance at December 31, 1997................ 1 92,225 (54,995) 0 0
Net income.................................. 3,528 $ 3,528
Issuance of common stock.................... 302
Foreign currency translation................ (593) (593)
-------
Comprehensive income........................ $ 2,935
------ -------- -------- -------- ------ -------
-------
Balance at December 31, 1998................ $ 1 $ 92,527 $(51,467) $ 0 $ (593)
------ -------- -------- -------- ------
------ -------- -------- -------- ------
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
American Axle & Manufacturing Holdings, Inc. ("Holdings") and its
subsidiaries (collectively, the "Company"), is a Tier I supplier to the
automotive industry and a world leader in the design, engineering and
manufacturing of driveline systems for light and medium-duty trucks,
sport-utility vehicles, vans and buses. The driveline system includes all the
components that transfer power from the transmission and deliver it to the drive
wheels. Driveline products produced by the Company at manufacturing facilities
in the United States and the United Kingdom include axles, propeller shafts,
chassis components driving heads, crankshafts, transmission parts and forged
products. In addition, the Company is in the process of constructing a
manufacturing facility in Guanajuato, Mexico.
Holdings is the survivor of a migratory merger with American Axle &
Manufacturing of Michigan, Inc. ("AAMM" or "the predecessor company") and has no
significant assets other than its investment in its subsidiaries. Pursuant to
this merger, which was effected in January, 1999, each share of the predecessor
company's common stock was converted into 3,945 shares of Holdings' common
stock. All share and per share amounts have been adjusted to reflect this
conversion.
In February, 1999, Holdings completed an initial public offering and issued
7 million shares of its common stock. The net proceeds of the offering, after
deduction of associated expenses, approximated $108 million.
Principles of Consolidation
The consolidated financial statements include the accounts of Holdings and
its subsidiaries. All intercompany transactions, balances and profits are
eliminated upon consolidation.
Revenue Recognition
The Company recognizes revenue when products are shipped to the customer.
Research and Development Costs
The Company expenses research and development costs as incurred. Research
and development costs were $29.5 million, $27.8 million and $23.4 million for
1998, 1997 and 1996, respectively.
Cash and Equivalents
Cash and equivalents include all cash balances and highly liquid
investments with a maturity of ninety days or less at time of purchase.
Tooling
Costs incurred by the Company for tooling for which customer reimbursement
is anticipated are classified as accounts receivable in the accompanying
consolidated balance sheets. Provisions for losses are recorded at the time the
Company anticipates the costs of these projects to exceed anticipated customer
reimbursement.
Inventories
Inventories in the U.S. are stated at the lower of cost or market under the
last-in, first-out method (LIFO). Inventories in countries other than the U.S.
are stated at the lower of cost or market under the first-in, first-out method
(FIFO). Supplies and repair parts inventory consists of materials consumed in
the manufacturing process but not incorporated into the finished products and
repair parts used to service machinery and equipment.
F-8
<PAGE>
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
The components of inventories are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and work-in-process...................................... $ 87,540 $68,323
Finished goods......................................................... 42,233 25,587
-------- -------
Gross inventories at average cost...................................... 129,773 93,910
Excess of average cost over LIFO cost.................................. (7,030) (7,650)
-------- -------
Net inventories........................................................ 122,743 86,260
Supplies and repair parts.............................................. 14,323 10,376
-------- -------
$137,066 $96,636
-------- -------
-------- -------
</TABLE>
Property, Plant and Equipment
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1997
---------- --------
(IN THOUSANDS)
<S> <C> <C>
Land and land improvements.......................................... $ 19,308 $ 15,757
Buildings and building improvements................................. 51,434 40,426
Machinery and equipment............................................. 843,419 506,927
Construction in progress............................................ 133,080 205,773
---------- --------
1,047,241 768,883
Accumulated depreciation............................................ (217,940) (119,103)
---------- --------
Property, plant and equipment, net.................................. $ 829,301 $649,780
---------- --------
---------- --------
</TABLE>
Property, plant and equipment are stated at cost. Construction in progress
includes costs incurred for machinery and equipment and building improvements in
process. Depreciation is provided using the straight-line method over the
estimated useful lives of the related assets. Depreciation of property, plant
and equipment amounted to $67 million, $48 million and $35 million in 1998, 1997
and 1996, respectively.
The estimated lives of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
Land improvements 15 years
<S> <C>
Buildings and building improvements 40 years
Machinery and equipment 3 to 15 years
</TABLE>
Effective January 1, 1997, the Company extended the estimated useful lives
of certain machinery and equipment to better allocate the cost of the assets
over their estimated useful lives. This change in estimated useful lives
increased operating income by approximately $6.4 million in 1997. The Company
analyzed the useful lives of machinery and equipment in conjunction with the
Agreements discussed in Note 11 together with alternative uses for this
equipment and determined that machinery and equipment lives could be extended to
15 years in certain circumstances.
Included in 1997 purchases of machinery and equipment was $9.6 million of
equipment acquired from an affiliate of Jupiter Capital Corporation (the
predecessor company's parent prior to the recapitalization discussed in Note 2;
"Jupiter") in an arms-length transaction.
F-9
<PAGE>
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Goodwill and Other Intangible Assets
Goodwill represents the excess of the cost of purchased businesses over the
fair value of their net assets at the date of acquisition and is amortized on a
straight-line basis over periods not exceeding 40 years. Other intangible assets
consist of patents, other identified rights and deferred charges and are
amortized over their estimated useful lives, ranging from one to eight years at
December 31, 1998.
Impairment of Long-Lived Assets
The Company periodically reviews the realizability of its long-lived
assets, including goodwill and other intangible assets, based on an evaluation
of remaining useful lives, cash flows and profitability projections and has
determined that there is no impairment at December 31, 1998.
Derivatives
Gains and losses on hedges of assets and liabilities are included in the
carrying amounts of those assets or liabilities and ultimately are recognized in
income. The interest rate differential relating to interest rate swaps and
collars used to hedge debt and lease obligations is reflected as an adjustment
to interest expense over the lives of the swaps. Cash flows from derivatives are
classified in the same category as the cash flows from the related activity. In
circumstances where the underlying assets or liabilities are sold or no longer
exist, any remaining carrying value adjustments are recognized in other income
or expense. See Note 5.
In June, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), Accounting for Derivative
Instruments and Hedging Activities, effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. SFAS 133 requires that all derivatives be
recognized either as assets or liabilities in the statement of financial
position and be measured at fair value. The Company is currently analyzing the
impact SFAS 133 will have on its financial statements.
Earnings Per Share
Basic earnings per share are based upon the weighted average number of
shares outstanding during each year. Diluted earnings per share assumes the
exercise of common stock options when dilutive.
Accounting for Stock Based Compensation
The Company has elected to follow Accounting Principles Board Opinion
Number 25 (APB No. 25), Accounting for Stock Issued to Employees and related
interpretations in accounting for its employee stock options. Accordingly,
compensation cost is measured on the excess, if any, of the market price of the
company's stock at the date of grant over the amount an employee must pay to
acquire the stock. The Company has adopted the disclosure-only provisions for
Statement of Financial Accounting Standards Number 123 (SFAS No. 123),
Accounting for Stock-Based Compensation, which requires the recording of
compensation for stock-based compensation at fair value.
Comprehensive Income
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 130, Reporting Comprehensive Income. Currency translation adjustments are
the Company's only component of other comprehensive income.
F-10
<PAGE>
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Currency Translation
Assets and liabilities of foreign subsidiaries are translated to U.S.
dollars at end-of-period exchange rates. The effect of translation for the
Company's foreign subsidiaries that use the local currency as their functional
currency is reported in a separate component of stockholders' equity. The effect
of remeasurement of assets and liabilities of the Company's foreign subsidiary
that uses the U.S. dollar as its functional currency is included in income.
Income statement elements of all foreign subsidiaries are translated to U.S.
dollars at average-period exchange rates and are recognized as part of revenues,
costs and expenses. Also included in income are gains and losses arising from
transactions denominated in a currency other than the functional currency of the
particular subsidiary.
EFFECT OF NEW ACCOUNTING STANDARDS
Statement of Position ("SOP") 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use, was issued in March, 1998. SOP
98-1, among other things, requires that certain costs of internal use software,
whether purchased or developed internally, be capitalized and amortized over the
estimated useful life of the software. Adoption of SOP 98-1 is required as of
January 1, 1999. The Company has historically followed the guidelines specified
in SOP 98-1.
SOP 98-5, Reporting on the Costs of Start-Up Activities, was issued in
April, 1998. SOP 98-5 establishes standards for the financial reporting of
start-up costs and organization costs and requires such costs to be expensed as
incurred. SOP 98-5 is effective for fiscal years beginning after December 15,
1998. The Company does not expect the adoption of SOP 98-5 to have a material
effect on its financial condition or results of operations.
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 and the disclosures in the
financial statements. Actual results could differ from those estimates.
Reclassifications
Certain 1996 and 1997 amounts have been reclassified to conform with 1998
presentation.
2. RECAPITALIZATION
On October 29, 1997, AAMM completed a comprehensive recapitalization (the
"Recapitalization"). Prior to the Recapitalization, AAMM was a wholly-owned
subsidiary of American Axle & Manufacturing, Inc. ("AAM Inc."). Pursuant to the
Recapitalization, AAMM acquired a 100% ownership interest in AAM Inc. by
exchanging shares of its own stock, on a one-for-one basis, with the
stockholders of AAM Inc. The exchange of shares has been accounted for in a
manner similar to a pooling of interests since both AAMM and AAM Inc. were under
common control. Following the exchange of shares, AAMM repurchased 50,760,906
shares or 61% of its common stock outstanding for $216.3 million. Following the
Recapitalization, the original stockholders of AAM Inc. owned 17.8% of
outstanding common stock. As part of the Recapitalization, AAMM repurchased all
outstanding Preferred Stock for $170.2 million. As part of the Recapitalization,
AAMM made a $74.2 million payment to Jupiter related to certain tax payments.
As part of the Recapitalization, AAMM redeemed and retired all outstanding
shares of Class A Preferred Stock ("preferred stock") issued in 1994 to General
Motors Corporation ("General Motors"). In 1997 and 1996, General Motors earned
$12 million and $17.9 million of dividends, respectively, based on cash flow and
net income formulae. Both the 1997 and 1996 dividends were declared and paid in
1997.
F-11
<PAGE>
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. RECAPITALIZATION--(CONTINUED)
Recapitalization expenses of $15.9 million consisted primarily of fees for
professional services. In addition, other Recapitalization costs of $18.2
million were paid either to stockholders or to third parties on the
stockholders' behalf and have been charged directly to retained earnings.
3. ACQUISITION
In October, 1998, the Company acquired Albion Automotive (Holdings) Limited
("Albion") for a purchase price of approximately $42 million and approximately
$30 million of assumed debt and capital lease obligations. The excess of the
purchase price over the fair value of the net assets acquired of $20 million has
been recorded as goodwill and is included in other assets and deferred charges.
Approximately $14 million of additional purchase price consideration may be
payable to Albion's former stockholders based upon Albion's future financial
performance. For the year ended December 31, 1998, Albion sales were
approximately $130 million. The consolidated statement of income includes the
operating results of Albion from the acquisition date.
4. LONG-TERM DEBT AND LEASE OBLIGATIONS
Long-term debt and capital lease obligations consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Credit Facilities:
Revolver............................................................ $223,000 $ 55,000
Tranche A Term Loan................................................. 0 0
Tranche B Term Loan................................................. 375,000 375,000
-------- --------
Total Credit Facilities.......................................... 598,000 430,000
Receivables Facility.................................................. 63,000 75,000
Albion Capital Lease Obligations...................................... 26,102 0
Other................................................................. 6,266 2,043
-------- --------
$693,368 $507,043
-------- --------
-------- --------
</TABLE>
At December 31, 1998, the Revolver and Receivables Facility are supported
by long-term Credit Facilities.
Credit Facilities
The Company's Senior Secured Bank Credit Facilities ("Credit Facilities")
consist of a (i) $250 million Revolving Credit Facility, due October 2004
("Revolver"), (ii) $125 million delayed draw Term Loan Facility ("Tranche A Term
Loan") due in semi-annual installments of varying amounts through October 2004
and (iii) $375 million Term Loan Facility ("Tranche B Term Loan") due in
semi-annual installments of varying amounts through April 2006. The Tranche A
Term Loan can be drawn until October 1999.
Amounts outstanding under the Credit Facilities are secured by the capital
stock of the Company's significant subsidiaries and all the assets except for
those securing the Receivables Facility and permitted equipment and lease
financings. Borrowings under the Credit Facilities bear interest at rates based
on The Chase Manhattan Bank ("Chase") alternate base rate or LIBOR, plus, in
each case, an applicable margin. At December 31, 1998, $125 million was
available for future borrowings under the Tranche A Term Loan and $27 million
was available for future borrowings under the Revolver.
The Credit Facilities contain various operating covenants which, among
other things, impose certain limitations on the Company's ability to declare or
pay dividends or distributions on capital stock, redeem or repurchase capital
stock, incur liens, incur indebtedness, or merge, make acquisitions or sell
assets. Under the
F-12
<PAGE>
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. LONG-TERM DEBT AND LEASE OBLIGATIONS--(CONTINUED)
Credit Facilities, the Company is required to comply with financial covenants
relating to interest coverage, leverage, retained earnings and capital
expenditures. Borrowings under the Credit Facilities may be prepaid by the
Company at any time at the option of the Company, without penalty, other than
breakage costs. Loans made under the Credit Facilities are subject to mandatory
prepayments under certain conditions. Additionally, the Credit Facilities
required the Company to enter into interest rate hedging arrangements with a
notional value of $112.5 million.
At December 31, 1998, the weighted average rate of interest on the balances
outstanding under the Credit Facilities was 8.1%.
Receivables Facility
In connection with the Recapitalization, AAM Inc. (the "Seller")
established a receivables financing facility (the "Receivables Facility")
through AAM Receivables Corp. ("AAM Receivables"), a wholly-owned,
bankruptcy-remote subsidiary of the Company. Pursuant to the Receivables
Facility, the Seller agreed to sell certain customer trade receivables created
from time to time to AAM Receivables which, in turn, transferred all of such
receivables to a trust, which issued a variable funding certificate (the "VFC")
representing an undivided interest in the receivables pool to Chase. Under the
VFC, Chase provided a revolving financing commitment, subject to the terms and
conditions of the Receivables Facility, of up to $153 million through November
2003. These receivables are not available to the Company's general creditors.
However, the primary customer of the Seller is also a supplier to the Seller
and, in certain circumstances, may be able to offset amounts payable by the
Seller against the Seller's trade receivables from the supplier. Accordingly,
the Receivables Facility has been accounted for as if it were a secured
borrowing.
Availability of financing under the VFC depends on the amount of
receivables generated by the Seller from its sales, the rate of collection on
those receivables and certain other characteristics of those receivables that
affect their eligibility. At December 31, 1998, approximately $66 million was
available of which $63 million was utilized under the VFC.
The Receivables Facility bears interest, at the Company's option, at rates
based on Chase's alternate base rate or LIBOR plus, in each case, an applicable
margin. The weighted average rate of interest on the balances outstanding under
the Receivables Facility at December 31, 1998 was 7.2%.
Leases
Albion leases certain facilities, machinery and equipment under capital
leases expiring at various dates. Approximately $32 million of such assets are
included in property, plant and equipment at December 31, 1998. The weighted
average rate of interest on these capital lease obligations was 8.5% at
December 31, 1998.
Substantially all of the Company's current maturities of long-term debt and
capital lease obligations at December 31, 1998 relate to Albion's capital
leases. The Company has sufficient availability to refinance this indebtedness
through its existing long-term Credit Facilities and, therefore, has classified
these capital lease obligations as noncurrent liabilities at December 31, 1998.
The Company leases certain facilities, machinery and equipment under
operating leases expiring at various dates. All of the leases contain renewal
and/or purchase options. Total expense for all operating leases was $14.0
million, $9.7 million and $4.4 million for the years ended December 31, 1998,
1997 and 1996 respectively.
F-13
<PAGE>
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. LONG-TERM DEBT AND LEASE OBLIGATIONS--(CONTINUED)
Future Minimum Debt and Lease Payments
Future minimum debt and lease payments at December 31, 1998, are as follows
(in thousands):
<TABLE>
<CAPTION>
OPERATING AGGREGATE DEBT AND
LEASES CAPITAL LEASES
--------- ------------------
<S> <C> <C>
1999..................................................................... $14,008 $ 5,759
2000..................................................................... 14,039 6,969
2001..................................................................... 14,052 5,770
2002..................................................................... 38,054 2,875
2003..................................................................... 1,698 2,234
Thereafter............................................................... 726 673,187
------- --------
Total obligations........................................................ $82,577 696,794
-------
-------
Amounts representing interest............................................ (3,426)
--------
Present value of long-term debt.......................................... $693,368
--------
--------
</TABLE>
The Company made cash payments of interest of $50.2 million, $1.7 million
and $14,000 in 1998, 1997 and 1996, respectively.
5. RISK MANAGEMENT
Financial Instruments
The Company uses interest-rate swaps and collars of up to 3 years in
duration to manage its exposure to adverse movements in interest rates. The
Company entered into a rate collar transaction in connection with
$112.5 million of the Tranche B Term Loan to pay a floating rate of interest
based on 3-month LIBOR with a cap rate of 6.5% and a floor rate of 5.5% which
terminates in December 2000. At December 31, 1998, the Company has interest rate
swap agreements with notional amounts of $70.2 million that convert the variable
rates of leases to fixed rates of approximately 8%.
Fair Values
The carrying value of cash and equivalents, accounts receivable, accounts
payable and accrued liabilities approximates fair value due to the short-term
maturities of these assets and liabilities. The fair values of long-term debt is
approximately the same as the carrying values due to the frequent resetting of
the interest rate. The estimated fair values of interest-rate swaps and collars
has been determined using available market information. At December 31, 1998,
the interest-rate swaps and collars have notional values of $182.7 million and
unrealized losses of approximately $5.5 million.
Concentrations of Credit Risk
In the normal course of business, the Company provides credit to customers
in the automotive industry, performs credit evaluations of these customers and
maintains reserves for potential credit losses which, when realized, have been
within the range of management's allowance for doubtful accounts.
The Company invests the majority of its excess cash in money market
accounts and, when appropriate, diversifies the concentration of cash among
different financial institutions. With respect to financial instruments, where
appropriate, the Company has diversified its selection of counter-parties.
F-14
<PAGE>
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. EMPLOYEE BENEFIT PLANS
Pension and Other Postretirement Benefits
The Company sponsors qualified and non-qualified defined benefit pension
plans covering substantially all hourly and salaried employees in the United
States. The Company also maintains hourly and salaried benefit plans that
provide postretirement medical, dental, vision and life benefits to retirees and
eligible dependents in the United States. Benefits for hourly employees are
substantially covered by collective bargaining agreements. Albion also sponsors
a defined benefit pension plan covering substantially all hourly and salaried
employees.
The following summarizes the changes in benefit obligations and plan assets
and reconciles the funded status of the benefit plans to net benefit plan
liability:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
-------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year............................ $ 78,361 $ 59,968 $ 52,666 $ 35,811
Service cost....................................................... 16,700 11,493 18,900 12,914
Interest cost...................................................... 7,100 4,111 5,400 2,804
Actuarial loss..................................................... 8,674 2,897 2,889 1,208
Acquisition of Albion.............................................. 38,150 -- -- --
Benefit payments................................................... (513) (108) (364) (71)
-------- -------- -------- --------
Net change....................................................... 70,111 18,393 26,825 16,855
-------- -------- -------- --------
Benefit obligation at end of year.................................. 148,472 78,361 79,491 52,666
-------- -------- -------- --------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year..................... 81,296 68,557 -- --
Actual return on plan assets....................................... 9,658 10,965 -- --
Employer contributions............................................. 18,843 1,764 364 71
Participant contributions.......................................... 262 118 -- --
Acquisition of Albion.............................................. 33,898 -- -- --
Benefit payments................................................... (513) (108) (364) (71)
-------- -------- -------- --------
Net change....................................................... 62,148 12,739 -- --
-------- -------- -------- --------
Fair value of plan at end of year.................................. 143,444 81,296 -- --
-------- -------- -------- --------
FUNDED STATUS...................................................... (5,028) 2,935 (79,491) (52,666)
Unrecognized actuarial gain........................................ (14,198) (22,825) (13,841) (18,060)
Unrecognized prior service cost.................................... 5,109 5,612 118 146
-------- -------- -------- --------
Subtotal......................................................... (14,117) (14,278) (93,214) (70,580)
Fourth quarter contribution........................................ -- 2,000 202 53
-------- -------- -------- --------
NET LIABILITY AT END OF YEAR....................................... $(14,117) $(12,278) $(93,012) $(70,527)
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
F-15
<PAGE>
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. EMPLOYEE BENEFIT PLANS--(CONTINUED)
The principal weighted average assumptions used in the valuation of the
U.S. and Albion plans were as follows:
<TABLE>
<CAPTION>
PENSION BENEFITS
--------------------------------------------
1998-U.S.
19971996 1998-ALBION 1997 1996
-------- -------- -------- --------
OTHER
BENEFITS
--
1998
--
Discount rate............................ 6.75% 5.50% 7.50% 7.00% 7.15% 7.50% 7.00%
<S> <C> <C> <C> <C>
Expected return on plan assets........... 9.25% 8.00% 9.00% 8.00% N/A N/A N/A
Rate of compensation increase............ 4.00% 3.50% 4.00% 4.00% 4.00% 4.00% 4.00%
</TABLE>
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
----------------------------- -----------------------------
1998 1997 1996 1998 1997 1996
------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost.................................... $17,194 $15,324 $22,586 $18,900 $17,219 $19,764
Interest cost................................... 7,603 5,807 5,046 5,400 4,102 3,559
Expected asset return........................... (8,971) (6,261) (3,085) N/A N/A N/A
Amortized gain.................................. (1,610) (964) 41 (1,329) (1,136) --
Amortized prior service cost.................... 510 502 112 27 27 27
------- ------- ------- ------- ------- -------
Net benefit cost.............................. $14,726 $14,408 $24,700 $22,998 $20,212 $23,350
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
</TABLE>
For measurement purposes, a 7.2% annual increase in the per capita cost of
covered health care benefits was assumed for 1999. The rate was assumed to
decrease gradually to 5.0% for 2002 and remain at that level thereafter. Health
care cost trend rates have a significant effect on the amounts reported for the
health care plans. A percentage-point change in assumed health care cost trend
rates would have the following effects:
<TABLE>
<CAPTION>
1-PERCENTAGE 1-PERCENTAGE
POINT INCREASE POINT DECREASE
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Total of service and interest cost....................................... $ 7,182 $ (5,752)
Postretirement benefit obligation........................................ 18,258 (14,844)
</TABLE>
Voluntary Savings Plans
The Company sponsors voluntary savings plans for eligible salaried and
hourly employees in the United States. The Company matches 50% of the first 6%
of salaried employee contributions. The Company's matching contribution was
increased to 50% from 25% of the first 6% of salaried contributions on July 1,
1997. Company matching contributions totaling $1.5 million, $910,000 and
$547,000 were made for the years ended December 31, 1998, 1997 and 1996,
respectively.
Profit-Sharing Plans
The Company sponsors profit-sharing plans covering substantially all of its
employees. Distributions are determined based upon established formulas and are
made annually. Profit sharing expense for the years ended December 31, 1998,
1997 and 1996 was $11.8 million, $23.3 million and $16.9 million, respectively.
7. CAPITAL STOCK
The authorized capital stock of the Company consists of (i) 150,000,000
shares of common stock, par value $.01, of which 32,456,107 shares are issued
and outstanding at December 31, 1998; (ii) 10,000,000 shares of preferred stock,
par value $.01 per share, of which no shares are issued and outstanding at
December 31, 1998; and (iii) 40,000,000 shares of series common stock, par value
$.01, of which no shares are issued and outstanding at December 31, 1998.
F-16
<PAGE>
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. STOCK OPTIONS
In 1994, the Company granted an officer of the Company options to purchase
6,891,915 shares of the Company's common stock. In 1997, the Company canceled
and replaced these options at substantially identical terms, except for a
modification of the exercisability period. The options may be exercised at any
time within a 10 year term at a nominal price per share. At December 31, 1998,
none of the options were exercised. The Company recognized compensation expense
of $6.8 million in 1997 resulting from the modification of the exercisability
period.
On October 29, 1997, the Company granted several officers of the Company
options to purchase 1,858,095 shares of the Company's common stock as
replacement for an incentive compensation plan established in 1994. The options
were immediately vested and exercisable at a weighted average exercise price per
share of approximately $.16. At December 31, 1998, none of the options were
exercised. Compensation expense relating to the incentive compensation plan
established in 1994 was $2.3 million and $6.1 million in 1997 and 1996,
respectively.
On October 29, 1997, the Company granted an officer of the Company options
to purchase 327,435 shares of the Company's common stock. The options may be
exercised at any time through November 20, 2000 at a price of $4.26 per share.
At December 31, 1998, 71,010 options were exercised.
On November 1, 1997, and as amended on November 15, 1997, the Company's
stockholders established a stock option plan ("the 1997 Plan"). There are
5,621,625 options authorized for grant under the 1997 Plan. The 1997 Plan allows
participants to vest in options to purchase shares of the Company's common stock
based upon duration of employment or operating performance. The exercise price
of the options equals the underlying value of the common stock at time of grant
and the options vest and become exercisable over a seven-year period. In 1997,
5,387,645 options were granted under the 1997 Plan at an exercise price of
$4.26. No options were granted under the 1997 Plan in 1998 and no options were
exercised as of December 31, 1998.
In January, 1999, the Company established the 1999 Stock Incentive Plan
("the 1999 Plan"). Under the 1999 Plan, a total of 3,500,000 shares of common
stock is authorized for issuance in the form of options, stock appreciation
rights or other awards that are based on the value of the Company's common
stock. The exercise price of the options, rights or other awards granted under
the 1999 Plan will not be less than the fair market value of the common stock on
the date of grant. No options, rights or other awards have been granted under
the 1999 Plan.
The following table summarizes the activity relating to the Company's stock
options:
<TABLE>
<CAPTION>
WEIGHTED-
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
---------- --------------
<S> <C> <C>
Outstanding at January 1, 1996................................... 6,891,915 $ .01
Options granted................................................ -- --
Options exercised.............................................. -- --
Options lapsed or canceled..................................... -- --
---------- ------
Outstanding at December 31, 1996................................. 6,891,915 $ .01
Options granted................................................ 14,465,090 1.71
Options exercised.............................................. -- --
Options lapsed or canceled..................................... 6,891,915 .01
---------- ------
Outstanding at December 31, 1997................................. 14,465,090 $ 1.71
Options granted................................................ --
Options exercised.............................................. (71,010) 4.26
Options lapsed or canceled..................................... (49,580) 4.26
---------- ------
Outstanding at December 31, 1998................................. 14,344,500 $ 1.68
---------- ------
---------- ------
Options exercisable at December 31, 1996......................... 6,891,915 $ .01
---------- ------
---------- ------
Options exercisable at December 31, 1997......................... 9,077,445 $ .19
---------- ------
---------- ------
Options exercisable at December 31, 1998......................... 9,362,306 $ .31
---------- ------
---------- ------
</TABLE>
F-17
<PAGE>
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. STOCK OPTIONS--(CONTINUED)
Options outstanding at December 31, 1998 have a weighted average remaining
life of approximately 10 years.
Had the Company determined compensation cost based upon the fair value of
the options at the grant date consistent with the method of SFAS No. 123, and
using the Minimum Value method at an assumed interest rate of 6.13%, the
Company's net income and earnings per share would have been adjusted to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
------- ------- -------
(IN THOUSANDS, EXCEPT FOR PER
SHARE DATA)
<S> <C> <C> <C>
Net income as reported................................. $ 3,528 $55,264 $61,724
------- ------- -------
------- ------- -------
Pro forma.............................................. $ 2,779 $55,138 $61,724
------- ------- -------
------- ------- -------
Basic earnings per share as reported................... $ .11 $ .74 $ .58
------- ------- -------
------- ------- -------
Pro forma.............................................. $ .09 $ .73 $ .58
------- ------- -------
------- ------- -------
Diluted earnings per share as reported................. $ .08 $ .43 $ .43
------- ------- -------
------- ------- -------
Pro forma.............................................. $ .06 $ .43 $ .43
------- ------- -------
------- ------- -------
</TABLE>
9. NET INTEREST (EXPENSE) INCOME
Net interest (expense) income consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1998 1997 1996
-------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Gross interest costs.................................................... $(48,572) $(9,173) $ (340)
Less interest costs capitalized......................................... 3,788 217 --
-------- ------- ------
Interest (expense)...................................................... (44,784) (8,956) (340)
Interest income......................................................... 447 7,110 9,752
-------- ------- ------
Net interest (expense) income........................................... $(44,337) $(1,846) $9,412
-------- ------- ------
-------- ------- ------
</TABLE>
10. INCOME TAXES
The following is a summary of the components of the provision for income
taxes:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1998 1997 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal.............................................................. $43,439 $37,773
Michigan single business tax......................................... $ 449 4,051 5,638
Other state and local................................................ (931) 1,094 738
------- ------- -------
(482) 48,584 44,149
Deferred:
Federal.............................................................. 3,580 (8,108) (8,247)
Michigan single business tax......................................... 1,220 (1,132) 221
Other state and local................................................ (422) (411) 477
Foreign.............................................................. (1,822) -- --
------- ------- -------
2,556 (9,651) (7,549)
------- ------- -------
$ 2,074 $38,933 $36,600
------- ------- -------
------- ------- -------
</TABLE>
F-18
<PAGE>
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. INCOME TAXES--(CONTINUED)
A reconciliation of income taxes at the United States federal statutory
rate to the effective income tax rate follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Federal statutory................................................... 35.0% 35.0% 35.0%
State and local..................................................... 5.7 2.9 4.1
Federal credits and other........................................... (7.3) 3.4 (1.9)
Foreign rate difference............................................. 3.6 -- --
------ ------ ------
Effective income tax rate........................................... 37.0% 41.3% 37.2%
------ ------ ------
------ ------ ------
</TABLE>
The following is a summary of the significant components of the Company's
deferred tax assets and liabilities:
<TABLE>
<CAPTION>
DEFERRED TAX
DEFERRED TAX ASSETS LIABILITIES
-------------------- ----------------------
CURRENT LONG-TERM CURRENT LONG-TERM
------- --------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
December 31, 1998:
Employee benefits...................................... $10,122 $38,958
Inventory.............................................. 3,394
Depreciation and amortization.......................... $ 8,562
Net operating loss carryforwards....................... 68,321
Tax credit carryforwards............................... 2,587
Goodwill............................................... 2,362
Prepaid taxes.......................................... 852
Other.................................................. 577 3,251
------- ------- ---- --------
14,093 116,331 0 8,562
Valuation allowance.................................... (45,575)
------- ------- ---- --------
$14,093 $70,756 $ 0 $ 8,562
------- ------- ---- --------
------- ------- ---- --------
December 31, 1997:
Employee benefits...................................... $ 1,958 $24,312
Inventory.............................................. 3,460
Depreciation and amortization.......................... 13,241
Net operating loss carryforwards....................... 13,539
Other.................................................. 190 2,867
------- ------- ---- --------
$ 5,608 $53,959 $ 0 $ 0
------- ------- ---- --------
------- ------- ---- --------
</TABLE>
Realization of the net deferred tax assets is dependent on future reversals
of existing temporary differences and adequate future taxable income, exclusive
of reversing temporary differences and carryforwards. Although realization is
not assured, the Company believes that it is more likely than not that the net
deferred tax assets will be realized.
As part of the Recapitalization, an election was made to treat the
transaction as a sale of assets for tax purposes under Internal Revenue Code
Section 338(h)(10). As a result of this election, certain differences between
book and tax bases of the Company's assets and liabilities were created which
generated a deferred tax asset of $30.4 million. This amount was charged
directly to retained earnings.
Through October 29, 1997, the Company filed a consolidated federal income
tax return with Jupiter. Under the terms of a tax-sharing agreement, federal
income taxes reflect the tax expense and the related liability which
F-19
<PAGE>
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. INCOME TAXES--(CONTINUED)
would have been applicable if a separate federal income tax return had been
filed by the Company. Subsequent to the Recapitalization, the Company files
stand-alone consolidated tax returns. Prior to October 29, 1997, the Company's
income tax expense would not have differed materially from that reported had the
Company filed tax returns on a stand-alone basis.
Income tax payments, including federal and state income taxes for the years
ended December 31, 1998, 1997 and 1996 were $9.3 million, $43.7 million and
$44.1 million, respectively.
At December 31, 1998, the Company has net operating loss carryforwards for
federal tax purposes of approximately $93 million and approximately $106 million
for other foreign, state and local purposes. These net operating loss
carryforwards generally expire between 2008 and 2018, except that $49 million of
foreign net operating loss carryforwards do not expire. The Company also has
$3.8 million of federal research and development tax credits and $7.4 million of
other state tax credits. These tax credit carryforwards expire between 2011 and
2018.
11. RELATED PARTY TRANSACTIONS
On March 1, 1994, AAM, Inc. finalized an Asset Purchase Agreement with
General Motors Corporation ("General Motors") to acquire substantially all of
General Motors' Saginaw Division's Final Drive and Forge Business Unit
inventory, property, plant and equipment, and various other assets. In addition,
the Company entered into long-term component supply agreements with General
Motors and General Motors of Canada, Ltd. ("GMCL"), which made the Company the
sole-source supplier to General Motors for all components manufactured by the
Company at the date of acquisition. In 1997, the Company and General Motors
entered into a binding memorandum of understanding (MOU) which provides the
framework for the continuance of this business relationship on a long term
basis. The GMCL supply agreement, which expires in September 1999, sets forth
the terms whereby GMCL supplies axles produced at the General Motors St.
Catharines, Ontario facility to the Company which resells them to General
Motors. The Company has an irrevocable option to purchase, for a nominal amount,
and relocate the equipment used in axle production by GMCL at this facility.
In 1994, General Motors agreed to contribute an additional $52 million to
fund capital improvements to increase the Company's productive capacity. General
Motors paid 14 installments of $867,000 and in March 1996 paid a final amount of
$35.6 million, to complete its obligation under this agreement. The Company is
not required to repay this contribution.
The following summarizes activity and balances with General Motors:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales to General Motors as a % of total........................ 93% 96% 96%
Purchases from General Motors...................................... $274,376 $331,116 $328,106
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
-------- --------
<S> <C> <C> <C>
Accounts receivable from General Motors............................ $ 78,970 $143,756
Accounts payable to General Motors................................. 23,337 23,223
</TABLE>
In connection with the Recapitalization, the Company and Blackstone
Management Partners L.P. ("Blackstone Management"), an affiliate of the
Company's majority stockholder, entered into an agreement pursuant to which
Blackstone Management provides certain advisory and consulting services to the
Company. In 1998 and 1997, respectively, the Company paid Blackstone Management
$2.4 million and $.9 million for such services.
At December 31, 1998, the Company had a $13.4 million receivable from a
stockholder which was repaid in 1999. At December 31, 1997, the Company had a
$7.2 million receivable from a stockholder associated with the Recapitalization
which was repaid in 1998.
F-20
<PAGE>
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. COMMITMENTS AND CONTINGENCIES
The Company plans to continue to make significant capital expenditures for
new product and capacity programs and to upgrade its machinery, equipment and
facilities. At December 31, 1998, obligated purchase commitments for capital
expenditures were approximately $145 million.
The Company is involved in various legal proceedings incidental to its
business. Although the outcome of these matters cannot be predicted with
certainty, management believes that none of these matters, individually or in
the aggregate, will have a material effect on the Company's consolidated
financial statements.
13. SEGMENT INFORMATION
The Company operates in one reportable segment, the design, engineering and
manufacturing of driveline systems (including forged products) for light and
medium-duty trucks, sport-utility vehicles, pick-ups, buses and vans. Financial
information relating to the Company's operations by geographic area are as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
NET SALES(1)
United States................................................. $1,619,058 $1,725,703 $1,661,745
Canada........................................................ 264,204 303,496 253,381
Mexico & South America........................................ 127,525 116,813 105,574
Europe and Other.............................................. 29,791 1,439 1,572
---------- ---------- ----------
$2,040,578 $2,147,451 $2,022,272
---------- ---------- ----------
---------- ---------- ----------
LONG-LIVED ASSETS
United States................................................. $ 786,988 $ 674,522 $ 423,183
Other......................................................... 83,033 -- --
---------- ---------- ----------
$ 870,021 $ 674,522 $ 423,183
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
- ------------------
(1) Net sales are attributed to countries based upon location of customer.
F-21
<PAGE>
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except share and per share data):
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Numerators:
Net Income.................................................... $ 3,528 $ 55,264 $ 61,724
Preferred dividends........................................... -- (29,915) (13,642)
Excess of the carrying amount over the fair value of the
consideration transferred to the holders of Class A
Preferred Stock............................................ -- 29,814 --
------------ ------------ ------------
NUMERATOR FOR BASIC EARNINGS PER SHARE--INCOME AVAILABLE TO
COMMON STOCKHOLDERS........................................ 3,528 55,163 48,082
Effect of dilutive securities:
Preferred dividends........................................ -- 29,915 13,642
Excess of the carrying amount over the fair value of the
consideration transferred to the holders of Class A
Preferred Stock............................................ -- (29,814) --
------------ ------------ ------------
NUMERATOR FOR DILUTED EARNINGS PER SHARE--INCOME AVAILABLE TO
COMMON STOCKHOLDERS AFTER ASSUMED CONVERSIONS.............. $ 3,528 $ 55,264 $ 61,724
------------ ------------ ------------
------------ ------------ ------------
Denominators:
DENOMINATOR FOR BASIC EARNINGS PER SHARE--WEIGHTED-AVERAGE
SHARES..................................................... 32,439,932 74,620,428 83,054,085
Effect of dilutive securities:
Dilutive stock options outstanding......................... 10,812,749 8,050,311 6,891,494
Conversion of Class A Preferred Stock...................... -- 43,836,840 52,602,630
------------ ------------ ------------
Dilutive potential common shares.............................. 10,812,749 51,887,151 59,494,124
DENOMINATOR FOR DILUTIVE EARNINGS PER SHARE--ADJUSTED
WEIGHTED-AVERAGE SHARES AND ASSUMED CONVERSION............. 43,252,681 126,507,579 142,548,209
------------ ------------ ------------
Basic earnings per share........................................ $ .11 $ .74 $ .58
------------ ------------ ------------
------------ ------------ ------------
Diluted earnings per share...................................... $ .08 $ .43 $ .43
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-22
<PAGE>
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 FULL YEAR
-------- -------- ------------ ----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
1998
Net sales..................................... $583,285 $462,913 $364,749 $ 629,631 $2,040,578
Gross profit.................................. 61,789 22,255 1,955 70,382 156,381
Net income (loss)............................. 16,923 (7,043) (21,081) 14,729 3,528
Diluted earnings per share.................... 0.39 (0.16) (0.49) 0.34 0.08
1997
Net sales..................................... $546,859 $538,730 $496,443 $ 565,419 $2,147,451
Gross profit.................................. 59,031 62,728 51,051 47,277 220,087
Net income (loss)............................. 24,790 26,403 17,890 (13,819) 55,264
Diluted earnings per share.................... 0.17 0.19 0.13 (0.18) 0.43
</TABLE>
16. SUBSEQUENT EVENTS (UNAUDITED)
On March 5, 1999, American Axle & Manufacturing, Inc., the Company's
wholly-owned subsidiary, issued $300,000,000 of 9 3/4% Senior
Subordinated Notes Due 2009 in a private placement pursuant to Rule 144A and
Regulation S of the Securities Act of 1933. The net proceeds from the sale of
the notes was approximately $289 million after deduction of discounts to the
initial purchasers and other fees and expenses.
Also in March 1999, the Company resyndicated its revolving receivables
facility through its subsidiary, AAM Receivables Corp. In addition, this
facility has been expanded from $125 million to $153 million.
On April 1, 1999, the Company purchased two forging companies, Colfor
Manufacturing, Inc. ("Colfor") and MSP Industries Corporation ("MSP"), for an
aggregate cash purchase price of approximately $223 million. Colfor specializes
in precision cold, warm and hot forgings and operates three manufacturing
facilities in Ohio. Giving effect as of January 1, 1998 to Colfor's October 1998
acquisition of Valley Forge, Inc., Colfor's pro forma 1998 sales would have been
approximately $126 million. MSP manufactures precision forged powertrain,
driveline, chasis and other components using cold and warm forging processes at
three manufacturing facilities in Michigan. MSP's 1998 sales were $56 million.
F-23
<PAGE>
[LOGO]
$300,000,000
AMERICAN AXLE & MANUFACTURING, INC.
OFFER TO EXCHANGE ALL OUTSTANDING 9 3/4% SENIOR SUBORDINATED NOTES DUE 2009 FOR
9 3/4% SENIOR SUBORDINATED NOTES DUE 2009 WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933
UNTIL , 1999 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Law") authorizes the Registrants to indemnify their officers and
directors under certain circumstances and subject to certain conditions and
limitations as stated therein, against all expenses and liabilities incurred by
or imposed upon them as a result of actions, suits and proceedings, civil or
criminal, brought against them as such officers and directors if they acted in
good faith and in a manner they reasonably believed to be in or not opposed to
the best interests of the Registrants and, with respect to any criminal action
or proceeding, had no reasonable cause to believe their conduct was unlawful.
Reference is hereby made to Article VI of Holding's Certificate of
Incorporation, a copy of which is filed as Exhibit 3.01(b), which provides for
indemnification of officers and directors of Holdings to the full extent
authorized by Section 145 of the Delaware Law. Reference is hereby made to
Article VI of the Issuer's By-laws, a copy of which is filed as
Exhibit 3.02(a), which provides for indemnification of officers and directors in
non-derivative and derivative actions and as a matter of right in the
circumstances as provided for in such Article VI. Section (c) of Article VI of
Holding's Certificate of Incorporation and Section 7 of Article VI of the
Issuer's By-Laws each authorizes Holdings and the Issuer respectively to
purchase and maintain insurance on behalf of any officer, director, employee,
trustee or agent of each of Holdings and the Issuer respectively against any
liability asserted against or incurred by them in such capacity or arising out
of their status as such, whether or not either of Holdings or the Issuer, as the
case may be, would have the power to indemnify such officer, director, employee,
trustee or agent against such liability under the provisions of such Article or
Delaware law.
Holdings maintains a directors' and officers' insurance policy which
insures the officers and directors of Holdings and its subsidiaries from any
claim arising out of an alleged wrongful act by such persons in their respective
capacities as officers and directors.
Section 102(b)(7) of the Delaware Law permits corporations to eliminate or
limit the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of a fiduciary duty of care as a
director. Reference is made to Article Nine of the Issuer's Restated Certificate
of Incorporation and to Section 2 of Article VI of Holding's Certificate of
Incorporation, copies of which are filed as Exhibits 3.01(a) and 3.01(b),
respectively, each of which limits a director's liability in accordance with
such Section.
Reference is made to Section 9 of the Purchase Agreement, a copy of which
is filed as Exhibit 1.01, for information concerning indemnification
arrangements among the Registrants and the initial purchaser of the outstanding
Notes.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
The following exhibits are filed herewith unless otherwise indicated.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
---------- -------------------------------------------------------------------------------------------------------
<C> <S> <C>
1.01 -- Purchase Agreement, dated March 2, 1999, among American Axle & Manufacturing, Inc. ("AAM, Inc."),
Chase Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Morgan Stanley &
Co. Incorporated
3.01(a) -- Certificate of Incorporation of the Issuer, as amended
3.01(b) -- Certificate of Incorporation of American Axle & Manufacturing Holdings, Inc., as amended
(Incorporated by reference to Exhibit 3.01 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
3.02(a) -- Bylaws of the Issuer
3.02(b) -- Bylaws of American Axle & Manufacturing Holdings, Inc., as Amended
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
---------- -------------------------------------------------------------------------------------------------------
(Incorporated by reference to Exhibit 3.02 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
<C> <S> <C>
4.01 -- Indenture, dated as of March 5, 1999, among AAM, Inc., as issuer, American Axle & Manufacturing
Holdings, Inc., as guarantor, and IBJ Whitehall Bank & Trust Company, as trustee
4.02 -- Form of 9 3/4% Senior Subordinated Note due 2009 (the "Exchange Note") (included as part of
Exhibit 4.01 hereto)
4.03 -- Exchange and Registration Rights Agreement, dated March 5, 1999, among AAM, Inc., Chase
Securities Inc., Donaldson Lufkin & Jenrette Securities Corporation and Morgan Stanley & Co.
Incorporated
5.01 -- Opinion of Simpson Thacher & Bartlett as to the legality of the securities being registered
10.01 -- Asset Purchase Agreement, dated February 18, 1994, between AAM, Inc. and General Motors
Corporation ("GM"), and all amendments thereto
(Incorporated by reference to Exhibit 10.1 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
+10.02 -- Component Supply Agreement, dated February 28, 1994, between AAM, Inc. and GM
(Incorporated by reference to Exhibit 10.2 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.02(a) -- Amendment No. 1 to Component Supply Agreement, dated February 28, 1994, between AAM, Inc. and GM
(Incorporated by reference to Exhibit 10.2(a) filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
+10.02(b) -- Amendment No. 2 to Component Supply Agreement, dated February 7, 1996, between AAM, Inc. and GM
(Incorporated by reference to Exhibit 10.2(b) filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
+10.02(c) -- Letter of Intent dated February 21, 1996, by G.M.T.G., GMT-800 PGM Worldwide Purchasing
("G.M.T.G") (re: front & rear axles)
(Incorporated by reference to Exhibit 10.2(c) filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
+10.02(d) -- Letter of Intent dated February 21, 1996, by G.M.T.G. (re: front & rear propeller shafts)
(Incorporated by reference to Exhibit 10.02(d) filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
+10.02(e) -- Letter Agreement dated June 25, 1997, between AAM, Inc. and GM
(Incorporated by reference to Exhibit 10.02(e) filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
+10.02(f) -- Amended and Restated Memorandum of Understanding, dated September 2, 1997, between AAM, Inc. and
GM
(Incorporated by reference to Exhibit 10.02(f) filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.02(g) -- MOU Extension Agreement, dated September 22, 1997, between AAM, Inc. and GM
(Incorporated by reference to Exhibit 10.2(g) filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
+10.03 -- GMCL Purchase Order Agreement dated February 17, 1994, by and between AAM, Inc. and General
Motors of Canada Limited ("GMCL")
(Incorporated by reference to Exhibit 10.03 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
---------- -------------------------------------------------------------------------------------------------------
+10.04 -- AAM/GMCL Supply Agreement, dated February 17, 1994 ("AAM/GMCL Supply Agreement"), by and between
AAM, Inc. and GMCL
<C> <S> <C>
(Incorporated by reference to Exhibit 10.4 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.04(a) -- Amending Agreement, dated as of September 5, 1996, between AAM, Inc. and GMCL
(Incorporated by reference to Exhibit 10.04(a) filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.04(b) -- Amending Agreement, dated as of October 7, 1996, between AAM, Inc. and GMCL
(Incorporated by reference to Exhibit 10.04(b) filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.04(c) -- Amendment No. 1 to AAM/GMCL Supply Agreement, dated February 17, 1994, between AAM, Inc. and GMCL
(Incorporated by reference to Exhibit 10.04(c) filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
+10.05 -- Agreement, dated February 17, 1997, between AAM, Inc. and GM
(Incorporated by reference to Exhibit 10.5 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
+10.05(a) -- Letter, dated December 13, 1996, by AAM, Inc.
(Incorporated by reference to Exhibit 10.05(a) filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.06 -- Lease, dated September 30, 1994, by and between AAM, Inc., as lessee, and First Industrial, L.P.,
as lessor (Technical Center)
(Incorporated by reference to Exhibit 10.06 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.07 -- 1997 American Axle & Manufacturing of Michigan, Inc. Replacement Plan
(Incorporated by reference to Exhibit 10.07 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.08 -- The Amended and Restated American Axle & Manufacturing of Michigan, Inc. Management Stock Option
Plan
(Incorporated by reference to Exhibit 10.08 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.09 -- Nonqualified Stock Option Agreement, dated October 30, 1997, between the Company and Dauch
(Incorporated by reference to Exhibit 10.09 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.10 -- Indemnification Agreement, dated February 28, 1994, between AAM, Inc. and GM
(Incorporated by reference to Exhibit 10.10 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.11 -- Employment Agreement, dated October 27, 1997, by and between the Company and Dauch
(Incorporated by reference to Exhibit 10.11 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.11(a) -- Letter Agreement, dated August 18, 1997, between AAM Acquisition, Inc. and Dauch
(Incorporated by reference to Exhibit 10.11(a) filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
---------- -------------------------------------------------------------------------------------------------------
10.12 -- Recapitalization Agreement, dated as of September 19, 1997, among AAM, Inc., the Company, Jupiter
Capital Corporation ("Jupiter"), Richard E. Dauch ("Dauch"), Morton E. Harris ("Harris") and AAM
Acquisition, Inc.
<C> <S> <C>
(Incorporated by reference to Exhibit 10.12 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.13 -- Stockholders' Agreement, dated as October 29, 1997, among Blackstone Capital Partners II Merchant
Banking Fund L.P., Blackstone Offshore Capital Partners II L.P., Blackstone Family Investment
Partnership II L.P., Jupiter, Dauch, Harris and AAM, Inc.
(Incorporated by reference to Exhibit 10.13 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.13(a) -- Disposition Agreement, dated as of December 10, 1998, between American Axle and Manufacturing of
Michigan, Inc. and Douch
(Incorporated by reference to Exhibit 10.13(a) filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.14 -- Monitoring Agreement, dated as of October 29, 1997, between the Company and Blackstone Management
Partners L.P.
(Incorporated by reference to Exhibit 10.14 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.15 -- Credit Agreement, dated as of October 27, 1997, (the "Credit Agreement") among the Company, AAM,
Inc., the lenders named therein, The Chase Manhattan Bank, as administrative agent and collateral
agent, and Chase Manhattan Bank Delaware, as fronting bank
(Incorporated by reference to Exhibit 10.15 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.15(a) -- Amendment No. 1, Waiver and Agreement, dated as of September 30, 1998, to the Credit Agreement
(Incorporated by reference to Exhibit 10.15(a) filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.15(b) -- Amendment No. 2, Waiver and Agreement, dated as of January 11, 1999, to the Credit Agreement
(Incorporated by reference to Exhibit 10.15(a) filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.16 -- AAM Master Trust Pooling Agreement, dated as of October 29, 1997, as Amended and Restated as of
March 25, 1999, among AAM Receivables Corp.("AAM Receivables"), the Company, as Servicer, and The
Chase Manhattan Bank, as Trustee
10.16(a) -- AAM Master Trust Series 1999-A Supplement to Pooling Agreement, dated as of March 25, 1999,
among AAM Receivables, the Company, as Servicer, and The Chase Manhattan Bank, as Trustee
10.17 -- Receivables Sale Agreement, dated as of October 29, 1997, as Amended and Restated as of
March 25, 1999, between AAM Receivables, as purchaser, and the Company, as Seller and Servicer
10.18 -- Servicing Agreement, dated as of October 29, 1997, as Amended and Restated as of March 25, 1999,
among AAM Receivables, the Company, as Servicer, and The Chase Manhattan Bank, as Trustee
10.19 -- Agreement for Information Technology Services, dated March 1, 1998, between AAM, Inc. and
Electronic Data Systems Corporation
(Incorporated by reference to Exhibit 10.19 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
---------- -------------------------------------------------------------------------------------------------------
10.20 -- 1998 Stock Incentive Plan
<C> <S> <C>
(Incorporated by reference to Exhibit 10.20 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.21 -- Nonqualified Stock Option Agreement, dated October 29, 1997, between the Company and Gary J.
Witosky
(Incorporated by reference to Exhibit 10.21 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
+10.22(a) -- Lifetime Program Contract for GMT 325 Products, between GM and AAM, Inc.
(Incorporated by reference to Exhibit 10.22(a) filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
+10.22(b) -- Lifetime Program Contract for GMT 330 Products, between GM and AAM, Inc.
(Incorporated by reference to Exhibit 10.22(b) filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
+10.22(c) -- Lifetime Program Contract for New M-SUV Products, between GM and AAM, Inc.
(Incorporated by reference to Exhibit 10.22(c) filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
+10.22(d) -- Lifetime Program Contract for GMT 400 Products, between GM and AAM, Inc.
(Incorporated by reference to Exhibit 10.22(d) filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
+10.22(e) -- Lifetime Program Contract for GMT 800 Products, between GM and AAM, Inc.; Letter of Intent dated
February 21, 1996, by G.M.T.G. (re: front & rear axles); Pricing Schedule Letter dated March 11,
1996, by AAM, Inc. (re: propshafts); Acceptance Letter dated April 3, 1997, by G.M.T.G. (re:
11.5' axles); Letter dated March 25, 1997, by AAM Inc. (re: GMT 800 increased volume
requirements); Letter dated April 7, 1995, by G.M.T.G. (re: GMT 800 steering components); and
Letter of Intent dated May 2, 1995, by G.M.T.G. (re: GMT 800 stabilizer bars)
(Incorporated by reference to Exhibit 10.22(e) filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.23 -- Nomination Letter, dated August 8, 1998 between Isuzu/GM Joint Purchasing Team and AAM Inc.
(Incorporated by reference to Exhibit 10.24 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
12.01 -- Statement of Computation of Ratio of Earnings to Fixed Charges
21 -- Subsidiaries of the Registrants
23.01 -- Consent of Simpson Thacher & Bartlett (contained in Exhibit 5.01)
23.02 -- Consent of Ernst & Young LLP
23.03 -- Consent of Deloitte & Touche LLP
25.01 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of IBJ Whitehall Bank &
Trust Company, as trustee
99.01 -- Form of Letter of Transmittal
99.02 -- Form of Notice of Guaranteed Delivery
</TABLE>
- ------------------
+ Certain portions of the identified Exhibit have been omitted and separately
filed with the Commission based upon a request for confidential treatment.
(b) Financial Statement Schedules
II-5
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS-- DEDUCTIONS--
BALANCE AT CHARGED TO SEE NOTE
BEGINNING OF COSTS AND (1) BALANCE AT
PERIOD PERIOD EXPENSES BELOW END OF PERIOD
- --------------------------------------------------------- ------------ ---------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Year Ended December 31, 1996............................. $1,000 $1,600 $ 0 $ 2,600
Year Ended December 31, 1997............................. $2,600 $1,000 $ 353(1) $ 3,247
Year Ended December 31, 1998............................. $3,247 $3,497 $ 3,758(1) $ 2,986
</TABLE>
- ------------------
(1) Uncollectible accounts charged off net of recoveries.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(b) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(c) Insofar as indemnification for liabilities arising under Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant 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 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(d) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more that a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
II-6
<PAGE>
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT ISSUER
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DETROIT, STATE OF
MICHIGAN, ON APRIL 19, 1999.
AMERICAN AXLE & MANUFACTURING, INC.
Registrant
By: /s/ PATRICK S. LANCASTER
--------------------------
Name: Patrick S. Lancaster
Title: Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being an
officer or director, or both, of AMERICAN AXLE & MANUFACTURING, INC. (the
"Issuer"), in his capacity as set forth below, hereby constitutes and appoints,
Patrick S. Lancaster and Michael K. Simonte and each of them, his true and
lawful attorney and agent, to do any and all acts and all things and to execute
any and all instruments which said attorney and agent may deem necessary or
desirable to enable the Issuer to comply with the Securities Act of 1933, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission thereunder, in connection with the
registration under the Act of the exchange Notes (the "Securities"), including,
without limitation, the power and authority to sign the name of each of the
undersigned in the capacities indicated below to the Registration Statement on
Form S-4 to be filed with the Securities and Exchange Commission with respect to
such Securities, to any and all amendments or supplements to such Registration
Statement, whether such amendments or supplements are filed before or after the
effective date of such Registration Statement, to any related Registration
Statement filed pursuant to Rule 462 under the Act, and to any and all
instruments or documents filed as part of or in connection with such
Registration Statement or any and all amendments thereto, whether such
amendments are filed before or after the effective date of such Registration
Statement; and each of the undersigned hereby ratifies and confirms all that
such attorney and agent shall 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 ON APRIL 19, 1999 BY OR BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<C> <S> <C>
By: /s/ Richard E. Dauch Chairman of the Board of Directors, April 19, 1999
------------------------------------- President and Chief Executive Officer
Richard E. Dauch
By: /s/ Gary J. Witosky Vice President--Finance and Chief Financial April 19, 1999
------------------------------------- Officer
Gary J. Witosky
By: /s/ Robert A. Krause Treasurer April 19, 1999
-------------------------------------
Robert A. Krause
</TABLE>
II-8
<PAGE>
<TABLE>
<C> <S> <C>
By: /s/ B. G. Mathis Director, Executive Vice President-- April 19, 1999
------------------------------------- Administration and Chief Administrative
B. G. Mathis Officer
By: /s/ Glenn H. Hutchins Director April 19, 1999
-------------------------------------
Glenn H. Hutchins
By: /s/ Bret D. Pearlman Director April 19, 1999
-------------------------------------
Bret D. Pearlman
By: /s/ David A. Stockman Director April 19, 1999
-------------------------------------
David A. Stockman
</TABLE>
II-9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
DETROIT, STATE OF MICHIGAN, ON APRIL 19, 1999.
AMERICAN AXLE & MANUFACTURING HOLDINGS,
INC.
Registrant
By: /s/ PATRICK S. LANCASTER
--------------------------
Name: Patrick S. Lancaster
Title: Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being an
officer or director, or both, of AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
(the "Guarantor"), in his capacity as set forth below, hereby constitutes and
appoints, Patrick S. Lancaster and Michael K. Simonte and each of them, his true
and lawful attorney and agent, to do any and all acts and all things and to
execute any and all instruments which said attorney and agent may deem necessary
or desirable to enable the Guarantor to comply with the Securities Act of 1933,
as amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission thereunder, in connection with the
registration under the Act of the exchange Notes (the "Securities"), including,
without limitation, the power and authority to sign the name of each of the
undersigned in the capacities indicated below to the Registration Statement on
Form S-4 to be filed with the Securities and Exchange Commission with respect to
such Securities, to any and all amendments or supplements to such Registration
Statement, whether such amendments or supplements are filed before or after the
effective date of such Registration Statement, to any related Registration
Statement filed pursuant to Rule 462 under the Act, and to any and all
instruments or documents filed as part of or in connection with such
Registration Statement or any and all amendments thereto, whether such
amendments are filed before or after the effective date of such Registration
Statement; and each of the undersigned hereby ratifies and confirms all that
such attorney and agent shall 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 ON APRIL 19, 1999 BY OR BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<C> <S> <C>
By: /s/ Richard E. Dauch Chairman of the Board of Directors, April 19, 1999
------------------------------------- President and Chief Executive Officer
Richard E. Dauch
By: /s/ Gary J. Witosky Vice President--Finance and Chief Financial April 19, 1999
------------------------------------- Officer
Gary J. Witosky
By: /s/ Robert A. Krause Treasurer April 19, 1999
-------------------------------------
Robert A. Krause
</TABLE>
II-10
<PAGE>
<TABLE>
<C> <S> <C>
By: /s/ B. G. Mathis Director, Executive Vice President-- April 19, 1999
------------------------------------- Administration and Chief Administrative
B. G. Mathis Officer
By: /s/ Glenn H. Hutchins Director April 19, 1999
-------------------------------------
Glenn H. Hutchins
By: /s/ Bret D. Pearlman Director April 19, 1999
-------------------------------------
Bret D. Pearlman
By: /s/ David A. Stockman Director April 19, 1999
-------------------------------------
David A. Stockman
</TABLE>
II-11
<PAGE>
EXECUTION COPY
American Axle & Manufacturing, Inc.
$300,000,000
9 3/4% Senior Subordinated Notes due 2009
PURCHASE AGREEMENT
March 2, 1999
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO. INCORPORATED
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
American Axle & Manufacturing, Inc., a Delaware corporation
(the "Issuer") proposes to issue and sell $300,000,000 aggregate principal
amount of its 9 3/4% Senior Subordinated Notes due 2009 (the "Securities"). The
Securities will be issued pursuant to an Indenture to be dated as of March 5,
1999 (the "Indenture"), among the Issuer, American Axle & Manufacturing
Holdings, Inc. ("Holdings") and IBJ Whitehall Bank & Trust Company, a New York
banking corporation, as trustee (the "Trustee"). The Securities will be
guaranteed on an unsecured senior subordinated basis by Holdings. The Issuer
hereby confirms its agreement with Chase Securities Inc. ("CSI"), Donaldson,
Lufkin & Jenrette Securities Corporation and Morgan Stanley & Co. Incorporated
(collectively, the "Initial Purchasers") concerning the purchase of the
Securities from the Issuer by the several Initial Purchasers.
The Securities will be offered and sold to the Initial
Purchasers without being registered under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance upon an exemption therefrom. The Issuer has
prepared a preliminary offering memorandum dated February 17, 1999 (the
"Preliminary Offering Memorandum"), and will prepare an offering memorandum
dated the date hereof (the "Offering Memorandum") setting forth information
concerning Holdings, the Issuer and its subsidiaries and the Securities. Copies
of the Preliminary Offering Memorandum have been, and copies of the Offering
Memorandum will be, delivered by the Issuer to the Initial Purchasers pursuant
to the terms of this Agreement. Any references herein to the Preliminary
Offering Memorandum and the Offering Memorandum shall be deemed to include all
amendments and supplements thereto, unless otherwise noted. The Issuer hereby
confirms that it has authorized the use of the Preliminary Offering Memorandum
and the Offering Memorandum in connection with the offering and resale of the
Securities by the Initial Purchasers in accordance with Section 2.
<PAGE>
2
Holders of the Securities (including the Initial Purchasers
and their direct and indirect transferees) will be entitled to the benefits of
an Exchange and Registration Rights Agreement, substantially in the form
attached hereto as Annex A (the "Registration Rights Agreement"), pursuant to
which the Issuer will agree to file with the Securities and Exchange Commission
(the "Commission") (i) a registration statement under the Securities Act (the
"Exchange Offer Registration Statement") registering an issue of senior
subordinated notes of the Issuer (the "Exchange Securities") which are identical
in all material respects to the Securities (except that the Exchange Securities
will not contain terms with respect to transfer restrictions) and (ii) under
certain circumstances, a shelf registration statement pursuant to Rule 415 under
the Securities Act (the "Shelf Registration Statement" and together with the
Exchange Offer Registration Statement, the "Registration Statements").
The proceeds from the sale of the Securities will be used (i)
to repay indebtedness of the Issuer and its subsidiaries, including indebtedness
outstanding (a) under the Credit Agreement dated as of October 27, 1997, as
amended, among Holdings (formerly known as American Axle & Manufacturing of
Michigan, Inc.), the Issuer, certain financial institutions listed as lenders
therein, Chase Manhattan Bank Delaware, as issuing bank, and The Chase Manhattan
Bank ("Chase"), as administrative agent and collateral agent, and (b) in
connection with the Issuer's receivables facility under the Pooling Agreement
dated as of October 29, 1997, among AAM Receivables Corp., the Issuer and Chase,
as trustee, (ii) for general corporate purposes, including financing
acquisitions and capital expenditures, and (iii) to pay related fees and
expenses.
Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Offering Memorandum.
1. Representations, Warranties and Agreements of the Issuer
and Holdings. The Issuer and Holdings jointly and severally represent and
warrant to, and agree with, the several Initial Purchasers on and as of the date
hereof and the Closing Date (as defined in Section 3) that:
(a) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its respective date, did not, and on the
Closing Date the Offering Memorandum will not, contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided that the Issuer and Holdings make no
representation or warranty as to information contained in or omitted
from the Preliminary Offering Memorandum or the Offering Memorandum in
reliance upon and in conformity with written information relating to
the Initial Purchasers furnished to the Issuer by or on behalf of any
Initial Purchaser specifically for use therein (the "Initial
Purchasers' Information").
(b) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its respective date, contains all the
information that, if requested by a prospective purchaser of the
Securities, would be required to be provided to such prospective
purchaser pursuant to Rule 144A(d)(4) under the Securities Act.
(c) Assuming the accuracy of the representations and
warranties of the Initial Purchasers contained in Section 2 and their
compliance with the agreements set forth
<PAGE>
3
therein, it is not necessary, in connection with the issuance and sale
of the Securities to the Initial Purchasers and the offer, resale and
delivery of the Securities by the Initial Purchasers in the manner
contemplated by this Agreement and the Offering Memorandum, to register
the Securities under the Securities Act or, prior to the effectiveness
of any Registration Statement, to qualify the Indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act").
(d) The accountants who certified the financial statements
included in the Offering Memorandum are independent certified public
accountants with respect to Holdings and its subsidiaries within the
meaning of Rule 101 of the Code of Professional Conduct of the American
Institute of Certified Public Accountants and its interpretations and
rulings thereunder.
(e) The audited financial statements of Holdings and its
consolidated subsidiaries (including the related notes) contained in
the Offering Memorandum comply in all material respects with the
requirements applicable to a registration statement on Form S-1 under
the Securities Act (except that certain supporting schedules are
omitted), and present fairly in all material respects the financial
position of Holdings and its consolidated subsidiaries at the dates
indicated and the respective statement of income, shareholders' equity
and cash flows of Holdings and its consolidated subsidiaries for the
periods specified; said financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved. The
financial information contained in the Offering Memorandum under the
headings "Summary Historical and Adjusted Consolidated Financial Data",
"Capitalization", "Selected Consolidated Financial and Other Data" and
"Management's Discussion and Analysis of Financial Condition and
Results of Operation" present fairly in all material respects the
information shown therein and have been compiled on a basis consistent
with that of the audited financial statements included in the Offering
Memorandum. The as adjusted financial data and the related notes
thereto included in the Offering Memorandum present fairly in all
material respects the information shown therein and have been properly
compiled on the bases described therein, and the assumptions used in
the preparation thereof are reasonable and the adjustments used therein
are appropriate to give effect to the transactions and circumstances
referred to therein.
(f) Since the respective dates as of which information is
given in the Offering Memorandum, except as otherwise stated therein,
(i) there has been no material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or
business prospects of Holdings and its subsidiaries (taken as a whole),
whether or not arising in the ordinary course of business (a "Material
Adverse Effect"), (ii) there have been no transactions entered into by
Holdings or any of its subsidiaries, other than those in the ordinary
course of business, which are material with respect to Holdings and its
subsidiaries (taken as a whole), and (iii) there has been no dividend
or distribution of any kind declared, paid or made by Holdings or any
of its subsidiaries.
(g) Each of Holdings and the Issuer has been duly organized
and is validly existing as a corporation in good standing under the
laws of the State of Delaware and has the corporate power and authority
to own, lease and operate its properties and to conduct its business as
described in the Offering Memorandum; and each of
<PAGE>
4
Holdings and the Issuer is duly qualified as a foreign corporation to
transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect.
(h) Each "significant subsidiary" of the Issuer (as such term
is defined in Rule 1-02 of Regulation S-X) (each a "Subsidiary" and,
collectively, the "Subsidiaries") has been duly organized and is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum and is duly qualified
as a foreign corporation to transact business and is in good standing
in each jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect; except as
otherwise disclosed in the Offering Memorandum, all of the issued and
outstanding capital stock of each such Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and is
owned by the Issuer, directly or through subsidiaries, free and clear
of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity; none of the outstanding shares of capital stock of any
Subsidiary was issued in violation of the preemptive or similar rights
of any securityholder of such Subsidiary.
(i) The authorized, issued and outstanding capital stock (as
stated to be adjusted for the initial public offering of Holdings'
common stock) of Holdings and its consolidated subsidiaries is as set
forth in the Offering Memorandum under the caption "Capitalization"
(except for subsequent issuances, if any, pursuant to reservations,
agreements or employee benefit plans referred to in the Offering
Memorandum or pursuant to the exercise of convertible securities or
options referred to in the Offering Memorandum), and Holdings owns 100%
of the issued and outstanding capital stock of the Issuer and has no
material operations or assets other than such capital stock. The shares
of issued and outstanding capital stock of Holdings and the Issuer have
been duly authorized and validly issued and are fully paid and
non-assessable; none of the outstanding shares of capital stock was
issued in violation of the preemptive or other similar rights of any
securityholder of Holdings or the Issuer.
(j) The Registration Rights Agreement has been duly authorized
by the Issuer and Holdings and, when duly executed and delivered in
accordance with its terms by each of the parties thereto, will
constitute a valid and legally binding agreement of the Issuer and
Holdings enforceable against the Issuer and Holdings in accordance with
its terms, except to the extent that such enforceability may be limited
by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and by general equitable principles (whether
considered in a proceeding in equity or at law).
(k) The Indenture has been duly authorized by the Issuer and
Holdings (and Holdings has duly authorized its guarantee of the
Securities made thereunder) and, when duly executed and delivered in
accordance with its terms by each of the parties thereto, will
constitute a valid and legally binding agreement of the Issuer and
<PAGE>
5
Holdings enforceable against the Issuer and Holdings in accordance with
its terms, except to the extent that such enforceability may be limited
by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and by general equitable principles (whether
considered in a proceeding in equity or at law). On the Closing Date,
the Indenture will conform in all material respects to the requirements
of the Trust Indenture Act and the rules and regulations of the
Commission applicable to an indenture that is qualified thereunder.
(l) This Agreement has been duly authorized, executed and
delivered by the Issuer and Holdings and constitutes a valid and
legally binding agreement of the Issuer and Holdings.
(m) The Securities to be purchased by the Initial Purchasers
from the Issuer have been duly authorized by the Issuer for issuance
and sale to the Initial Purchasers pursuant to this Agreement and, when
duly executed, authenticated, issued and delivered by the Issuer
pursuant to the Indenture and this Agreement against payment of the
consideration set forth herein, will be duly and validly issued and
outstanding and will constitute valid and legally binding obligations
of the Issuer, as issuer, and of Holdings as a guarantor, entitled to
the benefits of the Indenture and enforceable against the Issuer, as
issuer, and Holdings as a guarantor, in accordance with their terms,
except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and by general equitable principles (whether
considered in a proceeding in equity or at law).
(n) Neither Holdings nor any of its subsidiaries is (i) in
violation of its charter or by-laws or in default, (ii) to Holdings'
knowledge, alleged by any other party to be in default, in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or other agreement or
instrument to which Holdings or any of its subsidiaries is a party or
by which it or any of them may be bound, or to which any of the
property or assets of Holdings or any of its subsidiaries is subject
(collectively, "Agreements and Instruments") or (iii) in violation in
any respect of any law, ordinance, governmental rule, regulation or
court decree to which it or its property or assets may be subject,
other than, in the case of clauses (ii) or (iii), such defaults or
violations that would not, singularly or in the aggregate, reasonably
be expected to have a Material Adverse Effect; Holdings and the Issuer
each have full right, power and authority to execute and deliver this
Agreement, the Indenture, the Registration Rights Agreement and the
Securities (collectively, the "Transaction Documents") and to perform
their respective obligations hereunder and thereunder, and the
execution, delivery and performance of the Transaction Documents and
consummation of the transactions contemplated herein and therein and
the use of the proceeds from the sale of the Securities as described in
the Offering Memorandum under the caption "Use of Proceeds" and
compliance by Holdings and the Issuer with their respective obligations
under the Transaction Documents have been duly authorized by all
necessary corporate action and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or default or Repayment Event (as defined
below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of Holdings or any of
its subsidiaries
<PAGE>
6
pursuant to, the Agreements and Instruments (except for such conflicts,
breaches or defaults or liens, charges or encumbrances that would not
result in a Material Adverse Effect), nor will such action result in
any violation of the provisions of the charter or by-laws of Holdings
or any of its subsidiaries or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over Holdings or any of its subsidiaries or any of their
assets, properties or operations. As used herein, a "Repayment Event"
means any event or condition which gives the holder of any note,
debenture or other evidence of indebtedness (or any person acting on
such holder's behalf) the right to require the repurchase, redemption
or repayment of all or a portion of such indebtedness by Holdings or
any of its subsidiaries.
(o) Each Transaction Document conforms in all material
respects to the description thereof contained in the Offering
Memorandum.
(p) No labor dispute with the employees of Holdings or any of
its subsidiaries exists or, to the knowledge of Holdings, is imminent,
and Holdings is not aware of any existing or imminent labor disturbance
by the employees of any of its or any subsidiary's principal suppliers,
manufacturers, customers or contractors, which, in either case, may
reasonably be expected to result in a Material Adverse Effect.
(q) There is no action, suit, proceeding, inquiry or
investigation before or brought by any court or governmental agency or
body, domestic or foreign, now pending, or, to the knowledge of
Holdings, threatened, against or affecting Holdings or any of its
subsidiaries, which (A) might reasonably be expected to result in a
Material Adverse Effect, (B) prevents or suspends the issuance of the
Securities, or prevents or suspends the use of the Preliminary Offering
Memorandum or the Offering Memorandum or the sale of the Securities in
any jurisdiction, or (C) might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation
of the transactions contemplated by the Transaction Documents or the
performance by Holdings and the Issuer of their respective obligations
hereunder and thereunder; the aggregate of all pending legal or
governmental proceedings to which Holdings or any of its subsidiaries
is a party or of which any of their respective property or assets is
the subject which are not described in the Offering Memorandum,
including ordinary routine litigation incidental to the business, could
not reasonably be expected to result in a Material Adverse Effect.
(r) Holdings and its subsidiaries own or possess, or can
acquire on reasonable terms, adequate patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary
to carry on the business now operated by them, and neither Holdings nor
any of its subsidiaries has received any notice or is otherwise aware
of any infringement of or conflict with asserted rights of others with
respect to any Intellectual Property or of any facts or circumstances
which would render any Intellectual Property invalid or inadequate to
protect the interest of Holdings or any of its subsidiaries therein,
and which infringement or conflict (if the subject of any
<PAGE>
7
unfavorable decision, ruling or finding) or invalidity or inadequacy,
singly or in the aggregate, would result in a Material Adverse Effect.
(s) No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency is necessary or required for the
performance by Holdings or the Issuer of their respective obligations
under the Transaction Documents, in connection with the offering,
issuance or sale of the Securities hereunder or the consummation of the
transactions contemplated by the Transaction Documents, except for such
filings, approvals, authorizations, consents, licenses, orders,
registrations, qualifications or decrees (i) which shall have been
obtained or made prior to the Closing Date or (ii) as may be required
to be obtained or made under the Securities Act and applicable state
securities laws as provided in the Registration Rights Agreement.
(t) Holdings and its subsidiaries possess such permits,
licenses, approvals, consents and other authorizations (collectively,
"Governmental Licenses") issued by the appropriate federal, state,
local or foreign regulatory agencies or bodies necessary to conduct the
business now operated by them, except where the failure to possess
would not, singly or in the aggregate, have a Material Adverse Effect;
Holdings and its subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses, except where the failure
so to comply would not, singly or in the aggregate, have a Material
Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full
force and effect would not have a Material Adverse Effect; and neither
Holdings nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would result in a
Material Adverse Effect.
(u) Holdings and its subsidiaries have good and marketable
title to all real property owned by Holdings and its subsidiaries and
good title to all other properties owned by them, in each case, free
and clear of all mortgages, pledges, liens, security interests, claims,
restrictions or encumbrances of any kind except such as (a) are
described in the Offering Memorandum or (b) do not, singly or in the
aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by
Holdings or any of its subsidiaries; and all of the leases and
subleases material to the business of Holdings and its subsidiaries,
considered as one enterprise, and under which Holdings or any of its
subsidiaries hold properties described in the Offering Memorandum, are
in full force and effect, and neither Holdings nor any subsidiary has
any notice of any material claim of any sort that has been asserted by
anyone adverse to the rights of Holdings or any subsidiary under any of
the leases or subleases mentioned above, or affecting or questioning
the rights of Holdings or such subsidiary to the continued possession
of the leased or subleased premises under any such lease or sublease.
(v) None of Holdings or any of its subsidiaries is, nor upon
the issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Offering
Memorandum will be, an "investment company" or an entity "controlled"
by an "investment company" as such terms are defined in the Investment
Company Act of 1940, as amended (the "1940 Act").
<PAGE>
8
(w) Except as described in the Offering Memorandum and except
as would not, singly or in the aggregate, result in a Material Adverse
Effect, (A) neither Holdings nor any of its subsidiaries is in
violation of any federal, state, local or foreign statute, law, rule,
regulation, ordinance, code, legally binding policy or rule of common
law or any judicial or legally binding administrative interpretation
thereof, including any judicial or legally binding administrative
order, consent, decree or judgment, relating to pollution or protection
of human health, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface
strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum or petroleum products (collectively, "Hazardous
Materials") or to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Materials (collectively, "Environmental Law"), (B) Holdings and its
subsidiaries have all permits, authorizations and approvals required
under any applicable Environmental Laws (except for such permits,
authorizations and approvals the absence of which would not result in a
Material Adverse Effect) and are each in compliance with their
requirements, (C) there are no pending or, to the knowledge of the
Issuer, threatened administrative, regulatory or judicial actions,
suits, demands, demand letters, claims, liens, notices of noncompliance
or violation, investigation or proceedings relating to any
Environmental Law against Holdings or any of its subsidiaries and (D)
there are no events or circumstances that might reasonably be expected
to form the basis of an order for clean-up or remediation, or an
action, suit or proceeding by any private party or governmental body or
agency, against or affecting Holdings or any of its subsidiaries
relating to Hazardous Materials or any Environmental Laws.
(x) Holdings and each of its subsidiaries have filed all
necessary federal, state, local and foreign income, payroll, franchise
and other tax returns (after giving effect to extensions) and have paid
all taxes shown as due thereon or with respect to any of its
properties, except for taxes being contested in good faith for which
adequate reserves have been provided, and there is no tax deficiency
that has been, or to the knowledge of Holdings is likely to be,
asserted against Holdings, any of its subsidiaries or any of their
properties or assets that would result in a Material Adverse Effect.
(y) Holdings and each of its subsidiaries is insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as is reasonably prudent in the business in
which it is engaged or proposed to engage after giving effect to the
transactions described in the Offering Memorandum; and Holdings does
not have any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not result in a Material
Adverse Effect.
(z) Neither Holdings or any of its subsidiaries nor, to the
knowledge of Holdings or the Issuer, any director, officer, agent,
employee or other person associated with or acting on behalf of
Holdings or any of its subsidiaries has (i) used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government
official or employee from
<PAGE>
9
corporate funds; (iii) violated or is in violation of any provision of
the Foreign Corrupt Practices Act of 1977; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment.
(aa) On and immediately after the Closing Date, the Issuer
(after giving effect to the issuance of the Securities and to the other
transactions related thereto as described in the Offering Memorandum)
will be Solvent. As used in this paragraph, the term "Solvent" means,
with respect to a particular date, that on such date (i) the present
fair market value (or present fair saleable value) of the assets of the
Issuer is not less than the total amount required to pay the probable
liabilities of the Issuer on its total existing debts and liabilities
(including contingent liabilities) as they become absolute and matured,
(ii) the Issuer is able to realize upon its assets and pay its debts
and other liabilities, contingent obligations and commitments as they
mature and become due in the normal course of business, (iii) assuming
the sale of the Securities as contemplated by this Agreement and the
Offering Memorandum, the Issuer is not incurring debts or liabilities
beyond its ability to pay as such debts and liabilities mature and (iv)
the Issuer is not engaged in any business or transaction, and is not
about to engage in any business or transaction, for which its property
would constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which the
Issuer is engaged. In computing the amount of such contingent
liabilities at any time, it is intended that such liabilities will be
computed at the amount that, in the light of all the facts and
circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
(bb) Except as described in the Offering Memorandum, there are
no outstanding subscriptions, rights, warrants, calls or options to
acquire, or instruments convertible into or exchangeable for, or
agreements or understandings with respect to the sale or issuance of,
any shares of capital stock of or other equity or other ownership
interest in Holdings or any of its subsidiaries.
(cc) Neither Holdings nor any of its subsidiaries owns any
"margin securities" as that term is defined in Regulation U of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), and none of the proceeds of the sale of the Securities will be
used, directly or indirectly, for the purpose of purchasing or carrying
any margin security, for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of the
Securities to be considered a "purpose credit" within the meanings of
Regulation T, U or X of the Federal Reserve Board.
(dd) The Securities satisfy the eligibility requirements of
Rule 144A(d)(3) under the Securities Act.
(ee) Neither the Issuer nor any of its affiliates or any
person acting on its or their behalf has engaged or will engage in any
directed selling efforts (as such term is defined in Regulation S under
the Securities Act ("Regulation S")), and all such persons have
complied and will comply with the offering restrictions requirement of
Regulation S to the extent applicable.
<PAGE>
10
(ff) Neither the Issuer nor any of its affiliates has,
directly or through any agent, sold, offered for sale, solicited offers
to buy or otherwise negotiated in respect of, any security (as such
term is defined in the Securities Act), which is or will be integrated
with the sale of the Securities in a manner that would require
registration of the Securities under the Securities Act.
(gg) Neither Holdings nor any of its affiliates or any person
acting on its or their behalf has engaged, in connection with the
offering of the Securities, in any form of general solicitation or
general advertising within the meaning of Rule 502(c) under the
Securities Act.
(hh) Except for Holdings' common stock, there are no
securities of Holdings or any of its subsidiaries registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
listed on a national securities exchange or quoted in a U.S. automated
inter-dealer quotation system.
(ii) Neither the Issuer nor any of its affiliates has taken or
will take, directly or indirectly, any action prohibited by Regulation
M under the Exchange Act in connection with the offering of the
Securities.
(jj) No forward-looking statement (within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act)
contained in the Preliminary Offering Memorandum or the Offering
Memorandum has been made or reaffirmed without a reasonable basis or
has been disclosed other than in good faith.
(kk) Holdings and its subsidiaries have implemented a
comprehensive, detailed program to analyze and address the risk that
the computer hardware and software used by them may be unable to
recognize and properly execute date-sensitive functions involving
certain dates prior to and any dates after December 31, 1999 (the "Year
2000 Problem"), and have determined that such risk will be remedied on
a timely basis without material expense and will not have a material
adverse effect upon the financial condition and results of operations
of Holdings and its subsidiaries, taken as a whole; and Holdings and
the Issuer believe, after due inquiry, that each supplier, vendor,
customer or financial service organization used or serviced by Holdings
and its subsidiaries has remedied or will remedy on a timely basis the
Year 2000 Problem, except to the extent that a failure to remedy by any
such supplier, vendor, customer or financial service organization would
not have a Material Adverse Effect.
(ll) No "prohibited transaction" (as defined in Section 406 of
the Employee Retirement Income Security Act of 1974, as amended,
including the regulations and published interpretations thereunder
("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as
amended from time to time (the "Code")) or "accumulated funding
deficiency" (as defined in Section 302 of ERISA) or any of the events
set forth in Section 4043(b) of ERISA (other than events with respect
to which the 30-day notice requirement under Section 4043 of ERISA has
been waived) has occurred with respect to any employee benefit plan of
Holdings or any of its subsidiaries which could reasonably be expected
to have a Material Adverse Effect; each such employee benefit plan is
in compliance in all material respects with applicable law, including
ERISA and the Code; Holdings and each of its subsidiaries have not
incurred and do not expect to incur liability under Title IV of ERISA
with
<PAGE>
11
respect to the termination of, or withdrawal from, any pension plan for
which Holdings or any of its subsidiaries would have any liability; and
each such pension plan that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and has
received a favorable determination letter with respect thereto from the
Internal Revenue Service and to the knowledge of Holdings, nothing has
occurred, whether by action or by failure to act, which could
reasonably be expected to have a material adverse effect on such
favorable determination.
2. Purchase and Resale of the Securities. (a) On the basis of
the representations, warranties and agreements contained herein, and subject to
the terms and conditions set forth herein, the Issuer agrees to issue and sell
to each of the Initial Purchasers, severally and not jointly, and each of the
Initial Purchasers, severally and not jointly, agrees to purchase from the
Issuer, the principal amount of Securities set forth opposite the name of such
Initial Purchaser on Schedule I hereto at a purchase price equal to 96.690% of
the principal amount thereof. The Issuer shall not be obligated to deliver any
of the Securities except upon payment for all of the Securities to be purchased
as provided herein.
(b) The Initial Purchasers have advised the Issuer that they
propose to offer the Securities for resale upon the terms and subject to the
conditions set forth herein and in the Offering Memorandum. Each Initial
Purchaser, severally and not jointly, represents and warrants to and agrees with
the Issuer that (i) it is purchasing the Securities pursuant to a private sale
exempt from registration under the Securities Act, (ii) it has not solicited
offers for, or offered or sold, and will not solicit offers for, or offer or
sell, the Securities by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) of Regulation D under the
Securities Act ("Regulation D") or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act and (iii) it has
solicited and will solicit offers for the Securities only from, and has offered
or sold and will offer, sell or deliver the Securities, as part of their initial
offering, only (A) within the United States to persons whom it reasonably
believes to be qualified institutional buyers ("Qualified Institutional
Buyers"), as defined in Rule 144A under the Securities Act ("Rule 144A"), or if
any such person is buying for one or more institutional accounts for which such
person is acting as fiduciary or agent, only when such person has represented to
it that each such account is a Qualified Institutional Buyer to whom notice has
been given that such sale or delivery is being made in reliance on Rule 144A and
in each case, in transactions in accordance with Rule 144A and (B) outside the
United States to persons other than U.S. persons in reliance on Regulation S
under the Securities Act ("Regulation S").
(c) In connection with the offer and sale of Securities in
reliance on Regulation S, each Initial Purchaser, severally and not jointly,
represents and warrants to and agrees with the Issuer that:
(i) the Securities have not been registered under the
Securities Act and may not be offered or sold within the United States
or to, or for the account or benefit of, U.S. persons except pursuant
to an exemption from, or in transactions not subject to, the
registration requirements of the Securities Act;
(ii) such Initial Purchaser has offered and sold the
Securities, and will offer and sell the Securities, (A) as part of
their distribution at any time and (B) otherwise until 40 days after
the later of the commencement of the offering of the Securities
<PAGE>
12
and the Closing Date, only in accordance with Regulation S or Rule 144A
or any other available exemption from registration under the Securities
Act;
(iii) none of such Initial Purchaser or any of its affiliates
or any other person acting on its or their behalf has engaged or will
engage in any directed selling efforts with respect to the Securities,
and all such persons have complied and will comply with the offering
restriction requirements of Regulation S;
(iv) at or prior to the confirmation of sale of any Securities
sold in reliance on Regulation S, it will have sent to each
distributor, dealer or other person receiving a selling concession, fee
or other remuneration that purchases Securities from it during the
restricted period a confirmation or notice to substantially the
following effect:
"The Securities covered hereby have not been registered under
the U.S. Securities Act of 1933, as amended (the "Securities
Act"), and may not be offered or sold within the United States
or to, or for the account or benefit of, U.S. persons (i) as
part of their distribution at any time or (ii) otherwise until
40 days after the later of the commencement of the offering of
the Securities and the date of original issuance of the
Securities, except in accordance with Regulation S or Rule
144A or any other available exemption from registration under
the Securities Act. Terms used above have the meanings given
to them by Regulation S"; and
(v) it has not and will not enter into any contractual
arrangement with any distributor with respect to the distribution of
the Securities, except with its affiliates or with the prior written
consent of the Issuer.
Terms used in this Section 2(c) have the meanings given to them by Regulation S.
(d) Each Initial Purchaser, severally and not jointly,
represents and warrants to and agrees with the Issuer that (i) it has not
offered or sold and prior to the date six months after the Closing Date will not
offer or sell any Securities to persons in the United Kingdom except to persons
whose ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 and the
Public Offers of Securities Regulations 1995 with respect to anything done by it
in relation to the Securities in, from or otherwise involving the United
Kingdom; and (iii) it has only issued or passed on and will only issue or pass
on in the United Kingdom any document received by it in connection with the
issue of the Securities to a person who is of a kind described in Article 11(3)
of the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1996 or is a person to whom such document may otherwise lawfully be issued
or passed on.
(e) Each Initial Purchaser, severally and not jointly, agrees
with the Issuer that, prior to or simultaneously with the confirmation of sale
by such Initial Purchaser to any purchaser of any of the Securities purchased by
such Initial Purchaser from the Issuer pursuant hereto, such Initial Purchaser
shall furnish to that purchaser a copy of the Offering Memorandum (and any
amendment or supplement thereto that the Issuer shall have
<PAGE>
13
furnished to such Initial Purchaser prior to the date of such confirmation of
sale). In addition to the foregoing, each Initial Purchaser acknowledges and
agrees that the Issuer and, for purposes of the opinions to be delivered to the
Initial Purchasers pursuant to Sections 5(d) and (e), counsel for the Issuer and
for the Initial Purchasers, respectively, may rely upon the accuracy of the
representations and warranties of the Initial Purchasers and their compliance
with their agreements contained in this Section 2, and each Initial Purchaser
hereby consents to such reliance.
(f) The Issuer and Holdings acknowledge and agree that the
Initial Purchasers may sell Securities to any affiliate of an Initial Purchaser
and that any such affiliate may sell Securities purchased by it to an Initial
Purchaser.
3. Delivery of and Payment for the Securities. (a) Delivery of
and payment for the Securities shall be made at the offices of Cravath, Swaine &
Moore, New York, New York, or at such other place as shall be agreed upon by the
Initial Purchasers and the Issuer, at 10:00 A.M., New York City time, on March
5, 1999, or at such other time or date, not later than seven full business days
thereafter, as shall be agreed upon by the Initial Purchasers and the Issuer
(such date and time of payment and delivery being referred to herein as the
"Closing Date").
(b) On the Closing Date, payment of the purchase price for the
Securities shall be made to the Issuer by wire or book-entry transfer of
same-day funds to such account or accounts as the Issuer shall specify prior to
the Closing Date or by such other means as the parties hereto shall agree prior
to the Closing Date against delivery to the Initial Purchasers of the
certificates evidencing the Securities. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligations of the Initial Purchasers hereunder. Upon delivery,
the Securities shall be in global form, registered in such names and in such
denominations as CSI on behalf of the Initial Purchasers shall have requested in
writing not less than two full business days prior to the Closing Date. The
Issuer agrees to make one or more global certificates evidencing the Securities
available for inspection by CSI on behalf of the Initial Purchasers in New York,
New York at least 24 hours prior to the Closing Date.
4. Further Agreements of the Issuer and Holdings. The Issuer
and Holdings agree with each of the several Initial Purchasers:
(a) to advise the Initial Purchasers promptly and, if
requested, confirm such advice in writing, of the happening of any
event during the period prior to the completion of the resale of the
Securities by the Initial Purchasers which makes any statement of a
material fact made in the Offering Memorandum untrue or which requires
the making of any additions to or changes in the Offering Memorandum
(as amended or supplemented from time to time) in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; to advise the Initial Purchasers promptly of
any order preventing or suspending the use of the Preliminary Offering
Memorandum or the Offering Memorandum, of any suspension of the
qualification of the Securities for offering or sale in any
jurisdiction and of the initiation or threatening of any proceeding for
any such purpose; and to use its reasonable best efforts to prevent the
issuance of any such order preventing or suspending the use of the
Preliminary Offering Memorandum or the Offering Memorandum or
suspending any such qualification
<PAGE>
14
and, if any such suspension is issued, to obtain the lifting thereof at
the earliest possible time;
(b) during the period prior to the completion of the resale of
the Securities by the Initial Purchasers, to furnish promptly to each
of the Initial Purchasers and counsel for the Initial Purchasers,
without charge, as many copies of the Preliminary Offering Memorandum
and the Offering Memorandum (and any amendments or supplements thereto)
as may be reasonably requested;
(c) prior to making any amendment or supplement to the
Offering Memorandum, to furnish a copy thereof to each of the Initial
Purchasers and counsel for the Initial Purchasers and not to effect any
such amendment or supplement to which the Initial Purchasers shall
reasonably object by notice to the Issuer after a reasonable period to
review;
(d) if, at any time prior to completion of the resale of the
Securities by the Initial Purchasers, any event shall occur or
condition exist as a result of which it is necessary, in the opinion of
counsel for the Initial Purchasers or counsel for the Issuer, to amend
or supplement the Offering Memorandum in order that the Offering
Memorandum will not include 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 existing at the time it is
delivered to a purchaser, not misleading, or if it is necessary to
amend or supplement the Offering Memorandum to comply with applicable
law, to promptly prepare such amendment or supplement as may be
necessary to correct such untrue statement or omission or so that the
Offering Memorandum, as so amended or supplemented, will comply with
applicable law;
(e) for so long as the Securities are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, to furnish to holders of the Securities and prospective
purchasers of the Securities designated by such holders, upon request
of such holders or such prospective purchasers, the information
required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act, unless the Issuer is then subject to and in compliance
with Section 13 or 15(d) of the Exchange Act (the foregoing agreement
being for the benefit of the holders from time to time of the
Securities and prospective purchasers of the Securities designated by
such holders);
(f) for a period of two years following the Closing Date, to
furnish to the Initial Purchasers copies of any annual reports,
quarterly reports and current reports filed by Holdings or the Issuer
with the Commission on Forms 10-K, 10-Q and 8-K, or such other similar
forms as may be designated by the Commission, and such other documents,
reports and information as shall be furnished by Holdings or the Issuer
to the Trustee or to the holders of the Securities pursuant to the
Indenture or the Exchange Act or any rule or regulation of the
Commission thereunder;
(g) to promptly take from time to time such actions as the
Initial Purchasers may reasonably request to qualify the Securities for
offering and sale under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchasers may designate and to continue
such qualifications in effect for so long as required for the resale of
the Securities; and to arrange for the determination of the eligibility
for investment of the Securities under the laws of such jurisdictions
as the Initial
<PAGE>
15
Purchasers may reasonably request; provided that, Holdings and its
subsidiaries shall not be obligated to qualify as foreign corporations
in any jurisdiction in which they are not so qualified or to file a
general consent to service of process in any jurisdiction;
(h) to assist the Initial Purchasers in arranging for the
Securities to be designated Private Offerings, Resales and Trading
through Automated Linkages ("PORTAL") Market securities in accordance
with the rules and regulations adopted by the National Association of
Securities Dealers, Inc. ("NASD") relating to trading in the PORTAL
Market and for the Securities to be eligible for clearance and
settlement through The Depository Trust Company ("DTC");
(i) not to, and to cause its affiliates not to, sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of
any "security" (as such term is defined in the Securities Act) that
could be integrated with the sale of the Securities in a manner that
would require registration of the Securities under the Securities Act;
(j) except following the effectiveness of the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case
may be, not to, and to cause its affiliates not to, and not to
authorize or knowingly permit any person acting on their behalf to,
solicit any offer to buy or offer to sell the Securities by means of
any form of general solicitation or general advertising within the
meaning of Regulation D or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act; and not to
offer, sell, contract to sell or otherwise dispose of, directly or
indirectly, any securities under circumstances where such offer, sale,
contract or disposition would cause the exemption afforded by Section
4(2) of the Securities Act to cease to be applicable to the offering
and sale of the Securities as contemplated by this Agreement and the
Offering Memorandum;
(k) for a period of 90 days from the date of the Offering
Memorandum, not to offer for sale, sell, contract to sell or otherwise
dispose of, directly or indirectly, or file a registration statement
for, or announce any offer, sale, contract for sale of or other
disposition of any debt securities issued or guaranteed by Holdings or
any of its subsidiaries (other than the Securities) without written
prior consent of the Initial Purchasers.
(l) during the period from the Closing Date until two years
after the Closing Date, without the prior written consent of the
Initial Purchasers, not to, and not permit any of its affiliates (as
defined in Rule 144 under the Securities Act) to, resell any of the
Securities that have been reacquired by them, except for Securities
purchased by the Issuer or any of its affiliates and resold in a
transaction registered under the Securities Act;
(m) not to, until the consummation of the Exchange Offer, be
or become, or be or become owned by, an open-end investment company,
unit investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the Investment Company
Act, and to not be or become, or be or become owned by, a closed-end
investment company required to be registered, but not registered
thereunder;
<PAGE>
16
(n) in connection with the offering of the Securities, until
CSI on behalf of the Initial Purchasers shall have notified the Issuer
of the completion of the resale of the Securities, not to, and to cause
its affiliated purchasers (as defined in Regulation M under the
Exchange Act) not to, either alone or with one or more other persons,
bid for or purchase, for any account in which it or any of its
affiliated purchasers has a beneficial interest, any Securities, or
attempt to induce any person to purchase any Securities; and not to,
and to cause its affiliated purchasers not to, make bids or purchase
for the purpose of creating actual, or apparent, active trading in or
of raising the price of the Securities;
(o) in connection with the offering of the Securities, to make
its officers, employees, independent accountants and legal counsel
reasonably available upon request by the Initial Purchasers;
(p) to furnish to each of the Initial Purchasers on the date
hereof a copy of the independent accountants' report included in the
Offering Memorandum signed by the accountants rendering such report;
(q) to do and perform all things required to be done and
performed by it under this Agreement that are within its control prior
to, on or after the Closing Date, and to use its best efforts to
satisfy all conditions precedent on its part to the delivery of the
Securities;
(r) to apply the net proceeds from the sale of the Securities
as set forth in the Offering Memorandum under the heading "Use of
Proceeds".
5. Conditions of Initial Purchasers' Obligations. The
respective obligations of the several Initial Purchasers hereunder are subject
to the accuracy, on and as of the date hereof and the Closing Date, of the
representations and warranties of the Issuer and Holdings contained herein, to
the accuracy of the statements of the Issuer and Holdings and their respective
officers made in any certificates delivered pursuant hereto, to the performance
by the Issuer and Holdings of their respective obligations hereunder, and to
each of the following additional terms and conditions:
(a) The Offering Memorandum (and any amendments or supplements
thereto) shall have been printed and copies distributed to the Initial
Purchasers as promptly as practicable on or following the date of this
Agreement or at such other date and time as to which the Initial
Purchasers may agree; and no stop order suspending the sale of the
Securities in any jurisdiction shall have been issued and no proceeding
for that purpose shall have been commenced or shall be pending or
threatened.
(b) None of the Initial Purchasers shall have discovered and
disclosed to the Issuer on or prior to the Closing Date that the
Offering Memorandum or any amendment or supplement thereto contains an
untrue statement of a fact that, in the opinion of counsel for the
Initial Purchasers, is material or omits to state any fact which, in
the opinion of such counsel, is material and is required to be stated
therein or is necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident
to the authorization, form and validity of each of the Transaction
Documents and the
<PAGE>
17
Offering Memorandum, and all other legal matters relating to the
Transaction Documents and the transactions contemplated thereby, shall
be reasonably satisfactory in all material respects to the Initial
Purchasers, and the Issuer and Holdings shall have furnished to the
Initial Purchasers and their counsel all documents and information that
they or their counsel may reasonably request to enable them to pass
upon such matters.
(d) Simpson Thacher & Bartlett shall have furnished to the
Initial Purchasers their written opinion, as counsel to the Issuer and
Holdings, and Patrick S. Lancaster, Esq., as General Counsel for the
Issuer, shall have furnished to the Initial Purchasers his written
opinion, in each case addressed to the Initial Purchasers and dated the
Closing Date, in form and substance reasonably satisfactory to the
Initial Purchasers and substantially to the effect set forth in Annexes
C-1 and C-2 hereto, respectively.
(e) The Initial Purchasers shall have received from Cravath,
Swaine & Moore and Mayer, Brown & Platt, each counsel for the Initial
Purchasers, such opinion or opinions, dated the Closing Date, with
respect to such matters as the Initial Purchasers may reasonably
require, and the Issuer shall have furnished to such counsel such
documents and information as they reasonably request for the purpose of
enabling them to pass upon such matters.
(f) The Issuer shall have furnished to the Initial Purchasers
(i) a letter of Deloitte & Touche LLP ("D&T") (the "D&T Initial
Letter") and (ii) a letter of Ernst & Young LLP (the "E&Y Initial
Letter" and, together with the D&T Initial Letter, the "Initial
Letters"), addressed to the Initial Purchasers and dated the date
hereof, in form and substance satisfactory to the Initial Purchasers,
substantially to the effect set forth in Annex B-1 and B-2,
respectively, hereto.
(g) The Issuer shall have furnished to the Initial Purchasers
a letter (the "D&T Bring-Down Letter") of D&T addressed to the Initial
Purchasers and dated the Closing Date confirming that they are
independent public accountants with respect to Holdings and its
subsidiaries within the meaning of Rule 101 of the Code of Professional
Conduct of the AICPA and its interpretations and rulings thereunder,
stating, as of the date of the Bring-Down Letter (or, with respect to
matters involving changes or developments since the respective dates as
of which specified financial information is given in the Offering
Memorandum, as of a date not more than three business days prior to the
date of the Bring-Down Letter), that the conclusions and findings of
such accountants with respect to the financial information and other
matters covered by the Initial Letter furnished by D&T are accurate and
confirming in all material respects the conclusions and findings set
forth in such Initial Letter.
(h) Each of the Issuer and Holdings shall have furnished to
the Initial Purchasers a certificate or certificates, dated the Closing
Date, of its chief financial officer and another authorized officer
stating that (A) such officers have carefully examined the Offering
Memorandum, (B) in their opinion, the Offering Memorandum, as of its
date, did not include any untrue statement of a material fact and did
not omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and since the
date of the Offering Memorandum, no event has occurred that should have
been set forth in a supplement or amendment
<PAGE>
18
to the Offering Memorandum so that the Offering Memorandum (as so
amended or supplemented) would not include any untrue statement of a
material fact and would not omit to state a material fact required to
be stated therein or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, (C) as of the Closing Date, the representations and
warranties of the Issuer or Holdings, as applicable, in this Agreement
are true and correct in all material respects; the Issuer or Holdings,
as applicable, has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder on or
prior to the Closing Date and (D) subsequent to the date of the most
recent financial statements contained in the Offering Memorandum, there
has been no material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects
of Holdings and its subsidiaries whether or not arising in the ordinary
course of business.
(i) The Initial Purchasers shall have received a counterpart
of the Registration Rights Agreement which shall have been executed and
delivered by a duly authorized officer of the Issuer and Holdings.
(j) The Indenture shall have been duly executed and delivered
by the Issuer, Holdings and the Trustee, and the Securities shall have
been duly executed and delivered by the Issuer and duly authenticated
by the Trustee.
(k) The Securities shall have been approved by the NASD for
trading in the PORTAL Market.
(l) If any event shall have occurred that requires the Issuer
under Section 4(d) to prepare an amendment or supplement to the
Offering Memorandum, such amendment or supplement shall have been
prepared, the Initial Purchasers shall have been given a reasonable
opportunity to comment thereon, and copies thereof shall have been
delivered to the Initial Purchasers reasonably in advance of the
Closing Date.
(m) There shall not have occurred any invalidation of Rule
144A under the Securities Act by any court or any withdrawal or
proposed withdrawal of any rule or regulation under the Securities Act
or the Exchange Act by the Commission or any amendment or proposed
amendment thereof by the Commission that in the reasonable judgment of
the Initial Purchasers would materially impair the ability of the
Initial Purchasers to purchase, hold or effect resales of the
Securities as contemplated hereby.
(n) Subsequent to the execution and delivery of this Agreement
or, if earlier, the dates as of which information is given in the
Offering Memorandum (exclusive of any amendment or supplement thereto),
there shall not have been any change in the capital stock or long-term
debt or any change, or any development involving a prospective change,
in or affecting the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of Holdings and its
subsidiaries whether or not arising in the ordinary course of business,
the effect of which, in any such case described above, is, in the
reasonable judgment of the Initial Purchasers, so material and adverse
as to make it impracticable or inadvisable to proceed with the sale or
delivery of the Securities on the terms and in the manner contemplated
<PAGE>
19
by this Agreement and the Offering Memorandum (exclusive of any
amendment or supplement thereto).
(o) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency or body that would, as of the Closing Date, prevent
the issuance or sale of the Securities; and no injunction, restraining
order or order of any other nature by any federal or state court of
competent jurisdiction shall have been issued as of the Closing Date
which would prevent the issuance or sale of the Securities.
(p) Subsequent to the execution and delivery of this Agreement
(i) no downgrading shall have occurred in the rating accorded the
Securities or any of the Issuer's other debt securities or preferred
stock by any "nationally recognized statistical rating organization",
as such term is defined by the Commission for purposes of Rule
436(g)(2) of the rules and regulations of the Commission under the
Securities Act and (ii) no such organization shall have publicly
announced that it has under surveillance or review (other than an
announcement with positive implications of a possible upgrading), its
rating of the Securities or any of the Issuer's other debt securities
or preferred stock.
(q) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange, the American Stock
Exchange or the over-the-counter market shall have been suspended or
limited, or minimum prices shall have been established on any such
exchange or market by the Commission, by any such exchange or by any
other regulatory body or governmental authority having jurisdiction, or
trading in any securities of the Issuer on any exchange or in the
over-the-counter market shall have been suspended or (ii) any
moratorium on commercial banking activities shall have been declared by
federal or New York state authorities or (iii) an outbreak or
escalation of hostilities involving the U.S. or a declaration by the
United States of a national emergency or war or (iv) a material adverse
change in general economic, political or financial conditions (or the
effect of international conditions on the financial markets in the
United States shall be such) the effect of which, in the case of this
clause (iv) is, in the judgment of the Initial Purchasers, so material
and adverse as to make it impracticable or inadvisable to proceed with
the sale or the delivery of the Securities on the terms and in the
manner contemplated by this Agreement and in the Offering Memorandum
(exclusive of any amendment or supplement thereto).
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Initial Purchasers.
6. Termination. The obligations of the Initial Purchasers
hereunder may be terminated by the Initial Purchasers, in their absolute
discretion, by notice given to and received by the Issuer prior to delivery of
and payment for the Securities if, prior to that time, any of the events
described in Section 5(m), (n), (o), (p) or (q) shall have occurred and be
continuing.
7. Defaulting Initial Purchasers. (a) If, on the Closing Date,
any Initial Purchaser defaults in the performance of its obligations under this
Agreement, the
<PAGE>
20
non-defaulting Initial Purchasers may make arrangements for the purchase of the
Securities (the "Unpurchased Securities") which such defaulting Initial
Purchaser agreed but failed to purchase by other persons satisfactory to the
Issuer and the non-defaulting Initial Purchasers, but if no such arrangements
are made within 36 hours after such default, then (i) if the principal amount of
the Unpurchased Securities does not exceed 10% of the principal amount of
Securities to be purchased on such date, the non-defaulting Initial Purchasers
shall be obligated to purchase on a pro rata basis the full amount thereof, or
(ii) if the principal amount of the Unpurchased Securities exceeds 10% of the
Securities to be purchased on such date, the Issuer shall be entitled to a
further period of 36 hours within which to procure another party or parties
reasonably satisfactory to the non-defaulting Initial Purchasers to purchase
such Unpurchased Securities upon the terms herein set forth. If, however, the
Issuer has not completed such arrangements within 72 hours after such default
and the principal amount of Unpurchased Securities exceeds 10% of the principal
amount of Securities to be purchased on such date, then this Agreement shall
terminate without liability on the part of the non-defaulting Initial Purchasers
or the Issuer, except that the Issuer and Holdings will continue to be liable
for the payment of expenses to the extent set forth in Sections 8 and 12 and
except that the provisions of Sections 9 and 10 shall not terminate and shall
remain in effect. As used in this Agreement, the term "Initial Purchasers"
includes, for all purposes of this Agreement unless the context otherwise
requires, any party not listed in Schedule I hereto that, pursuant to this
Section 7, purchases Securities which a defaulting Initial Purchaser agreed but
failed to purchase.
(b) Nothing contained herein shall relieve a defaulting
Initial Purchaser of any liability it may have to the Issuer or any
non-defaulting Initial Purchaser for damages caused by its default. If other
persons are obligated or agree to purchase the Securities of a defaulting
Initial Purchaser, either the non-defaulting Initial Purchasers or the Issuer
may postpone the Closing Date for up to seven full business days in order to
effect any changes that in the opinion of counsel for the Issuer or counsel for
the Initial Purchasers may be necessary in the Offering Memorandum or in any
other document or arrangement, and the Issuer agrees promptly to prepare any
amendment or supplement to the Offering Memorandum that effects any such
changes.
8. Reimbursement of Initial Purchasers' Expenses. If (a) this
Agreement shall have been terminated in accordance with Section 6 or 7, (b) the
Issuer shall fail to tender the Securities for delivery to the Initial
Purchasers for any reason permitted under this Agreement or (c) the Initial
Purchasers shall decline to purchase the Securities for any reason permitted
under this Agreement, the Issuer and Holdings shall reimburse the Initial
Purchasers (except a defaulting Initial Purchaser) for such out-of-pocket
expenses (including reasonable fees and disbursements of counsel) as shall have
been reasonably incurred by the Initial Purchasers in connection with this
Agreement and the proposed purchase and resale of the Securities. If this
Agreement is terminated pursuant to Section 7 by reason of the default of one or
more of the Initial Purchasers, neither the Issuer nor Holdings shall be
obligated to reimburse any defaulting Initial Purchaser on account of such
expenses.
9. Indemnification. (a) The Issuer and Holdings shall jointly
and severally indemnify and hold harmless each Initial Purchaser, its
affiliates, their respective officers, directors, employees, representatives and
agents, and each person, if any, who controls any Initial Purchaser within the
meaning of the Securities Act or the Exchange Act (collectively referred to for
purposes of this Section 9(a) and Section 10 as an Initial Purchaser), from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, without limitation, any loss, claim, damage,
liability or action relating to
<PAGE>
21
purchases and sales of the Securities), to which that Initial Purchaser may
become subject, whether commenced or threatened, under the Securities Act, the
Exchange Act, any other federal or state statutory law or regulation, at common
law or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Offering Memorandum or
the Offering Memorandum or in any amendment or supplement thereto or in any
information provided by the Issuer or Holdings pursuant to Section 4(e) or (ii)
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and shall
reimburse each Initial Purchaser promptly upon demand for any legal or other
expenses reasonably incurred by that Initial Purchaser in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that the Issuer and
Holdings shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of, or is based upon, an untrue
statement or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and in conformity with any Initial
Purchasers' Information; and provided, further, that with respect to any such
untrue statement in or omission from the Preliminary Offering Memorandum, the
indemnity agreement contained in this Section 9(a) shall not inure to the
benefit of any such Initial Purchaser to the extent that the sale to the person
asserting any such loss, claim, damage, liability or action was an initial
resale of Securities by such Initial Purchaser and any such loss, claim, damage,
liability or action of or with respect to such Initial Purchaser results from
the fact that both (A) to the extent required by applicable law, a copy of the
Offering Memorandum was not sent or given to such person at or prior to the
written confirmation of the sale of such Securities to such person and (B) the
untrue statement in or omission from the Preliminary Offering Memorandum was
corrected in the Offering Memorandum, unless such failure to deliver the
Offering Memorandum was a result of non-compliance by the Issuer and Holdings
with Section 4(b).
(b) Each Initial Purchaser, severally and not jointly, shall
indemnify and hold harmless Holdings, the Issuer, their respective affiliates,
officers, directors, employees, representatives and agents, and each person, if
any, who controls Holdings or the Issuer within the meaning of the Securities
Act or the Exchange Act (collectively referred to for purposes of this Section
9(b) and Section 10 as Holdings), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which Holdings
or the Issuer may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in the Preliminary
Offering Memorandum or the Offering Memorandum or in any amendment or supplement
thereto or (ii) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with any Initial Purchasers' Information, and shall
reimburse Holdings and the Issuer for any legal or other expenses reasonably
incurred by Holdings or the Issuer in connection with investigating or defending
or preparing to defend against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or action as such
expenses are incurred.
<PAGE>
22
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 9(a) or 9(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability that it may have under this Section 9 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and, provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability that it
may have to an indemnified party otherwise than under this Section 9. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 9 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that an
indemnified party shall have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 9(a) and 9(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party (which
consent shall not be unreasonably withheld), effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
reasonably could have been a party and indemnity could have been sought
hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
<PAGE>
23
The obligations of each of the Issuer, Holdings and the
Initial Purchasers in this Section 9 and in Section 10 are in addition to any
other liability that the Issuer, Holdings or the Initial Purchasers, as the case
may be, may otherwise have, including in respect of any breaches of
representations, warranties and agreements made herein by any such party.
10. Contribution. If the indemnification provided for in
Section 9 is unavailable or insufficient to hold harmless an indemnified party
under Section 9(a) or 9(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Issuer and Holdings on the one
hand and the Initial Purchasers on the other from the offering of the Securities
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Issuer and Holdings on the one hand and the Initial Purchasers on the other
with respect to the statements or omissions that resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Issuer and
Holdings on the one hand and the Initial Purchasers on the other with respect to
such offering shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Securities purchased under this Agreement
(before deducting expenses) received by or on behalf of the Issuer and Holdings,
on the one hand, and the total discounts and commissions received by the Initial
Purchasers with respect to the Securities purchased under this Agreement, on the
other, bear to the total gross proceeds from the sale of the Securities under
this Agreement. The relative fault 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 the
Issuer or Holdings or information supplied by the Issuer or Holdings, on the one
hand or to any Initial Purchasers' Information on the other, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The Issuer, Holdings and
the Initial Purchasers agree that it would not be just and equitable if
contributions pursuant to this Section 10 were to be determined by pro rata
allocation (even if the Initial Purchasers were treated as one entity for such
purpose) or by any other method of allocation that does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 10 shall be deemed
to include, for purposes of this Section 10, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending or preparing to defend any such action or claim. Notwithstanding
the provisions of this Section 10, no Initial Purchaser shall be required to
contribute any amount in excess of the amount by which the total discounts and
commissions received by such Initial Purchaser with respect to the Securities
purchased by it under this Agreement exceeds the amount of any damages which
such Initial Purchaser has otherwise paid or become liable to pay by reason of
any untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Initial Purchasers'
obligations to contribute as provided in this Section 10 are several in
proportion to their respective purchase obligations and not joint.
11. Persons Entitled to Benefit of Agreement. This Agreement
shall inure to the benefit of and be binding upon the Initial Purchasers, the
Issuer, Holdings and their
<PAGE>
24
respective successors. This Agreement and the terms and provisions hereof are
for the sole benefit of only those persons, except as provided in Sections 9 and
10 with respect to affiliates, officers, directors, employees, representatives,
agents and controlling persons of the Issuer, Holdings and the Initial
Purchasers and in Section 4(e) with respect to holders and prospective
purchasers of the Securities. Nothing in this Agreement is intended or shall be
construed to give any person, other than the persons referred to in this Section
11, any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision contained herein.
12. Expenses. The Issuer and Holdings agree with the Initial
Purchasers to pay (a) the costs incident to the authorization, issuance, sale,
preparation and delivery of the Securities to the Initial Purchasers and any
taxes payable in that connection; (b) the costs incident to the preparation,
printing and distribution of the Preliminary Offering Memorandum, the Offering
Memorandum and any amendments or supplements thereto; (c) the costs of
reproducing and distributing each of the Transaction Documents; (d) the costs
incident to the preparation, printing and delivery of the certificates
evidencing the Securities, including stamp duties and transfer taxes, if any,
payable upon issuance of the Securities to the Initial Purchasers; (e) the fees
and expenses of the Issuer's counsel and the independent accountants; (f) any
fees charged by rating agencies for rating the Securities; (g) the fees and
expenses of the Trustee and any paying agent (including related fees and
expenses of any counsel to such parties); (h) all expenses and application fees
incurred in connection with the application for the inclusion of the Securities
on the PORTAL Market and the approval of the Securities for book-entry transfer
by DTC; and (i) all other costs and expenses incident to the performance of the
obligations of the Issuer and Holdings under this Agreement which are not
otherwise specifically provided for in this Section 12; provided, however, that
except as provided in this Section 12 and Section 8, the Initial Purchasers
shall pay their own costs and expenses.
13. Survival. The respective indemnities, rights of
contribution, representations, warranties and agreements of the Issuer, Holdings
and the Initial Purchasers contained in this Agreement or made by or on behalf
of the Issuer, Holdings or the Initial Purchasers pursuant to this Agreement or
any certificate delivered pursuant hereto shall survive the delivery of and
payment for the Securities and shall remain in full force and effect, regardless
of any termination or cancelation of this Agreement or any investigation made by
or on behalf of any of them or any of their respective affiliates, officers,
directors, employees, representatives, agents or controlling persons.
14. Notices, etc.. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or sent
by mail or telecopy transmission to Chase Securities Inc., 270 Park Avenue, New
York, New York 10017, Attention: Legal Department (telecopier no.: (212)
270-0994); or
(b) if to the Issuer or Holdings, shall be delivered or sent
by mail or telecopy transmission to the address of the Issuer set forth in the
Offering Memorandum, Attention: Mr. Patrick S. Lancaster (telecopier no.: (313)
974-3204 with a copy to Mr. Bret D. Pearlman, The Blackstone Group L.P., 345
Park Avenue, New York, New York 10154 (telecopier no.: (212) 754-8716);
<PAGE>
25
provided that any notice to an Initial Purchaser pursuant to Section 9(c) shall
also be delivered or sent by mail to such Initial Purchaser at its address set
forth on the signature page hereof. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Issuer shall be
entitled to act and rely upon any request, consent, notice or agreement given or
made on behalf of the Initial Purchasers by CSI.
15. Definition of Terms. For purposes of this Agreement, (a)
the term "business day" means any day on which the New York Stock Exchange, Inc.
is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
16. Initial Purchasers' Information. The parties hereto
acknowledge and agree that, for all purposes of this Agreement, the Initial
Purchasers' Information consists solely of the following information in the
Preliminary Offering Memorandum and the Offering Memorandum: (i) the last two
bullet points on the front cover page concerning the terms of the offering of
the Securities by the Initial Purchasers and (ii) the statements concerning the
Initial Purchasers contained in the third, fourth, fifth, seventh, ninth,
twelfth and thirteenth paragraphs under the heading "Plan of Distribution".
17. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
18. Counterparts. This Agreement may be executed in one or
more counterparts (which may include counterparts delivered by telecopier) and,
if executed in more than one counterpart, the executed counterparts shall each
be deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
19. Amendments. No amendment or waiver of any provision of
this Agreement, nor any consent or approval to any departure therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
parties hereto.
20. Headings. The headings herein are inserted for convenience
of reference only and are not intended to be part of, or to affect the meaning
or interpretation of, this Agreement.
<PAGE>
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement between the Issuer, Holdings and the
several Initial Purchasers in accordance with its terms.
Very truly yours,
AMERICAN AXLE & MANUFACTURING, INC.
By /s/ Gary J. Witosky
-------------------------------
Name:
Title:
AMERICAN AXLE & MANUFACTURING
HOLDINGS, INC.
By /s/ Patrick S. Lancaster
-------------------------------
Name:
Title:
Accepted:
CHASE SECURITIES INC.,
By /s/ Ira Ginsburg
--------------------------
Authorized Signatory
Address for notices pursuant to Section 9(c):
1 Chase Plaza, 25th floor
New York, New York 10081
Attention: Legal Department
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION,
By /s/ William J. R. Wilson
--------------------------
Authorized Signatory
Address for notices pursuant to Section 9(c):
277 Park Avenue, 23rd Floor
New York, NY 10017
Attention: Legal Department
MORGAN STANLEY & CO.
INCORPORATED,
By /s/ Helen T. Meates
-------------------------
Authorized Signatory
Address for notices pursuant to Section 9(c):
1585 Broadway
New York, New York 10036
Attention: Legal Department
<PAGE>
MORGAN STANLEY & CO.
INCORPORATED,
By /s/ Helen T. Meates
--------------------------
Authorized Signatory
Address for notices pursuant to Section 9(c):
1585 Broadway
New York, NY 10036
Attention: Legal Department
<PAGE>
SCHEDULE I
Principal Amount
Initial Purchasers of Securities
- ------------------ ----------------
Chase Securities Inc. $ 195,000,000
Donaldson, Lufkin & Jenrette Securities
Corporation 52,500,000
Morgan Stanley & Co. Incorporated 52,500,000
------------
Total $300,000,000
<PAGE>
ANNEX A
[Form of Exchange and Registration Rights Agreement]
<PAGE>
ANNEX B-1
FORM OF D&T COMFORT LETTER
The Issuer shall have furnished to the Initial Purchasers a
letter of Deloitte & Touche LLP, addressed to the Initial Purchasers and dated
the date of the Purchase Agreement, in form and substance satisfactory to the
Initial Purchasers, substantially to the effect set forth below:
(i) they are independent certified public accountants with
respect to Holdings and its subsidiaries within the meaning of Rule 101
of the Code of Professional Conduct of the AICPA and its
interpretations and rulings;
(ii) in their opinion, the audited financial statements and
pro forma financial information included in the Offering Memorandum and
reported on by them comply in form in all material respects with the
accounting requirements of the Exchange Act and the related published
rules and regulations of the Commission thereunder that would apply to
the Offering Memorandum if the Offering Memorandum were a prospectus
included in a registration statement on Form S-1 under the Securities
Act (except that certain supporting schedules are omitted);
(iii) based upon a reading of the latest unaudited financial
statements made available by Holdings and the Issuer, the procedures of
the AICPA for a review of interim financial information as described in
Statement of Auditing Standards No. 71, reading of minutes and
inquiries of certain officials of Holdings and the Issuer who have
responsibility for financial and accounting matters and certain other
limited procedures requested by the Initial Purchasers and described in
detail in such letter, nothing has come to their attention that causes
them to believe that (A) any unaudited financial statements included in
the Offering Memorandum do not comply as to form in all material
respects with applicable accounting requirements, (B) any material
modifications should be made to the unaudited financial statements
included in the Offering Memorandum for them to be in conformity with
generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements
included in the Offering Memorandum or (C) the information included
under the headings, "Summary--Summary Historical and Adjusted
Consolidated Financial Data", "Capitalization", "Selected Consolidated
Financial and Other Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" is not in conformity
with the disclosure requirements of Regulation S-K that would apply to
the Offering Memorandum if the Offering Memorandum were a prospectus
included in a registration statement on Form S-1 under the Securities
Act;
(iv) based upon the procedures detailed in such letter with
respect to the period subsequent to the date of the last available
balance sheet, including reading of minutes and inquiries of certain
officials of Holdings and the Issuer who have responsibility for
financial and accounting matters, nothing has come to their attention
that causes them to believe that (A) at a specified date not more than
three business days prior to the date of such letter, there was any
change in capital stock, increase in long-term debt or decrease in net
current assets of Holdings as compared with the amounts shown in the
December 31, 1998 unaudited balance sheet included in the Offering
Memorandum or (B) for the period from January 1, 1999, to a specified
date not more than three business days prior to the date of such
letter, there were any decreases, as compared with the corresponding
period in the preceding
<PAGE>
2
year, in net sales, income from operations, EBITDA or net income of
Holdings and its consolidated subsidiaries, except in all instances for
changes, increases or decreases that the Offering Memorandum discloses
have occurred or which are set forth in such letter, in which case the
letter shall be accompanied by an explanation by Holdings as to the
significance thereof unless said explanation is not deemed necessary by
the Initial Purchasers;
(v) based upon the procedures detailed in such letter with
respect to the period subsequent to December 31, 1998, including
reading of minutes and inquiries of certain officials of Holdings and
the Issuer who have responsibility for financial and accounting
matters, nothing has come to their attention that causes them to
believe that (A) at a specified date not more than three business days
prior to the date of such letter, there was any change in capital
stock, increase in long-term debt or decrease in net current assets of
Holdings as compared with the amounts shown in the December 31, 1998
audited balance sheet included in the Offering Memorandum or (B) for
the period from January 1, 1999, to a specified date not more than
three business days prior to the date of such letter, there were any
decreases, as compared with the corresponding period in the preceding
year, in net sales, income from operations, EBITDA or net income of
Holdings and its consolidated subsidiaries, except in all instances for
changes, increases or decreases that the Offering Memorandum discloses
have occurred or which are set forth in such letter, in which case the
letter shall be accompanied by an explanation by Holdings as to the
significance thereof unless said explanation is not deemed necessary by
the Initial Purchasers;
(vi) they have performed certain other specified procedures as
a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of Holdings and its subsidiaries) set forth
in the Offering Memorandum agrees with the accounting records of
Holdings and its subsidiaries, excluding any questions of legal
interpretation; and
(vii) on the basis of a reading of the unaudited pro forma
financial information included in the Offering Memorandum, carrying out
certain specified procedures, reading of minutes and inquiries of
certain officials of Holdings and the Issuer who have responsibility
for financial and accounting matters and proving the arithmetic
accuracy of the application of the pro forma adjustments to the
historical amounts in the pro forma financial information, nothing came
to their attention which caused them to believe that the pro forma
financial information does not comply in form in all material respects
with the applicable accounting requirements of Rule 11-02 of Regulation
S-X or that the pro forma adjustments have not been properly applied to
the historical amounts in the compilation of such information.
<PAGE>
ANNEX B-2
FORM OF E&Y COMFORT LETTER
The Issuer shall have furnished to the Initial Purchasers a
letter of Ernest & Young LLP, addressed to the Initial Purchasers and dated the
date of the Purchase Agreement, in form and substance satisfactory to the
Initial Purchasers, substantially to the effect set forth below:
(i) they are independent certified public accountants with
respect to Service America and its subsidiaries within the meaning of
Rule 101 of the Code of Professional Conduct of the AICPA and its
interpretations and rulings;
(ii) in their opinion, the audited financial statements
included in the Offering Memorandum and reported on by them comply in
form in all material respects with the accounting requirements of the
Exchange Act and the related published rules and regulations of the
Commission thereunder that would apply to the Offering Memorandum if
the Offering Memorandum were a prospectus included in a registration
statement on Form S-1 under the Securities Act (except that certain
supporting schedules are omitted);
(iii) based upon a reading of the latest unaudited financial
statements made available by Holdings, the procedures of the AICPA for
a review of interim financial information as described in Statement of
Auditing Standards No. 71, reading of minutes and inquiries of certain
officials of Holdings who have responsibility for financial and
accounting matters and certain other limited procedures requested by
the Initial Purchasers and described in detail in such letter, nothing
has come to their attention that causes them to believe that the
information included under the headings "Summary--Summary Financial
Data", "Selected Financial and Other Data" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" is not
in conformity with the disclosure requirements of Regulation S-K that
would apply to the Offering Memorandum if the Offering Memorandum were
a prospectus included in a registration statement on Form S-1 under the
Securities Act; and
(iv) they have performed certain other specified procedures as
a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of Holdings and its subsidiaries) set forth
in the Offering Memorandum agrees with the accounting records of
Holdings and its subsidiaries, excluding any questions of legal
interpretation.
<PAGE>
ANNEX C
Form of Opinion of Counsel for the Issuer
Simpson, Thacher & Bartlett shall have furnished to the
Initial Purchasers their written opinion, as counsel to the Issuer, addressed to
the Initial Purchasers and dated the Closing Date, in form and substance
reasonably satisfactory to the Initial Purchasers, substantially to the effect
set forth below:
(i) Holdings and each of its subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of their respective jurisdictions of incorporation, are
duly qualified to do business and are in good standing as foreign
corporations in each jurisdiction in which their respective ownership
or lease of property or the conduct of their respective businesses
requires such qualification, and have all power and authority necessary
to own or hold their respective properties and to conduct the
respective businesses in which they are engaged (except where the
failure to so qualify or have such power or authority would not,
singularly or in the aggregate, have a Material Adverse Effect),
(ii) Holdings has an authorized capitalization as set forth in
the Offering Memorandum, and all of the outstanding shares of capital
stock of Holdings have been duly and validly authorized and issued and
are fully paid and non-assessable; and the capital stock of Holdings
conforms in all material respects to the description thereof contained
in the Offering Memorandum;
(iii) the descriptions in the Offering Memorandum of statutes,
legal and governmental proceedings and contracts and other documents
are accurate in all material respects; the statements in the Offering
Memorandum under the heading "Certain Federal Income Tax
Considerations", to the extent that they constitute summaries of
matters of law or regulation or legal conclusions, have been reviewed
by such counsel and fairly summarize the matters described therein in
all material respects; and such counsel does not have actual knowledge
of any current or pending legal or governmental actions, suits or
proceedings which would be required to be described in the Offering
Memorandum if the Offering Memorandum were a prospectus included in a
registration statement on Form S-1 which are not described as so
required;
(iv) the Indenture conforms in all material respects with the
requirements of the Trust Indenture Act and the rules and regulations
of the Commission applicable to an indenture which is qualified
thereunder;
(v) Holdings and the Issuer have full right, power and
authority to execute and deliver each of the Transaction Documents to
which they are a party and to perform their respective obligations
thereunder; and all corporate action required to be taken for the due
and proper authorization, execution and delivery of each of the
Transaction Documents and the consummation of the transactions
contemplated thereby have been duly and validly taken;
(vi) each of the Purchase Agreement and the Registration
Rights Agreement has been duly authorized, executed and delivered by
the Issuer and Holdings and constitutes a valid and legally binding
agreement of the Issuer and Holdings enforceable against the Issuer and
Holdings in accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy,
<PAGE>
2
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws affecting creditors' rights generally and by general
equitable principles (whether considered in a proceeding in equity or
at law) and except to the extent that the indemnification provisions
thereof may be unenforceable;
(vii) the Indenture has been duly authorized, executed and
delivered by the Issuer and Holdings and, assuming due authorization,
execution and delivery thereof by the Trustee, constitutes a valid and
legally binding agreement of the Issuer enforceable against the Issuer
and Holdings in accordance with its terms, except to the extent that
such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws affecting creditors' rights generally and by general
equitable principles (whether considered in a proceeding in equity or
at law);
(viii) the Securities have been duly authorized and issued by
the Issuer and, assuming due authentication thereof by the Trustee and
upon payment and delivery in accordance with the Purchase Agreement,
will constitute valid and legally binding obligations of the Issuer as
issuer, and Holdings, as guarantor, entitled to the benefits of the
Indenture and enforceable against the Issuer as issuer, and Holdings,
as guarantor, in accordance with their terms, except to the extent that
such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws affecting creditors' rights generally and by general
equitable principles (whether considered in a proceeding in equity or
at law);
(ix) each Transaction Document conforms in all material
respects to the description thereof contained in the Offering
Memorandum;
(x) the execution, delivery and performance by the Issuer and
Holdings of each of the Transaction Documents to which each is a party,
the issuance, authentication, sale and delivery of the Securities and
compliance by the Issuer and Holdings with the terms thereof and the
consummation of the transactions contemplated by the Transaction
Documents will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Issuer or any of its subsidiaries
pursuant to, any material indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument to which the Issuer
or any of its subsidiaries is a party or by which the Issuer or any of
its subsidiaries is bound or to which any of the property or assets of
the Issuer or any of its subsidiaries is subject, nor will such actions
result in any violation of the provisions of the charter or by-laws of
the Issuer or any of its subsidiaries or any statute or any judgment,
order, decree, rule or regulation of any court or arbitrator or
governmental agency or body having jurisdiction over the Issuer or any
of its subsidiaries or any of their properties or assets; and no
consent, approval, authorization or order of, or filing or registration
with, any such court or arbitrator or governmental agency or body under
any such statute, judgment, order, decree, rule or regulation is
required for the execution, delivery and performance by the Issuer and
Holdings of each of the Transaction Documents to which each is a party,
the issuance, authentication, sale and delivery of the Securities and
compliance by the Issuer and Holdings with the terms thereof and the
consummation of the transactions contemplated by the Transaction
Documents, except for such consents,
<PAGE>
3
approvals, authorizations, filings, registrations or qualifications (i)
which have been obtained or made prior to the Closing Date and (ii) as
may be required to be obtained or made under the Securities Act and
applicable state securities laws as provided in the Registration Rights
Agreement;
(xi) to the best knowledge of such counsel, there are no
pending actions or suits or judicial, arbitral, rule-making,
administrative or other proceedings to which the Issuer or any of its
subsidiaries is a party or of which any property or assets of the
Issuer or any of its subsidiaries is the subject which (A) singularly
or in the aggregate, if determined adversely to the Issuer or any of
its subsidiaries, could reasonably be expected to have a Material
Adverse Effect or (B) questions the validity or enforceability of any
of the Transaction Documents or any action taken or to be taken
pursuant thereto; and to the best knowledge of such counsel, no such
proceedings are threatened or contemplated by governmental authorities
or threatened by others.
(xii) neither Holdings nor any of its subsidiaries is (A) in
violation of its charter or by-laws, (B) in default in any material
respect, and no event has occurred which, with notice or lapse of time
or both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any material
indenture, mortgage, deed of trust, loan agreement or other material
agreement or instrument to which it is a party or by which it is bound
or to which any of its property or assets is subject or (C) in
violation in any material respect of any law, ordinance, governmental
rule, regulation or court decree to which it or its property or assets
may be subject;
(xiii) neither Holdings nor any of its subsidiaries is (A) an
"investment company" or a company "controlled by" an investment company
within the meaning of the Investment Company Act and the rules and
regulations of the Commission thereunder, without taking account of any
exemption under the Investment Company Act arising out of the number of
holders of Holdings' securities or (B) a "holding company" or a
"subsidiary company" of a holding company or an "affiliate" thereof
within the meaning of the Public Utility Holding Company Act of 1935,
as amended;
(xiv) neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance, execution or
delivery of the Securities will violate Regulation T, U or X of the
Federal Reserve Board; and
(xv) assuming the accuracy of the representations, warranties
and agreements of the Issuer, Holdings and of the Initial Purchasers
contained in the Purchase Agreement, no registration of the Securities
under the Securities Act or qualification of the Indenture under the
Trust Indenture Act is required in connection with the issuance and
sale of the Securities by the Issuer and the offer, resale and delivery
of the Securities by the Initial Purchasers in the manner contemplated
by the Purchase Agreement and the Offering.
Such counsel shall also state that they have participated in
conferences with representatives of the Issuer, representatives of its
independent accountants and counsel and representatives of the Initial
Purchasers and their counsel at which conferences the contents of the
Preliminary Offering Memorandum and the Offering Memorandum and any amendment
and supplement thereto and related matters were discussed and, although such
<PAGE>
4
counsel assumes no responsibility for the accuracy, completeness or fairness of
the Offering Memorandum or any amendment or supplement thereto (except as
expressly provided above), nothing has come to the attention of such counsel to
cause such counsel to believe that the Offering Memorandum or any amendment or
supplement thereto (other than the financial statements and other financial and
statistical information contained therein, as to which such counsel need express
no belief), as of the date thereof and as of the Closing Date, contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely as to matters
of fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Issuer and Holdings and public officials which are furnished to
the Initial Purchasers.
<PAGE>
EXHIBIT 3.01(a)
State of Delaware
PAGE 1
Office of the Secretary of State
----------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"AMERICAN AXLE & MANUFACTURING, INC.", FILED IN THIS OFFICE ON THE
TWENTY-FIFTH DAY OF FEBRUARY, AT. 1994, AT 10 O'CLOCK A.M.
/s/ Edward J. Freel
[SEAL] -------------------------------------
Edward J. Freel, Secretary of State
2355170 8100 AUTHENTICATION 9598005
991074375 DATE: 02-25-99
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 10:00 AM 02/25/1994
944028341 - 2355170
RESTATED
----------
CERTIFICATE OF INCORPORATION
-------------------------------
OF
--
AMERICAN AXLE & MANUFACTURING. INC.
---------------------------------------
----------------------------
Duly adopted pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware
----------------------------
American Axle & Manufacturing, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
1. The original Certificate of Incorporation of the Corporation was filed
with the Secretary of State of Delaware on October 14, 1993.
2. The sole director of the Corporation duly approved and adopted this
Restated Certificate of Incorporation by written consent pursuant to Sections
141(f), 242 and 245 of the General Corporation Law of the State of Delaware on
February 23, 1994 and submitted for consideration the proposed Restated
Certificate of Incorporation to the sole stockholder of the Corporation. The
sole stockholder of the Corporation duly approved and adopted this Restated
Certificate of Incorporation by written consent in the manner and by the vote
prescribed by Sections 228, 242 and 245 of the General Corporation Law of the
State of Delaware on February 23, 1994. This Restated Certificate of
Incorporation is as follows:
FIRST: The name of the Corporation is American Axle Manufacturing, Inc.
SECOND: The address of the Corporation's registered office in the State
of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle 19801. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be
<PAGE>
organized under the General Corporation Law of the State of Delaware.
FOURTH: The number of shares which the Corporation is authorized to have
outstanding is 49,518 shares, consisting of (i) l3,334 shares of Class A
Variable Rate Non-Voting Convertible Preferred Stock, $0.01 par value per share
("Class A Preferred Stock"), (ii) 50 shares of Class B 8% Non-Voting Preferred
Stock, $0.01 par value per share ("Class B Preferred Stock") and (iii) 36,134
shares of Common Stock, $0.01 par value per share ("Common Stock"). Capitalized
words and terms not otherwise defined herein shall have the meanings ascribed to
them in subsection A.9. of this ARTICLE FOURTH.
A. Class A Preferred Stock. The preferences, rights and privileges of the
Class A Preferred Stock and the qualifications, limitations and restrictions
thereof shall be as follows:
1. Dividends.
a. Payment. The holders of the Class A Preferred Stock shall be
entitled to receive cash dividends as and when declared by the Board of
Directors, out of the funds of the Corporation legally available therefor, in
amounts to be determined as provided in subsection A.1.b. hereof. Such
dividends, if any, shall be payable at least annually with respect to each
Fiscal Year on the last day of the immediately succeeding March, commencing on
March 31, 1995, pro rata to the holders of all outstanding Class A Preferred
Stock as of the record date fixed for such dividend on the basis of the relative
number of such shares held of record on that date by each holder
-2-
<PAGE>
except as otherwise provided in subsection A.2. or A.3. hereof. Such dividends,
if any, shall be cumulative as provided in subsection A.1.b. hereof.
Accumulations of dividends shall not bear interest. Unless all dividends on,
and required redemptions of, the Class A Preferred Stock payable through the
current Fiscal Year shall have been paid or declared (and funds for the payment
thereof set apart), no dividend shall be declared or paid and no other
distribution shall be made on or with respect to any other class of capital
stock of the Corporation. Unless all Class A Preferred Stock has been redeemed,
no other class of capital stock of the Corporation, other than the Class B
Preferred Stock which may be purchased, redeemed or retired at any time in the
discretion of the Corporation's Board of Directors, shall be purchased,
redeemed or retired, and no monies shall be made available for a sinking fund
for such purpose.
Except as set forth in the second sentence of this paragraph, no
dividends on the Common Stock shall be paid or declared for any Fiscal Year such
that, immediately after such payment and giving effect thereto, the amount of
dividends paid on the Common Stock for such Fiscal Year divided by $20,000,000
shall exceed (i) the amount of dividends paid on the Class A Preferred Stock for
such Fiscal Year, divided by (ii) $14,999.25 multiplied by the average number of
shares of Class A Preferred Stock outstanding during such Fiscal Year.
Notwithstanding the immediately preceding sentence, in addition to any dividend
paid or payable pursuant to the immediately preceding sentence, the Board of
Directors may declare a dividend payable on both the
-3-
<PAGE>
Common Stock and the Class A Preferred Stock (with Common Stock and Class A
Preferred Stock being paid the same dividend per share) in any Fiscal Year in
an aggregate amount not to exceed (A) the net income of the Corporation for the
most recently completed Fiscal Year determined in accordance with generally
accepted accounting principles ("GAAP'), consistently applied, multiplied by
(B) the Preferred Stock Dividend Rate (as defined in subsection A.1.b. below)
with respect to the most recently completed Fiscal Year; provided, however,
that no such dividend shall be declared or paid unless (i) the Corporation will
have retained earnings of not less than $20,000,000 immediately after the
payment of such dividend, and (ii) all dividends on, and required redemptions
of, the Class A Preferred Stock payable through the current Fiscal Year shall
have been paid or declared (and funds for the payment thereof set apart).
b. Calculation of Amount. The cash dividend payable with respect to
each completed Fiscal Year, including any Fiscal Year in which all shares of
Class A Preferred Stock are redeemed or the Corporation dissolves or is
liquidated, shall be cumulative, and the amount thereof payable to all holders
of Class A Preferred Stock for such Fiscal Year in the aggregate, shall be
determined as follows:
If Audited Cash Flow Dividend payable for
for such Fiscal Year is: such Fiscal Year
--------------------------- -------------------
(1) Less than $20,000,000 Zero
(2) Equal to or greater than Four percent (4%) per annum
$20,000,000 but less than of $14,999.25 multiplied by
30,000,000 the average number of
shares of Class A Preferred
Stock outstanding during
such Fiscal
-4-
<PAGE>
Year, not to exceed Eight
Million Dollars (8,000,000)
(3) Equal to or greater than Six percent (6%) per annum
$30,000,000 but less than by of $14,999.25
$40,000,000 multiplied the average
numbers of shares of Class
A Preferred Stock
outstanding during such
Fiscal Year, not to exceed
Twelve Million Dollars
($12,000,000)
(4) Equal to or greater than Eight percent (8%) per
$40,000,000 annum of $14,999.25
multiplied by the average
number of shares of Class A
Preferred Stock outstanding
during such Fiscal Year,
not to exceed Sixteen
Million Dollars
($16,000,000)
The average shares outstanding shall be computed by adding for each share of
Class A Preferred Stock outstanding at any time during such Fiscal Year, the
number of months such share was outstanding during such fiscal year (rounded to
the nearest whole month) and dividing the result by 12. The required dividend
described in this subsection A.1.b. shall accrue ratably during and for such
Fiscal Year on each share of Class A Preferred Stock for each month during such
Fiscal Year (rounded to the nearest whole month) that such share was
outstanding. If payment of the full required dividend is not permitted by the
Delaware General Corporation Law for any reason, the dividend shall be paid as
soon as legally permitted thereafter.
If the Class A Preferred Stock is not outstanding for the entire Fiscal
Year, the dollar amounts in the column of the above table in this subsection
A.1.b. hereof captioned "If Audited Cash Flow for such Fiscal Year is:" and the
dollar amount in subsection (c)(ii) of the definition of "Audited Cash Flow" in
subsection A.9. hereof shall be reduced by a fraction equal to the number of
months any Class A Preferred Stock was outstanding during such Fiscal Year
-5-
<PAGE>
(rounded to the nearest whole month) divided by 12. The percentages referred to
in subsections A.1.b.(2), (3) and (4) above are referred to herein as the
"Preferred Stock Dividend Rates."
2. Redemption.
a. Optiona1 Redemption. Subject to subsection A.5.b. below,
the corporation may, at its option, redeem shares of the Class A Preferred
Stock, as a whole or in part, at any time and from time to time, including,
without limitation, at any time immediately prior to the closing of any Public
Offering.
b. Mandatory Redemption. Subject to subsection A. 5.b. below:
(1) Capita1 Cost Shortfall Redemption. On March 31, 2000,
the Corporation shall redeem a number of full shares, if any, of then
outstanding Class A Preferred Stock that can be redeemed with the
Capital Cost Shortfall Amount.
(2) Cash Flow Redemption. Beginning March 31, 2001, and on
March 31 of each Fiscal Year thereafter in which any Class A Preferred
Stock is outstanding, the Corporation shall redeem a number of full
shares, if any, of then outstanding Class A Preferred Stock that can
be redeemed with seventy-five percent (75%) of Net Audited Cash Flow
for the immediately preceding Fiscal Year.
(3) Total Redemption on December 31. 2003. On December 31,
2003, all then outstanding shares of Class A Preferred Stock shall be
redeemed by the
-6-
<PAGE>
Corporation; provided however, that if the Corporation is
prohibited by law from consummating such redemption or if the
financial performance of the Corporation does not permit such
redemption, then the Corporation shall not be required to redeem all
of the Class A Preferred Stock, but the Corporation shall redeem the
portion of the then outstanding shares of Class A Preferred Stock that
it is permitted to redeem based on the financial performance of the
Corporation and by law and the holders of such Class A Preferred Stock
and the Corporation shall work in good faith to arrive at a mutually
agreeable solution with regard to the total redemption of the
remaining Class A Preferred Stock.
c. Class A Preferred Stock Redemption Price. In the event of
any redemption of Class A Preferred Stock, there shall be paid to the holders
thereof the redemption price of $14,999.25 per share, plus accrued but unpaid
dividends, if any, on each such share, in the amounts specified in subsection
A.1.b. hereof for all Fiscal Years through and including the date fixed for
redemption (collectively, the "Class A Preferred Stock Redemption Price");
provided, however, that if the Class A Preferred Stock is redeemed on a date
other than December 31 of any Fiscal Year (i) all accrued but unpaid dividends
for periods prior to the Fiscal Year during which the date fixed redemption
occurs shall be paid on the date fixed for redemption and (ii) all accrued but
unpaid dividends for periods relating to the
-7-
<PAGE>
Fiscal Year during which the date fixed redemption occurs shall be paid on the
next succeeding March 31.
d. Partial Redemptions. Redemptions of less than all of the
outstanding shares of Class A Preferred Stock pursuant to this subsection A.2.
shall be pro rata from each holder of such shares on the basis of the relative
number of such shares outstanding and held of record by such holder at the time
the Corporation elects or is obligated to make such redemption.
e. Redemption Procedure. Notice of every redemption shall be
deposited in the U.S. mail, postage prepaid, not less than sixty (60) days
before the Corporation elects or becomes obligated to redeem the Class A
Preferred Stock, and addressed to each record holder of shares thereof at their
respective addresses then appearing on the books of the Corporation and
specifying (i) the redemption date, which date shall be not less than sixty (60)
days after the date such notice is mailed nor on a date different from any
required redemption date specified in this subsection A.2., and (ii) the
depository, which shall be a bank or trust company located in Cleveland, Ohio or
Detroit, Michigan, to whom such certificates representing such Class A Preferred
Stock should be delivered.
f. Payment of Aggregate Class A Preferred Stock Redemption
Price by Corporation. Not less than one (1) business day prior to a specified
redemption date, the corporation shall deposit in good same day funds with the
designated depository the aggregate Class A Preferred Stock Redemption Price for
all shares of Class A Preferred Stock to be redeemed, less the amount of
-8-
<PAGE>
such Class A Preferred Stock Redemption Price equal to dividends on the
redeemed shares relating to the Fiscal Year including the date fixed for
redemption (the "Current Dividends"), which amount shall be paid at the time
and in the manner set forth in subsection A.1. hereof. At or before the time of
such deposit, the Corporation shall direct that the designated depository pay
such amount by certified checks or wire transfer of funds to the respective
holders of Class A Preferred Stock to be redeemed in amounts equal to the
aggregate Class A Preferred Stock Redemption Price (less the Current Dividends)
for all shares of Class A Preferred Stock to be redeemed by each such holder.
Upon the Corporation having given the notice required under subsection A.2.e.
hereof and having made such deposits, holders of Class A Preferred Stock to be
redeemed pursuant to such call for redemption shall cease to be stockholders
with respect to such Class A Preferred Stock as of the redemption date, and
shall have, from and after the redemption date, no interest in or claim against
the Corporation with respect to such Class A Preferred Stock, except only to
receive such checks or wire transfer of funds, without interest, from the
designated depository and Current Dividends.
g. Cancellation of Redeemed Stock. All shares of Class A
Preferred Stock which are redeemed shall be retired and cancelled as of the date
fixed for redemption, shall no longer be deemed to be outstanding and may not
thereafter be reissued.
-9-
<PAGE>
3. Liquidation. In the event of liquidation or dissolution of the
Corporation, after the payment or provision for payment of all of the
liabilities of the Corporation and before any payment or other distribution is
made on account of the Common Stock, there shall be paid to the holders of the
Class A Preferred Stock the amount of the Class A Preferred Stock Redemption
Price; provided, however, that the amount of accrued and unpaid dividends to be
included therein shall be accrued up to the date of payment. After payment to
the holders of the Class A Preferred Stock of the full preferential amount as
provided above, such holders, as such, shall not be entitled to share further in
the assets of the Corporation or in the proceeds of the liquidation. Nothing
contained herein shall be construed to prohibit the retirement of the Class A
Preferred Stock by purchase or redemption, and neither the purchase nor
redemption of the Class A Preferred Stock, nor a merger, consolidation or
reorganization of the Corporation, nor a sale, or lease or transfer of all or
substantially all of the assets of the Corporation, shall be considered a
liquidation or dissolution of the Corporation within the meaning of this
subsection A.3. If the net assets of the Corporation legally available therefor
or the proceeds therefrom are insufficient to permit the payment upon all
outstanding shares of Class A Preferred Stock and Class B Preferred Stock of the
full amount to which the holders thereof are entitled, then such net assets
shall be distributed pro rata to each holder of such shares on the basis of the
relative number of Class A Preferred Stock and Class B Preferred Stock shares
-10-
<PAGE>
outstanding and held of record by each such holder at the time of such payment
multiplied by the amounts of the Class A Preferred Stock Redemption Price and
the Class B Preferred Stock Redemption Price, respectively.
4. Voting. The holders of the Class A Preferred Stock shall have no
voting rights, except as required by law or as provided in subsection A.7.
hereof.
5. Conversion.
a. Public Offering Conversion. Simultaneously with the closing
of any Public Offering, shares of Class A Preferred Stock then outstanding shall
be convertible in whole or in part, at the option of the holders thereof, into
Common Stock at the rate specified in subsection A.5.c. hereof. Such holders
shall be responsible for the payment of any taxes arising from any such
conversion.
b. Redemption Conversion. Upon receipt by any holder of any
outstanding shares of Class A Preferred Stock of notice of redemption pursuant
to subsection A.2. with respect to a redemption of such shares by the
Corporation in accordance with subsection A.2., all such shares called for
redemption by the Corporation and held by any such holder or holders shall be
convertible in whole and not in part, at the option of each such holder, into
Common Stock at the rate specified in subsection A.5.c. hereof. Each such holder
Shall be responsible for the payment of any taxes arising from any such
conversion.
-11-
<PAGE>
c. Conversion Rate. Each share of Class A Preferred Stock
shall be convertible into one (1) share of Common Stock.
d. Conversion Procedure for Public Offering Conversion. At all
times that any shares of Class A Preferred Stock are outstanding, the
Corporation shall give written notice to the holders of Class A Preferred Stock
of the Corporation's intention to engage in a Public Offering not less than
ninety (90) days prior to the date of first filing a registration statement with
respect to such proposed Public Offering with the Securities and Exchange
Commission. Any holder of shares of Class A Preferred Stock desiring to convert
all or any portion of such shares, within sixty (60) days after his or its
receipt of written notice from the Corporation informing such stockholder of the
Corporation's proposed Public Offering and the percentage of shares held by
existing holders of Common Stock being sold in the Public Offering and
requesting delivery of the certificate or certificates evidencing any such
shares to be so converted, shall deliver or cause to be delivered to the
Secretary of the Corporation (the "Secretary") at the principal office of the
Corporation such certificate or certificates, together with a notice signed by
or on behalf of such holder notifying the Secretary of the number of shares of
Class A Preferred Stock that he or it desires to convert.
e. Conversion Procedure for Redemption Conversion. Not less
than five (5) days prior to a specified redemption date (as provided in
subsection A.2.e.) with respect
-12-
<PAGE>
to a redemption by the Corporation pursuant to subsection A.2., the holders of
shares of Class A Preferred Stock desiring to convert all or, if permitted, any
portion of such shares shall deliver or cause to be delivered to the Secretary
at the principal office of the Corporation the certificate or certificates
evidencing any such shares to be so converted, together with a notice signed by
or on behalf of such holder notifying the secretary of the number of shares of
Class A Preferred Stock that he or it desires to convert into shares of Common
Stock.
f. Certain Other Provisions. Upon receipt by the Secretary of
a certificate or certificates representing Class A Preferred Stock, together
with the foregoing described notice pursuant to subsection A.5.d. or A.5.e., the
Corporation shall at the closing of such Public Offering or on the specified
redemption date, as the case may be, deliver or cause to be delivered to the
converting holder (i) a certificate or certificates (issued in such name or
names and in such denomination or denominations as the converting holder has
specified) representing the number of shares of Common Stock issuable by reason
of such conversion, and (ii) a certificate representing any Preferred Shares
which were represented by the certificate or certificates delivered to the
Corporation in connection with such conversion but which were not converted.
Shares of Class A Preferred Stock which have been converted hereunder shall
revert to the status of unissued shares and shall not be reissued, and such
shares may be eliminated as provided by
-13-
<PAGE>
law. The Corporation shall not be required to issue any fractional shares of
its Common Stock in connection with any conversion of Class A Preferred Stock,
but shall, in lieu thereof, pay cash equal to the corresponding fraction of the
price of an integral share of Common Stock.
Upon conversion as provided for in this subsection A.5., the holders of the
converted Class A Preferred Stock, as such, shall cease to be stockholders with
respect to such shares as of the date of conversion, and no such holder shall
have any claim against the Corporation with respect to such Class A Preferred
Stock, except only to receive the shares of Common Stock into which the Class A
Preferred Stock is convertible. For purposes of subsection A.5.d., the date of
conversion shall mean the date of the closing of the Public Offering. For
purposes of subsection A.5.e., the date of conversion shall mean the date
specified for redemption.
Thirteen thousand three hundred thirty-four (13,334) shares of Common Stock
shall initially be set aside and reserved and such shares shall be issued only
in conversion for Class A Preferred Stock as provided in this subsection A.5.
Common Stock set aside under this paragraph shall be increased or decreased as
the case may be to permit the conversion of all outstanding shares of Class A
Preferred Stock into Common Stock.
The provisions for conversion of the Class A Preferred Stock set forth in
this subsection A.5. shall be subject to all applicable statutory limitations
and restrictions.
-14-
<PAGE>
6. Antidilution of Conversion Rights. Any stock, warrant, option
(except any option to purchase Common Stock granted to the Corporation's chief
executive officer for not more than 2,B00 shares), right or other security
dividend, stock split, reverse stock split, capital reorganization,
reclassification, consolidation, merger, share exchange or sale of all or
substantially all of the Corporation's assets to another person which is
effected in such a way that holders of Common Stock are entitled to receive
(either directly, or upon subsequent liquidation) stock, securities or assets
with respect to or in exchange for Common Stock is referred to herein as an
"Organic Change." Prior to the consummation of any Organic Change, the
Corporation will make appropriate provisions to insure that each holder of Class
A Preferred Stock will, and pursuant to this subsection A.6. each holder of
Class A Preferred Stock will, thereafter have the right to acquire and receive,
in lieu of or in addition to the shares of Common Stock, as the case may be,
immediately theretofore acquirable and receivable upon the conversion of such
holder's shares of Class A Preferred Stock, such shares of stock, securities or
assets as such holder would have received in connection with such Organic Change
if such holder had converted his or its shares of Class A Preferred Stock
immediately prior to such Organic Change. In any such case, the Corporation will
make appropriate provisions to insure that the provisions of this subsection
A.6. will thereafter be applicable to the Class A Preferred Stock. The
Corporation will not effect any such consolidation, merger, share exchange or
-15-
<PAGE>
sale, unless prior to the consummation thereof, the successor corporation (if
other than the Corporation) resulting from consolidation or merger or the
corporation purchasing such assets assumes by written instrument, the
obligation to deliver to each such holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to acquire. The Corporation will use its best efforts to give written
notice to the holders of the Class A Preferred Stock at least thirty (30) days
prior to the date on which any Organic Change will take place. In the event of
an occurrence of the type contemplated by the foregoing provisions of this
subsection A.6., but which is not expressly provided for by such provisions,
the Corporation's Board of Directors will make an appropriate adjustment in the
conversion procedure so as to protect the holders of the Class A Preferred
Stock from dilution of their conversion rights.
7. Amendments to This Section A. Notwithstanding the provisions of
subsection A.4. hereof, the affirmative vote of the holders of at least a
majority of the Class A Preferred Stock, voting separately as a class, shall be
necessary to (i) adopt any amendment after the date hereof to this ARTICLE
FOURTH of this Amended and Restated Certificate of Incorporation, except an
amendment to this ARTICLE FOURTH to effect a stock split or authorization of
additional shares of Common Stock, or both, in either event in contemplation of,
and to be effective upon the consummation of, a Public Offering, provided that
the additional number of shares of Common Stock shall not exceed the number of
-16-
<PAGE>
shares to be sold in such Public Offering, including any such shares included
in an underwriter's over-allotment option (whether or not exercised), plus 10%
of the total number of shares of Common Stock and Class A Preferred Stock to be
outstanding immediately after such Public Offering, or (ii) approve any merger,
consolidation or share exchange involving the Corporation or any sale of all or
substantially all of the Corporation's assets.
This subsection A.7. shall provide no voting rights to the holders of
Class A Preferred Stock except as to the matters explicitly set forth in this
subsection.
8. Preemptive Rights. Except as expressly set forth in subsection
A.6. hereof, holders of Class A Preferred Stock shall not be entitled on account
of holding such shares to preemptive rights or other rights to acquire or
subscribe for additional shares or securities of the Corporation authorized to
be issued.
9. Definitions. As used in this Amended and Restated Certificate of
Incorporation, the following words and terms shall have the meanings ascribed to
them below:
"Affiliate" means, as to the Corporation: (i) any director, officer
(other than an assistant secretary or assistant treasurer), or 5% or greater
stockholder of the Corporation; (ii) any corporation, association, firm, or
other entity of which any of the entities or persons listed in clause (i)
immediately above is a member, director, officer, or 5% or greater stockholder:
and (iii) any other person, directly or indirectly
-17-
<PAGE>
controlling or controlled by or under direct or indirect common control with the
Corporation.
"Audited Cash Flow" means, for each Fiscal Year, the audited net income
after tax of the Corporation for such Fiscal Year, plus:
(a) the aggregate amount of all depreciation expense incurred
by the Corporation with respect to such Fiscal Year;
(b) the aggregate amount of all payments (excluding Ordinary
Course Payments) made to any Affiliate of the Corporation during such Fiscal
Year; and
(c) any non-cash expense accrued but not paid within two years
after the date such accrual is made (including, for example, a reserve required
by adoption of a new Financial Accounting Standard Board statement); and minus
(i) capitalized Facility Improvement Items with respect to
each Fiscal Year during the period through December 31, 1999; and
(ii) with respect to each Fiscal Year during the period
through December 31, 1999, $60 million, or with respect to each Fiscal Year
beginning on or after January 1, 2000, the sum of the amounts of all actual
capital expenditures.
All of the foregoing shall be determined by the Corporation's independent
auditors in accordance with GAAP, consistently applied.
-18-
<PAGE>
"Capital Cost Shortfall Amount" means the amount, if any, by
which Three Hundred Sixty Million Dollars ($360,000,000) exceeds the sum of (1)
the total of all capital expenditures, committed capital expenditures (in an
amount not to exceed $5,000,000), and Facility Improvement Items expensed (and
not capitalized) during the Fiscal Years on and from the date of first issuance
of the Class A Preferred Stock through December 31, 1999, and (2) $14,999.25
multiplied by the number of shares of Class A Preferred Stock redeemed prior to
December 31, 1999. The $360,000,000 figure in this definition shall be prorated
for any partial Fiscal Years to which it is applied.
"Facility Improvement Items" means, collectively, any costs
related to the removal and replacement of (1) PCB-contaminated equipment, (2)
asbestos-containing material, (3) wood floor block and (4) underground storage
tanks.
"Fiscal Year" means the twelve (12) month period ending
December 31 of any year.
"Net Audited Cash Flow" means, for each Fiscal Year, the
Audited Cash Flow for such Fiscal Year plus the amount of any capital
expenditures during such Fiscal Year included in the Capital Cost Shortfall
Amount calculation as "committed capital expenditures" for the purposes of
making the Capital Cost Shortfall Redemption, and minus the aggregate amount of
(i) all dividends paid with respect to the Class A Preferred Stock for such
Fiscal Year, and (ii) all principal payments made on scheduled debt service for
such Fiscal Year.
-19-
<PAGE>
"Ordinary Course Payment" means any of the following paid to
an Affiliate: (i) payment of reasonable compensation for services (including
salary, bonus and fringe benefits) to an Affiliate who is a full-time employee
of the Corporation, and reimbursement of reasonable expenses to an Affiliate who
is a full-time employee of the Corporation, (ii) reasonable director's fees and
reimbursement of expenses of directors of the Corporation in attending meetings
of the Board of Directors and performing the functions of a director of the
Corporation; and (iii) payments for goods or services supplied by an Affiliate
to the Corporation in the ordinary course of the corporation's business on terms
no less favorable to the Corporation than could be obtained from a Person who is
not an Affiliate.
"Public Offering" means the closing of a sale to the public by
the Corporation or any stockholder of the Corporation of any securities of the
Corporation pursuant to an effective registration statement (except for
registration statements concerning business combinations or employee benefit
plans) for such shares filed with the Securities and Exchange Commission by the
Corporation under the Securities Act of 1933, as amended.
B. Class B Preferred Stock. The preferences, rights and privilegs of
the Class B Preferred Stock and the qualifications, limitations and restrictions
thereof shall be as follows:
-20-
<PAGE>
1. Dividends.
a. Payment. The holders of the Class B Preferred Stock shall be
entitled to receive cash dividends with respect to each Fiscal Year the Class B
Preferred Stock is outstanding as and when declared by the Board of Directors,
out of the funds of the Corporation legally available therefor, in the amount of
8% per annum of the liquidation preference of $10,000 per share. Such dividends
shall be payable at least annually with respect to each Fiscal Year on the last
day of the immediately succeeding March, commencing on March 31, l995, pro rata
to the holders of all outstanding Class B Preferred Stock as of the record date
fixed for such dividend on the basis of the relative number of such shares held
of record on that date by each holder. Such dividends shall be cumulative as
provided in subsection B.1.b. hereof. Accumulations of dividends shall not bear
interest.
b. Cumulative. The cash dividend payable with respect to each completed
Fiscal Year, including any Fiscal Year in which all shares of Class B Preferred
Stock are redeemed or the Corporation dissolves or is liquidated, shall be
cumulative.
2. Redemption.
a. Optional Redemption. The Corporation may, at its option, redeem
shares of the Class B Preferred Stock, as a whole or in part, at any time and
from time to time on or after April 1, l995.
b. Class B Preferred Stock Redemption Price. In the event of any
redemption of Class B Preferred Stock, there
-21-
<PAGE>
shall be paid to the holders thereof the redemption price of $10,000 per share,
plus accrued but unpaid dividends on each such share for all Fiscal Years
through and including the date fixed for redemption (collectively, the "Class B
Preferred Stock Redemption Price").
c. Partial Redemption's. Redemptions of less than all of the
outstanding shares of Class B Preferred Stock pursuant to this subsection B.2.
shall be pro rata from each holder of such shares on the basis of the relative
number of such shares outstanding and held of record by such holder at the time
the Corporation elects or is obligated to make such redemption.
d. Redemption Procedure. Notice of every redemption shall be deposited
in the U.S. mail, postage prepaid, not less than fifteen (15) days before the
corporation elects to redeem the Class B Preferred Stock, and addressed to each
record holder of shares thereof at their respective addresses then appearing on
the books of the Corporation and specifying (i) the redemption date, which date
shall be not less than fifteen (15) or more than sixty (60) days after the date
such notice is mailed, and (ii) the depository, which shall be a bank or trust
company located in Cleveland, Ohio or Detroit, Michigan, to whom such
certificates representing such Class B Preferred Stock should be delivered.
e. Payment of Aggregate Redemption Price by Corporation. Not less than
one (1) business day prior to a specified redemption date, the Corporation shall
deposit in good same day funds with the designated depository the aggregate
Class
-22-
<PAGE>
B Preferred Stock Redemption Price for all shares of Class B Preferred Stock to
be redeemed. At or before the time of such deposit, the Corporation shall
direct that the designated depository pay such amount by certified checks or
wire transfer of funds to the respective holders of Class B Preferred Stock to
be redeemed in amounts equal to the aggregate Class B Preferred Stock
Redemption Price for all shares of Class B Preferred Stock to be redeemed by
each such holder. Upon the Corporation having given the notice required under
subsection B.2.d. hereof and having made such deposits, holders of Class B
Preferred Stock to be redeemed pursuant to such call for redemption shall cease
to be stockholders with respect to such Class B Preferred Stock as of the
redemption date, and shall have, from and after the redemption date, no
interest in or claim against the Corporation with respect to such Class B
Preferred Stock, except only to receive such checks or wire transfer of funds,
without interest, from the designated depository.
f. Cancellation of Redeemed Stock. All shares of Class B Preferred
Stock which are redeemed shall be retired and cancelled as of the date fixed for
redemption, shall no longer be deemed to be outstanding and may not thereafter
be reissued.
3. Liquidation. In the event of liquidation or dissolution of the
Corporation, after the payment or provision for payment of all of the
liabilities of the Corporation and before any payment or other distribution is
made on account of the Common Stock, there shall be paid to the holders of the
Class
-23-
<PAGE>
B Preferred Stock the amount of the Class B Preferred Stock Redemption Price:
provided, however, that the amount of accrued and unpaid dividends to be
included therein shall be accrued up to the date of payment. After payment to
the holders of the Class B Preferred Stock of the full preferential amount as
provided above, such holders, as such, shall not be entitled to share further
in the assets of the Corporation or in the proceeds of the liquidation. Nothing
contained herein shall be construed to prohibit the retirement of the Class B
Preferred Stock by purchase or redemption, and neither the purchase nor
redemption of the Class B Preferred Stock, nor a merger, consolidation or
reorganization of the Corporation, nor a sale, or lease or transfer of all or
substantially all of the assets of the Corporation, shall be considered a
liquidation or dissolution of the Corporation within the meaning of this
subsection B.3. If the net assets of the Corporation legally available therefor
or the proceeds therefrom are insufficient to permit the payment upon all
outstanding shares of Class B Preferred Stock and Class A Preferred Stock of
the full amount to which the holders thereof are entitled, then such net assets
shall be distributed pro rata to each holder of Class B Preferred Stock and
Class A Preferred Stock shares on the basis of the relative number of such
shares outstanding and held of record by each such holder at the time of such
payment multiplied by the amounts of the Class B Preferred Stock Redemption
Price and the Class A Preferred Stock Redemption Price, respectively.
-24-
<PAGE>
4. Voting. The holders of the Class B Preferred Stock shall have no
voting rights, except as required by law.
5. Preemptive Rights. Holders of Class B Preferred Stock shall not
be entitled on account of holding such shares to preemptive rights or other
rights to acquire or subscribe for additional shares or securities of the
Corporation authorized to be issued.
C. Common Stock. The preferences, rights and privileges of the Common
Stock, and the qualifications, limitations and restrictions thereof, shall be as
follows. Except as set forth above with respect to dividends, the shares of
Common Stock shall be subject to the preferences, rights and privileges of the
Class A Preferred Stock and the Class B Preferred Stock. Each share of Common
Stock shall be equal to every other share of Common Stock. The holders of shares
of Common Stock shall be entitled to one (1) vote for each share of Common
Stock upon all matters presented or required to be presented to the stockholders
for a vote. Holders of Common Stock shall not be entitled on account of holding
such stock to preemptive rights or other rights to acquire or subscribe for
additional stock or securities of the Corporation authorized to be issued.
FIFTH: The number of directors which shall constitute the whole
board shall be fixed by, or in the manner provided in, the By-laws of the
Corporation. Meetings of stockholders shall be held at such place, within or
without the State of Delaware, as may be designated by or in the manner provided
in the By-laws, or, if not so designated, at the registered office of the
-25-
<PAGE>
Corporation in the State of Delaware. Election of directors need not be by
written ballot unless and to the extent that the Bylaws of the Corporation so
provide.
SIXTH: In furtherance and not in limitation of the powers conferred by
statute, a majority in number of the Board of Directors is expressly authorized
to make, alter or repeal the By-laws of the Corporation.
SEVENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them, and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application of the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for the Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code, or on the application of trustees
in dissolution or of any receiver or receivers appointed for the Corporation
under the provisions of Section 279 of Title 8 of the Delaware Code, order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Corporation, as the case may be, to be summoned in
such manner as the court directs. If a majority in number representing fifty-one
percent (51%) in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, and/or holders of a
majority of the outstanding shares of Class A Preferred Stock, as the case may
be, agree to any compromise or arrangement and to any reorganization of the
Corporation as a
-26-
<PAGE>
consequence of such compromise or arrangement, such compromise or arrangement
and such reorganization shall, if sanctioned by the court to which such
application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of the
Corporation, as the case may be, and also on the Corporation.
EIGHTH: In the event any provision (or portion thereof) of this
Restated Certificate of Incorporation shall be found to be invalid, prohibited,
or unenforceable for any reason, the remaining provisions (or portions thereof)
of this Restated Certificate of Incorporation shall be deemed to remain in full
force and effect, and shall be construed as if such invalid, prohibited, or
unenforceable provision had been stricken herefrom or otherwise rendered
inapplicable, it being the intent of the Corporation and its stockholders that
each such remaining provision (or portion thereof) of this Restated Certificate
of Incorporation remain, to the fullest extent permitted by law, applicable and
enforceable as to all stockholders, notwithstanding any such finding.
NINTH: To the fullest extent permitted by the General Corporation Law
of the State of Delaware, as the same exists or may hereafter be amended, a
director of the Corporation shall not be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Any repeal or modification of the foregoing provisions of this ARTICLE
NINTH by the stockholders of the Corporation shall be prospective only and shall
not adversely affect any
-27-
<PAGE>
right or protection of a director of the Corporation existing at the time of
such repeal or modification for or with respect to any act or omission of a
director occurring prior to such repeal or modification.
TENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate of Incorporation, in
the manner now or hereafter prescribed by statute and this Restated Certificate
of Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
ELEVENTH: Except as otherwise provided in this Restated Certificate of
Incorporation or the By-laws of the Corporation, notwithstanding any provisions
in the General Corporation Law of the State of Delaware now or hereafter in
effect, requiring for any purpose the vote, consent, waiver or release of the
holders of a designated proportion (but less than all) of the stock of the
Corporation or of any particular class or classes of stock, as the case may be,
the vote, consent, waiver or release of the holders of stock entitling them to
exercise a majority of the voting power of the shares of the Corporation or of
any class or classes of shares, as the case may be, shall be required and
sufficient for any such purpose.
TWELFTH: The Corporation is to have perpetual existence.
THIRTEENTH: This Restated Certificate of Incorporation supersedes and
replaces in its entirety the original Certificate of Incorporation filed by the
Corporation on October 14, 1993.
-28-
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by its Vice President and attested by its Secretary as of this 23rd day
of February, 1994.
AMERICAN AXLE & MANUFACTURING, INC.
By: /s/ R. Matthew Kent
---------------------------------
R. Matthew Kent, Vice President
Attest:
/s/ Robert J. Peterson,
- --------------------------------
Robert J. Peterson, Secretary
-29-
<PAGE>
Adopted February 26, 1994
Amended October 20, 1994
Amended November 6, 1997
BY-LAWS
OF
AMERICAN AXLE & MANUFACTURING, INC.
ARTICLE I
Meetings of Stockholders
Section 1. Annual Meetings. The annual meeting of stockholders shall be
held at such time and place and on such date in each year as may be fixed by
the board of directors and stated in the notice of the meeting, for the
election of directors, the consideration of reports to be laid before such
meeting and the transaction of such other business as may properly come before
the meeting.
Section 2. Special Meetings. Special meetings of the stockholders shall be
called upon the written request of the chairman of the board of directors, the
president, the directors by action at a meeting, a majority of the directors
acting without a meeting, or of the holders of shares entitling them to
exercise a majority of the voting power of the Corporation entitled to vote
thereat. Calls for such meetings shall specify the purposes thereof. No
business other than that specified in the call shall be considered at any
special meeting.
Section 3. Notices of Meetings. Unless waived, and except as provided in
Section 230 of the General Corporation Law of the State of Delaware, written
notice of each annual or special meeting stating the date, time, place and
purposes thereof shall be given by personal delivery or by mail to each
stockholder of record entitled to vote at or entitled to notice of the meeting,
not more than sixty (60) days nor less than ten (10) days before any such
meeting. If mailed, such notice shall be directed to the stockholder at his
address as the same appears upon the records of the Corporation. Any
stockholder, either before or after any meeting, may waive any notice required
to be given by law or under these By-Laws.
Section 4. Place of Meetings. Meetings of stockholders shall be held at
the principal office of the Corporation unless the board of directors
determines that a meeting shall be held at some other place within or without
the State of Delaware and causes the notice thereof to so state.
Section 5. Quorum. The holders of shares entitling them to exercise a
majority of the voting power of the Corporation entitled to vote at any
meeting, present in person or by proxy, shall constitute a quorum for the
transaction of business to be considered at such meeting; provided, however,
that no action required by law or by the Certificate of Incorporation or these
By-Laws to be authorized or taken by the holders of a designated proportion of
the shares of any particular class or of each class may be authorized or taken
by a lesser proportion; and
<PAGE>
provided, further, that if a separate class vote is required with respect to
any matter, the holders of a majority of the outstanding shares of such class,
present in person or by proxy, shall constitute a quorum of such class, and the
affirmative vote of the majority of shares of such class so present shall be
the act of such class. 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, until a quorum shall be present.
Section 6. Record Date. The board of directors may fix a record date for
any lawful purpose, including, without limiting the generality of the
foregoing, the determination of stockholders entitled to (i) receive
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, (ii)
receive payment of any dividend or other distribution or allotment of any
rights, or (iii) exercises any rights in respect of any change,
conversion or exchange of stock. Such record date shall not proceed the date on
which the resolution fixing the record date is adopted by the board of
directors. Such record date shall not be more than sixty (60) days nor less
than ten (10) days before the date of such meeting, nor more than sixty
(60) days before the date fixed for the payment of any dividend or distribution
or the date fixed for the receipt or the exercise of rights, nor more
than ten days after the date on which the resolution fixing the record
date for such written consent is adopted by the board of directors, as the case
may be.
If a record date shall not be fixed in respect of any such matter, the
record date shall be determined in accordance with the General Corporation Law
of the State of Delaware.
Section 7. Proxies. A person who is entitled to attend a stockholders'
meeting, to vote thereat, or to execute consents, waivers or releases, may be
represented at such meeting or vote thereat, and execute consents, waivers and
releases, and exercise any of his other rights, by proxy or proxies appointed
by a writing signed by such person.
ARTICLE II
Directors
Section 1. Number of Directors. The number of directors of the
Corporation, none of which need to be stockholders, shall be fixed from time to
time by resolution of the Board of Directors, but in no event shall the number
of directors be less than five (5) or more than eleven (11).
-2-
<PAGE>
Section 2. Election of Directors. Directors shall be elected at the annual
meeting of stockholders, but when the annual meeting is not held or directors
are not elected thereat, they may be elected at a special meeting called and
held for that purpose. Such election shall be by ballot whenever requested by
any stockholder entitled to vote at such election, but unless such request is
made the election may be conducted in any manner approved at such meeting.
At each meeting of stockholders for the election of directors, the persons
receiving the greatest number of votes shall be directors.
Section 3. Term of Office. Each director shall hold office until the
annual meeting next succeeding his election and until his successor is elected
and qualified, or until his earlier resignation, removal from office or death.
Section 4. Removal. All the directors, or all the directors of a
particular class, or any individual director may be removed from office,
without assigning any cause, by the vote of the holders of a majority of the
voting power entitling them to elect directors in place of those to be
removed.
Section 5. Vacancies. Vacancies in the Board of Directors by reason of
death, resignation, removal, increase in the number of directors or otherwise
shall be filled by the affirmative vote of a majority of the remaining
directors then in office, even though less than a quorum of the Board of
Directors, unless filled by action of the stockholders of the Corporation. Each
person so elected shall be a director for a term of office continuing only
until the next election of directors by the stockholders.
Section 6. Quorum and Transaction of Business. A majority of the whole
authorized number of directors shall constitute a quorum for the transaction of
business, except that a majority of the directors in office shall constitute a
quorum for filling a vacancy on the board. Whenever less than a quorum is
present at the time and place appointed for any meeting of the board, a
majority of those present may adjourn the meeting from time to time, until a
quorum shall be present. The act of a majority of the directors present at a
meeting at which a quorum is present shall be the act of the board.
Section 7. Annual Meeting. Annual meetings of the board of directors shall
be held immediately following annual meetings of the stockholders, or as soon
thereafter as is practicable. If no annual meeting of the stockholders is held,
or if directors are not elected thereat, then the annual meeting of the
board of directors shall be held immediately following any special meeting of
the stockholders at which directors are elected, or as soon thereafter as is
practicable. If such annual meeting of directors is held immediately
following a meeting of
-3-
<PAGE>
the stockholders, it shall be held at the same place at which such
stockholders' meeting was held.
Section 8. Regular Meetings. Regular meetings of the board of directors
shall be held at such times and places, within or without the State of
Delaware, as the board of directors may, by resolution, from time to time
determine. The secretary shall give notice of each such resolution to any
director who was not present at the time the same was adopted, but no further
notice of such regular meeting need be given.
Section 9. Special Meetings. Special meetings of the board of directors
may be called by the chairman of the board, the president, any vice president
or any two members of the board of directors, and shall be held at such times
and places, within or without the state of Delaware, as may be specified in
such call.
Section 10. Notice of Annual or Special Meetings. Notice of the time and
place of each annual or special meeting shall be given to each director by the
secretary or by the person or persons calling such meeting. Such notice need
not specify the purpose or purposes of the meeting and may be given in any
manner or method and at such time so that the director receiving it may have
reasonable opportunity to attend the meeting. Such notice shall, in all events,
be deemed to have been properly and duly given if mailed at least forty-eight
(48) hours prior to the meeting and directed to the residence of each director
as shown upon the secretary's records. The giving of notice shall be deemed to
have been waived by any director who shall attend and participate in such
meeting and may be waived, in a writing, by any director either before or after
such meeting.
Section 11. Compensation. The directors, as such, shall be entitled to
receive such reasonable compensation, if any, for their services as may be
fixed from time to time by resolution of the board, and expenses of attendance,
if any, may be allowed for attendance at each annual, regular or special
meeting of the board. Nothing herein contained shall be construed to preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of the executive committee or of any standing or
special committee may by resolution of the board be allowed such compensation
for their services as the board may deem reasonable, and additional
compensation may be allowed to directors for special services rendered.
-4-
<PAGE>
ARTICLE III
Committees
Section 1. Executive Committee. The board of directors may from time to
time, by resolution passed by a majority of the whole board, create an
executive committee of three or more directors, the members of which shall be
elected by the board of directors to serve during the pleasure of the board. If
the board of directors does not designate a chairman of the executive
committee, the executive committee shall elect a chairman from its own number.
Except as otherwise provided herein and in the resolution creating an executive
committee, such committee shall, during the intervals between the meetings of
the board of directors, possess and may exercise all of the powers of the board
of directors in the management of the business and affairs of the Corporation,
other than that of filling vacancies among the directors or in any committee of
the directors or except as provided by law. The executive committee shall keep
full records and accounts of its proceedings and transactions. All action by
the executive committee shall be reported to the board of directors at its
meeting next succeeding such action and shall be subject to control, revision
and alteration by the board of directors, provided that no rights of third
persons shall be prejudicially affected thereby. Vacancies in the executive
committee shall be filled by the directors, and the directors may appoint one
or more directors as alternate members of the committee who may take the place
of any absent member or members at any meeting.
Section 2. Meetings of Executive Committee. Subject to the provisions of
these By-Laws, the executive committee shall fix its own rules of procedure and
shall meet as provided by such rules or by resolutions of the board of
directors, and it shall also meet at the call of the chairman of the board, the
president, the chairman of the executive committee or any two members of the
committee. Unless otherwise provided by such rules or by such resolutions, the
provisions of Section 10 of Article II relating to the notice required to be
given of meetings of the board of directors shall also apply to meetings of the
members of the executive committee. A majority of the executive committee shall
be necessary to constitute a quorum. The executive committee may act in a
writing without a meeting, but no such action of the executive committee shall
be effective unless concurred in by all members of the committee.
Section 3. Other Committees. The board of directors may by resolution
provide for such other standing or special committees as it deems desirable,
and discontinue the same at its pleasure. Each such committee shall have such
powers and perform such duties, not inconsistent with law, as may be delegated
to it
-5-
<PAGE>
by the board of directors. The provisions of Section 1 and Section 2 of this
Article shall govern the appointment and action of such committees so far as
consistent, unless otherwise provided by the board of directors. Vacancies in
such committees shall be filled by the board of directors or as the board of
directors may provide.
ARTICLE IV
Officers
Section 1. General Provisions. The board of directors shall elect a
president, such number of vice presidents, if any, as the board may from time
to time determine, a secretary and a treasurer. The board of directors may also
elect a chairman of the board of directors and may from time to time create
such offices and appoint such other officers, subordinate officers and
assistant officers as it may determine. The chairman of the board, if one be
elected, shall be, but the other officers need not be, chosen from among the
members of the board of directors. Any two or more of such offices, other than
those of president and vice president, may be held by the same person, but no
officer shall execute, acknowledge or verify any instrument in more than one
capacity.
Section 2. Term of Office. The officers of the Corporation shall hold
office during the pleasure of the board of directors, and, unless sooner
removed by the board of directors, until the annual meeting of the board of
directors following the date of their election and until their successors are
chosen and qualified. The board of directors may remove any officer at any
time, with or without cause. Subject to the provisions of Section 6 of Article
V of these By-Laws, a vacancy in any office, however created, shall be filled
by the board of directors.
ARTICLE V
Duties of Officers
Section 1. Chairman of the Board. The chairman of the board shall preside
at all meetings of the board of directors.
Section 2. Vice Chairman of the Board. The vice chairman of the board, if
one be elected, shall have such powers and duties as may be prescribed by the
board of directors.
Section 3. President. The president shall be the chief executive officer
of the Corporation and shall exercise supervision over the business of the
Corporation and over its
-6-
<PAGE>
several officers, subject, however, to the control of the board of directors.
In the absence of the chairman of the board, or if none be elected, the
president shall preside at meetings of stockholders. The president shall have
authority to sign all certificates for shares and all deeds, mortgages, bonds,
agreements, notes, and other instruments requiring his signature: and shall
have all the powers and duties prescribed by the General Corporation Law of the
State of Delaware and such others as the board of directors may from time to
time assign to him.
Section 4. Vice Presidents. The vice presidents shall have such powers and
duties as may from time to time be assigned to them by the board of directors,
the chairman of the board or the president. At the request of the president, or
in the case of his absence or disability, the vice president designated by the
president (or in the absence of such designation, the vice president designated
by the board) shall perform all the duties of the president and, when so
acting, shall have all the powers of the president. The authority of vice
presidents to sign in the name of the Corporation certificates for shares and
deeds, mortgages, bonds, agreements, notes and other instruments shall be
coordinate with like authority of the president.
Section 5. Secretary. The secretary shall keep minutes of all the
proceedings of the stockholders and the board of directors and shall make
proper record of the same, which shall be attested by him; shall have authority
to execute and deliver certificates as to any of such proceedings and any other
records of the Corporation; shall have authority to sign all certificates for
shares and all deeds, mortgages, bonds, agreements, notes and other instruments
to be executed by the Corporation which require his signature; shall give
notice of meetings of stockholders and directors; shall produce on request at
each meeting of stockholders a certified list of stockholders arranged in
alphabetical order; shall keep such books and records as may be required by law
or by the board of directors; and, in general, shall perform all duties
incident to the office of secretary and such other duties as may from time to
time be assigned to him by the board of directors, the chairman of the board or
the president.
Section 6. Treasurer. The treasurer shall have general supervision of all
finances; he shall have in charge all money, bills, notes, deeds, leases,
mortgages and similar property belonging to the Corporation, and shall do with
the same as may from time to time be required by the board of directors. He
shall cause to be kept adequate and correct accounts of the business
transactions of the Corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, stated capital and shares, together
with such other accounts as may be required: and he shall have such other
powers and duties
-7-
<PAGE>
as may from time to time be assigned to him by the board of directors, the
chairman of the board or the president.
Section 7. Assistant and Subordinate Officers. Each other officer shall
perform such duties as the board of directors, the chairman of the board or the
president may prescribe. The board of directors may, from time to time,
authorize any officer to appoint and remove subordinate officers, to prescribe
their authority and duties, and to fix their compensation.
Section 8. Duties of Officers May Be Delegated. In the absence of any
officer of the Corporation, or for any other reason the board of directors may
deem sufficient, the board of directors may delegate, for the time being, the
powers or duties, or any of them, of such officers to any other officer or to
any director.
ARTICLE VI
Indemnification and Insurance
Section 1. Indemnification in Non-Derivative Actions. The Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation) by reason of the fact that he is or was
a director or officer of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. 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
corporation and, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
Section 2. Indemnification in Derivative Actions. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
the Corporation to
-8-
<PAGE>
procure a judgment in its favor by reason of the fact that he is or was a
director or officer of the Corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, 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 corporation and 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 Corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
Section 3. Indemnification as a Matter of Right. To the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred
to in Sections 1 and 2 of this Article VI, or in 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.
Section 4. Determination of Conduct. Any indemnification under Sections 1
and 2 of this Article VI (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth
in Sections 1 and 2 of this Article VI. Such determination shall be made (1) by
the board of directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (2) if such a
quorum is not obtainable, or, even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or (3)
by the stockholders.
Section 5. Advance Payment of Expenses. Expenses incurred in defending a
civil or criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the director, officer, employee or
agent to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this section.
-9-
<PAGE>
Section 6. Nonexclusivity. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
Section 7. Liability Insurance. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this section.
Section 8. Corporation. For purposes of this Article VI, references to
"the Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article VI with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
Section 9. Employee Benefit Plans. For purposes of this Article VI,
references to any "other enterprise" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee
or agent of the Corporation which imposes duties on, or involves services by,
such director, officer, employee or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not
-10-
<PAGE>
opposed to the best interests of the Corporation" as referred to in this
Article VI.
Section 10. Continuation. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article VI shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
ARTICLE VII
Certificates for Shares
Section 1. Form and Execution. Certificates for shares, certifying the
number of full-paid shares owned, shall be issued to each stockholder in such
form as shall be approved by the board of directors. Such certificates shall be
signed by the chairman or vice-chairman of the board of directors or the
president or a vice president and by the secretary or an assistant secretary or
the treasurer or an assistant treasurer; provided, however, that the signatures
of any of such officers and the seal of the Corporation upon such certificates
may be facsimiles, engraved, stamped or printed. If any officer or officers who
shall have signed, or whose facsimile signature shall have been used, printed
or stamped on any certificate or certificates for shares, shall cease to be
such officer or officers, because of death, resignation or otherwise, before
such certificate or certificates shall have been delivered by the Corporation,
such certificate or certificates shall nevertheless be as effective in all
respects as though signed by a duly elected, qualified and authorized officer
or officers, and as though the person or persons who signed such certificate or
certificates, or whose facsimile signature or signatures shall have been used
thereon, had not ceased to be an officer or officers of the Corporation.
Section 2. Registration of Transfer. Any certificate for shares of the
corporation shall be transferable in person or by attorney upon the surrender
thereof to the Corporation or any transfer agent therefor (for the class of
shares represented by the certificate surrendered) properly endorsed for
transfer and accompanied by such assurances as the Corporation or such transfer
agent may require as to the genuineness and effectiveness of each necessary
endorsement.
Section 3. Lost, Destroyed or Stolen Certificates. A new share certificate
or certificates may be issued in place of any certificate theretofore issued by
the corporation which is alleged to have been lost, destroyed or wrongfully
taken upon (i)
-11-
<PAGE>
the execution and delivery to the corporation by the person claiming the
certificate to have been lost, destroyed or wrongfully taken of an affidavit of
that fact, specifying whether or not, at the time of such alleged loss,
destruction or taking, the certificate was endorsed and (ii) the furnishing to
the Corporation of indemnity and other assurances, if any, satisfactory to the
corporation and to all transfer agents and registrars of the class of shares
represented by the certificate against any and all losses, damages, costs,
expenses or liabilities to which they or any of them may be subjected by reason
of the issue and delivery of such new certificate or certificates or in respect
of the original certificate.
Section 4. Registered Stockholders. A person in whose name shares are of
record on the books of the Corporation shall conclusively be deemed the
unqualified owner and holder thereof for all purposes and to have capacity to
exercise all rights of ownership. Neither the Corporation nor any transfer
agent of the Corporation shall be bound to recognize any equitable interest in
or claim to such shares on the part of any other person, whether disclosed upon
such certificate or otherwise, nor shall they be obliged to see to the
execution of any trust or obligation.
ARTICLE VIII
Fiscal Year
The fiscal year of the Corporation shall commence on such date in each
year as shall be designated from time to time by the board of directors. In the
absence of such designation, the fiscal year of the Corporation shall end on
December 31 in each year.
ARTICLE IX
Seal
The board of directors may provide a suitable seal containing the name of the
Corporation. If deemed advisable by the board of directors, duplicate seals
may be provided and kept for the purposes of the Corporation.
ARTICLE X
Amendments
These By-Laws shall be subject to alteration, amendment, repeal, or the
adoption of new By-Laws either by the
-12-
<PAGE>
affirmative vote or written consent of a majority of the whole board of
directors, or by the affirmative vote or written consent of the holders of
record of a majority of the outstanding stock of the Corporation, present in
person or represented by proxy and entitled to vote in respect thereof, given
at an annual meeting or at any special meeting at which a guorum shall be
present.
ARTICLE XI
Stockholder Agreements
These By-Laws are not in limitation of the contractual rights of the
Corporation and of stockholders of the Corporation, who shall be entitled to
enter into agreements limiting or restricting or otherwise modifying the terms
and provisions hereof and the governance of the Corporation from a contractual
standpoint, and in the event of any conflict between these ByLaws and any such
agreement, the terms and provisions of such agreement shall control provided
the same are in writing and signed by the party to be charged, and the rights
and remedies under such agreement shall not be limited or modified by the terms
hereof.
-13-
<PAGE>
EXECUTION COPY
American Axle & Manufacturing, Inc.
9 3/4% Senior Subordinated Notes due 2009
INDENTURE
Dated as of March 5, 1999
IBJ WHITEHALL BANK & TRUST COMPANY,
Trustee
<PAGE>
2
TABLE OF CONTENTS
Page
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions ............................................... 1
SECTION 1.02. Other Definitions ......................................... 21
SECTION 1.03. Incorporation by Reference of Trust Indenture Act ......... 22
SECTION 1.04. Rules of Construction ..................................... 23
ARTICLE 2
The Securities
SECTION 2.01. Amount of Securities; Issuable in Series .................. 23
SECTION 2.02. Form and Dating ........................................... 24
SECTION 2.03. Execution and Authentication .............................. 25
SECTION 2.04. Registrar and Paying Agent ................................ 25
SECTION 2.05. Paying Agent to Hold Money in Trust ....................... 26
SECTION 2.06. Securityholder Lists ...................................... 26
SECTION 2.07. Transfer and Exchange ..................................... 26
SECTION 2.08. Replacement Securities .................................... 27
SECTION 2.09. Outstanding Securities .................................... 27
SECTION 2.10. Temporary Securities ...................................... 28
SECTION 2.11. Cancelation ............................................... 28
SECTION 2.12. Defaulted Interest ........................................ 28
SECTION 2.13. CUSIP Numbers ............................................. 28
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee ........................................ 29
SECTION 3.02. Selection of Securities 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. Securities Redeemed in Part ............................... 30
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities ..................................... 31
SECTION 4.02. Reports and Other Information ............................. 31
<PAGE>
3
SECTION 4.03. Limitation on Incurrence of Indebtedness and Issuance
of Disqualified Stock and Preferred Stock ................. 31
SECTION 4.04. Limitation on Restricted Payments ......................... 35
SECTION 4.05. Dividend and Other Payment Restrictions Affecting
Subsidiaries .............................................. 40
SECTION 4.06. Asset Sales ............................................... 41
SECTION 4.07. Transactions with Affiliates .............................. 44
SECTION 4.08. Liens ..................................................... 45
SECTION 4.09. Change of Control ......................................... 45
SECTION 4.10. Limitation on Other Pari Passu Indebtedness ............... 47
SECTION 4.11. Compliance Certificate .................................... 47
SECTION 4.12. Further Instruments and Acts .............................. 47
SECTION 4.13. Future Guarantors ......................................... 47
ARTICLE 5
Successor Company
SECTION 5.01. Merger, Consolidation or Sale of All or
Substantially All Assets .................................. 47
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default ......................................... 49
SECTION 6.02. Acceleration .............................................. 51
SECTION 6.03. Other Remedies ............................................ 51
SECTION 6.04. Waiver of Past Defaults ................................... 52
SECTION 6.05. Control by Maturity ....................................... 52
SECTION 6.06. Limitation on Suits ....................................... 52
SECTION 6.07. Rights of Holders of Receive Payment ...................... 53
SECTION 6.08. Collection Suit by Trustee ................................ 53
SECTION 6.09. Trustee May File Proofs of Claim .......................... 53
SECTION 6.10. Priorities ................................................ 53
SECTION 6.11. Undertaking for Costs ..................................... 54
SECTION 6.12. Waiver of Stay or Extension Laws .......................... 54
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee ......................................... 54
SECTION 7.02. Rights of Trustee ......................................... 55
SECTION 7.03. Individual Rights of Trustee .............................. 56
SECTION 7.04. Trustee's Disclaimer ...................................... 56
SECTION 7.05. Notice of Defaults ........................................ 56
SECTION 7.06. Reports by Trustee to Holders ............................. 56
<PAGE>
4
SECTION 7.07. Compensation and Indemnity ................................ 56
SECTION 7.08. Replacement of Trustee .................................... 57
SECTION 7.09. Successor Trustee by Merger ............................... 58
SECTION 7.10. Eligibility; Disqualification ............................. 58
SECTION 7.11. Preferential Collection of Claims Against Issuer .......... 58
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance .......... 59
SECTION 8.02. Conditions to Defeasance .................................. 60
SECTION 8.03. Application of Trust Money ................................ 61
SECTION 8.04. Repayment to Issuer ....................................... 61
SECTION 8.05. Indemnity for Governmental Obligations .................... 61
SECTION 8.06. Reinstatement ............................................. 61
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders ................................ 61
SECTION 9.02. With Consent of Holders ................................... 62
SECTION 9.03. Compliance with Trust Indenture Act ....................... 63
SECTION 9.04. Revocation and Effect of Consents and Waivers ............. 63
SECTION 9.05. Notation on or Exchange of Securities ..................... 64
SECTION 9.06. Trustee to Sign Amendments ................................ 64
SECTION 9.07. Payment for Consent ....................................... 64
ARTICLE 10
Subordination
SECTION 10.01. Agreement To Subordinate .................................. 64
SECTION 10.02. Liquidation, Dissolution, Bankruptcy ...................... 65
SECTION 10.03. Default on Senior Indebtedness of the Issuer .............. 65
SECTION 10.04. Acceleration of Payment of Securities ..................... 66
SECTION 10.05. When Distribution Must Be Paid Over ....................... 66
SECTION 10.06. Subrogation ............................................... 66
SECTION 10.07. Relative Rights ........................................... 67
SECTION 10.08. Subordination May Not Be Impaired by the Issuer ........... 67
SECTION 10.09. Rights of Trustee and Paying Agent ........................ 67
SECTION 10.10. Distribution or Notice to Representative .................. 67
SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit
Right To Accelerate ....................................... 67
SECTION 10.12. Trust Moneys Not Subordinated ............................. 67
SECTION 10.13. Trustee Entitled To Rely .................................. 68
SECTION 10.14. Trustee to Effectuate Subordination ....................... 68
<PAGE>
5
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness .............................................. 68
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions .................................. 68
SECTION 10.17. Trustee's Compensation Not Prejudiced ..................... 69
ARTICLE 11
Guarantees
SECTION 11.01. Guarantees ................................................ 69
SECTION 11.02. Limitation on Liability ................................... 71
SECTION 11.03. Successors and Assigns .................................... 71
SECTION 11.04. No Waiver ................................................. 72
SECTION 11.05. Modification .............................................. 72
SECTION 11.06. Execution of Supplemental Indenture for Future
Guarantors ................................................ 72
ARTICLE 12
Subordination of the Guarantees
SECTION 12.01. Agreement to Subordinate .................................. 72
SECTION 12.02. Liquidation, Dissolution, Bankruptcy ...................... 73
SECTION 12.03. Default on Designated Senior Indebtedness of a
Guarantor ................................................. 73
SECTION 12.04. Demand for Payment ........................................ 74
SECTION 12.05. When Distribution Must Be Paid Over ....................... 74
SECTION 12.06. Subrogation ............................................... 74
SECTION 12.07. Relative Rights ........................................... 74
SECTION 12.08. Subordination May Not Be Impaired by a Guarantor .......... 75
SECTION 12.09. Rights of Trustee and Paying Agent ........................ 75
SECTION 12.10. Distribution or Notice to Representative .................. 75
SECTION 12.11. Article 12 Not To Prevent Events of Default or
Limit Right To Accelerate ................................. 75
SECTION 12.12. Trustee Entitled to Rely .................................. 75
SECTION 12.13 Trustee to Effectuate Subordination ....................... 76
SECTION 12.14 Trustee Not Fiduciary for Holders of Senior
Indebtedness of a Guarantor ............................... 76
SECTION 12.15. Reliance by Holders of Senior Indebtedness of a
Guarantor on Subordination Provisions ..................... 76
SECTION 12.16. Defeasance ................................................ 76
ARTICLE 13
Miscellaneous
SECTION 13.01. Trust Indenture Act Controls .............................. 76
SECTION 13.02. Notices ................................................... 77
SECTION 13.03. Communication by Holders with Other Holders ............... 77
SECTION 13.04. Certificate of Opinion as to Conditions Precedent ......... 77
SECTION 13.05. Statements Required in Certificate or Opinion ............. 78
<PAGE>
6
SECTION 13.06. When Securities Disregarded ............................... 78
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar .............. 78
SECTION 13.08. Legal Holidays ............................................ 78
SECTION 13.09. Governing Law ............................................. 78
SECTION 13.10. No Recourse Against Others ................................ 78
SECTION 13.11. Successors ................................................ 79
SECTION 13.12. Multiple Originals ........................................ 79
SECTION 13.13. Table of Contents; Headings ............................... 79
Appendix A - Provisions Relating to Original Securities, Additional
Securities, Exchange Securities and Private Exchange
Securities
Exhibit A - Form of Initial Security
Exhibit B - Form of Exchange Security
Exhibit C - Form of Supplemental Indenture
Exhibit D - Form of Transferee Letter of Representation
<PAGE>
EXECUTION COPY
INDENTURE dated as of March 5, 1999, among AMERICAN
AXLE & MANUFACTURING, INC., a Delaware corporation,
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC., a Delaware
corporation ("Holdings") and IBJ WHITEHALL BANK & TRUST
COMPANY, a New York banking corporation, as trustee (the
"Trustee").
Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of (i) the Issuer's
9 3/4% Senior Subordinated Notes due 2009 issued on the date hereof (the
"Original Securities"), (ii) any Additional Securities (as defined herein) that
may be issued on any Issue Date (all such Securities in clauses (i) and (ii)
being referred to collectively as the "Initial Securities"), (iii) if and when
issued as provided in a Registration Agreement (as defined in Appendix A hereto
(the "Appendix")), the Issuer's 9 3/4% Senior Subordinated Notes due 2009 issued
in a Registered Exchange Offer (as defined in the Appendix) in exchange for any
Initial Securities (the "Exchange Securities") and (iv) if and when issued as
provided in a Registration Agreement, the Private Exchange Securities (as
defined in the Appendix, and together with the Initial Securities and any
Exchange Securities issued hereunder, the "Securities") issued in a Private
Exchange (as defined in the Appendix). Except as otherwise provided herein, the
Securities shall be limited to $400,000,000 in aggregate principal amount
outstanding, of which $300,000,000 in aggregate principal amount shall be
initially issued on the date hereof. Subject to the conditions and compliance
with the covenants set forth herein, the Issuer may issue up to $100,000,000
aggregate principal amount of Additional Securities.
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Acquired Indebtedness" means, with respect to any specified
Person, (i) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Restricted Subsidiary of such
specified Person and (ii) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person, in each case, other than Indebtedness
Incurred as consideration in, in contemplation of, or to provide all or any
portion of the funds or credit support utilized to consummate, the transaction
or series of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was otherwise acquired by such Person, or such
asset was acquired by such Person, as applicable.
"Additional Securities" means up to $100,000,000 aggregate
principal amount of 9 3/4% Senior Subordinated Notes due 2009 issued under the
terms of this Indenture subsequent to the Closing Date.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common
<PAGE>
2
control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise.
"Asset Sale" means (i) the sale, conveyance, transfer or other
disposition (whether in a single transaction or a series of related
transactions) of property or assets (including by way of a Sale/Leaseback
Transaction) of the Issuer or any Restricted Subsidiary (each referred to in
this definition as a "disposition") or (ii) the issuance or sale of Equity
Interests of any Restricted Subsidiary (other than to the Issuer or another
Restricted Subsidiary) (whether in a single transaction or a series of related
transactions), in each case other than: (a) a disposition of Cash Equivalents or
Investment Grade Securities or obsolete or worn out equipment in the ordinary
course of business; (b) the disposition of all or substantially all of the
assets of the Issuer in a manner permitted pursuant to Section 5.01 or any
disposition that constitutes a Change of Control; (c) any Restricted Payment or
Permitted Investment that is permitted to be made, and is made, under Section
4.04; (d) any disposition of assets or issuance or sale of Equity Interests of
any Restricted Subsidiary with an aggregate Fair Market Value of less than
$5,000,000; (e) any disposition of property or assets by a Restricted Subsidiary
to the Issuer or by the Issuer or a Restricted Subsidiary to a Restricted
Subsidiary; (f) any exchange of like property pursuant to Section 1031 of the
Internal Revenue Code of 1986, as amended, for use in a Similar Business; (g)
sales of assets received by the Issuer upon the foreclosure on a Lien; (h) any
sale of Equity Interests in, or Indebtedness or other securities of, an
Unrestricted Subsidiary; (i) sales of inventory in the ordinary course of
business; (j) the lease, assignment or sub-lease of any real or personal
property in the ordinary course of business; (k) a sale of accounts receivable
and related assets of the type specified in the definition of "Receivables
Financing" to a Receivables Subsidiary in a Qualified Receivables Financing; and
(l) a transfer of accounts receivable and related assets of the type specified
in the definition of "Receivables Financing" (or a fractional undivided interest
therein) by a Receivables Subsidiary in a Qualified Receivables Financing.
"Bank Indebtedness" means any and all amounts payable under or
in respect of the Credit Agreement, the other Senior Credit Documents and any
Refinancing Indebtedness with respect thereto, as amended from time to time,
including principal, premium (if any), interest (including interest accruing on
or after the filing of any petition in bankruptcy or for reorganization relating
to the Issuer whether or not a claim for post-filing interest is allowed in such
proceedings), fees, charges, expenses, reimbursement obligations, guarantees and
all other amounts payable thereunder or in respect thereof.
"Blackstone" means Blackstone Capital Partners II Merchant
Banking Fund L.P. and its Affiliates.
"Board of Directors" means the Board of Directors of the
Issuer or any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means a day other than a Saturday, Sunday or
other day on which banking institutions in New York State are authorized or
required by law to close.
<PAGE>
3
"Capitalized Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be required to be capitalized and
reflected as a liability on a balance sheet (excluding the footnotes thereto) in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited), and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Contribution Amount" means the aggregate amount of cash
contributions made to the capital of the Issuer described in the definition of
"Contribution Indebtedness."
"Cash Equivalents" means (i) U.S. dollars and foreign currency
exchanged into U.S. dollars within 180 days, (ii) securities issued or directly
and fully guaranteed or insured by the United States government or any agency or
instrumentality thereof, (iii) certificates of deposit, time deposits and
eurodollar time deposits with maturities of one year or less from the date of
acquisition, bankers' acceptances with maturities not exceeding one year and
overnight bank deposits, in each case with any commercial bank having capital
and surplus in excess of $500,000,000 and whose long-term debt is rated "A" or
the equivalent thereof by Moody's or S&P, (iv) repurchase obligations for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above, (v) commercial paper issued by a corporation (other than
an Affiliate of the Issuer) rated at least "A-2" or the equivalent thereof by
Moody's or S&P and in each case maturing within one year after the date of
acquisition, (vi) investment funds investing at least 95% of their assets in
securities of the types described in clauses (i) through (v) above, (vii)
readily marketable direct obligations issued by any state of the United States
of America or any political subdivision thereof having one of the two highest
rating categories obtainable from either Moody's or S&P, and (viii) Indebtedness
or preferred stock issued by Persons (other than Blackstone or its Affiliates)
with a rating of "A" or higher from S&P or "A-2" or higher from Moody's.
"Change of Control" means the occurrence of any of the
following events:
(i) the sale, lease or transfer, in one or a series of related
transactions, of all or substantially all the assets of the Issuer and
its Subsidiaries, taken as a whole, to a Person other than the
Permitted Holders;
(ii)(A) the Issuer becomes aware (by way of a report or any
other filing pursuant to Section 13(d) of the Exchange Act, proxy,
vote, written notice or otherwise) of the acquisition by any Person or
group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of
the Exchange Act, or any successor provision), including any group
acting for the purpose of acquiring, holding or disposing of securities
(within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other
than the Permitted Holders, in a single transaction or in a related
series of transactions, by way of merger, consolidation or other
business
<PAGE>
4
combination or purchase of beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act, or any successor provision), of 35%
or more of the total voting power of the Voting Stock of the Issuer or
Holdings and (B) the Permitted Holders beneficially own (as defined
above), directly or indirectly, in the aggregate a lesser percentage of
the total voting power of the Voting Stock of the Issuer or Holdings,
as applicable, than such other Person or group and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors; or
(iii) during any one year period, individuals who at the
beginning of such period constituted the board of directors of the
Issuer or Holdings (together with any new directors whose election by
such board of directors or whose nomination for election by the
shareholders of the Issuer or Holdings, as applicable, was approved by
a vote of a majority of the directors of the Issuer or Holdings, as
applicable, then still in office who were either directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a
majority of the board of directors of the Issuer or Holdings, as
applicable, then in office.
"Closing Date" means the date of this Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Depreciation and Amortization Expense" means
with respect to any Person for any period, the total amount of depreciation and
amortization expense of such Person and its Restricted Subsidiaries for such
period on a consolidated basis and otherwise determined in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any
Person for any period, the sum, without duplication, of: (i) consolidated
interest expense of such Person and its Restricted Subsidiaries for such period,
to the extent such expense was deducted in computing Consolidated Net Income
(including amortization of original issue discount, the interest component of
Capitalized Lease Obligations, and net payments and receipts (if any) pursuant
to Hedging Obligations and excluding amortization of deferred financing fees),
(ii) consolidated capitalized interest of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued, (iii) one-third of the
obligations of such Person and its Restricted Subsidiaries for rental payments
under operating leases as part of Sale/Leaseback Transactions made during such
period and (iv) commissions, discounts, yield and other fees and charges
Incurred in connection with any Receivables Financing which are payable to
Persons other than the Issuer and its Restricted Subsidiaries.
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis; provided,
however, that (i) any net after-tax extraordinary gains or losses (less all fees
and expenses relating thereto) shall be excluded, (ii) any increase in
amortization or depreciation resulting from purchase accounting in relation to
any acquisition that is consummated after the Closing Date, net of taxes, shall
be excluded, (iii) the Net Income for such period shall not include the
cumulative effect of a change in accounting principles during such period, (iv)
any net after-tax income or loss from discontinued operations and any net
after-tax gains or losses
<PAGE>
5
on disposal of discontinued operations shall be excluded, (v) any net after-tax
gains or losses (less all fees and expenses relating thereto) attributable to
asset dispositions other than in the ordinary course of business (as determined
in good faith by the Board of Directors) shall be excluded, (vi) the Net Income
for such period of any Person that is not a Subsidiary of such Person, or is an
Unrestricted Subsidiary, or that is accounted for by the equity method of
accounting, shall be included only to the extent of the amount of dividends or
distributions or other payments paid in cash (or to the extent converted into
cash) to the referent Person or a Restricted Subsidiary thereof in respect of
such period, (vii) the Net Income of any Person acquired in a pooling of
interests transaction shall not be included for any period prior to the date of
such acquisition, and (viii) the Net Income for such period of any Restricted
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by such Restricted Subsidiary of its Net
Income is not at the date of determination permitted without any prior
governmental approval (which has not been obtained) or, directly or indirectly,
by the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
that Restricted Subsidiary or its stockholders, unless such restrictions with
respect to the payment of dividends or similar distributions have been legally
waived; provided that the net loss of any such Restricted Subsidiary shall be
included. Notwithstanding the foregoing, for the purpose of Section 4.04 only,
there shall be excluded from Consolidated Net Income any dividends, repayments
of loans or advances or other transfers of assets from Unrestricted Subsidiaries
to the Issuer or a Restricted Subsidiary to the extent such dividends,
repayments or transfers increase the amount of Restricted Payments permitted
under clauses (a)(3)(D) and (a)(3)(E) of Section 4.04.
"Contingent Obligations" means, with respect to any Person,
any obligation of such Person guaranteeing any leases, dividends or other
obligations that do not constitute Indebtedness ("primary obligations") of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (A) for the purchase or payment of any such primary obligation or
(B) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, or (iii)
to purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation against loss in respect
thereof.
"Contribution Indebtedness" means Indebtedness of the Issuer
in an aggregate principal amount not greater than twice the aggregate amount of
cash contributions (other than Excluded Contributions) made to the capital of
the Issuer, provided that (i) if the aggregate principal amount of such
Contribution Indebtedness is greater than one times such cash contributions to
the capital of the Issuer, the amount in excess shall be Pari Passu Indebtedness
or Subordinated Indebtedness with a Stated Maturity later than the Stated
Maturity of the Securities, and (ii) such Contribution Indebtedness (I) is
Incurred within 180 days after the making of such cash contributions and (II) is
so designated as Contribution Indebtedness pursuant to an Officers' Certificate
on the Incurrence date thereof.
"Credit Agreement" means the credit agreement dated as of
October 27, 1997, as amended, restated, supplemented, waived, replaced,
restructured, repaid,
<PAGE>
6
refunded, refinanced or otherwise modified from time to time, including any
agreement extending the maturity thereof or otherwise restructuring all or any
portion of the Indebtedness under such agreement or increasing the amount loaned
thereunder or altering the maturity thereof (except to the extent that any such
amendment, restatement, supplement, waiver, replacement, refunding, refinancing
or other modification thereto would be prohibited by the terms of this
Indenture, unless otherwise agreed to by the Holders of at least a majority in
aggregate principal amount of Securities at the time outstanding), among the
Issuer, Holdings, the financial institutions named therein, The Chase Manhattan
Bank, as Administrative Agent and Collateral Agent and Chase Manhattan Bank
Delaware, as Issuing Bank.
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
"Designated Noncash Consideration" means the Fair Market Value
of noncash consideration received by the Issuer or one of its Restricted
Subsidiaries in connection with an Asset Sale that is so designated as
Designated Noncash Consideration pursuant to an Officers' Certificate, setting
forth the basis of such valuation, less the amount of Cash Equivalents received
in connection with a subsequent sale of such Designated Noncash Consideration.
"Designated Preferred Stock" means Preferred Stock of the
Issuer or Holdings (other than Disqualified Stock) that is issued for cash
(other than to the Issuer, a Subsidiary of the Issuer or an employee stock
ownership plan or trust established by the Issuer or any of its Subsidiaries)
and is so designated as Designated Preferred Stock, pursuant to an Officers'
Certificate, on the issuance date thereof, the cash proceeds of which are
excluded from the calculation set forth in Section 4.04(a)(3).
"Designated Senior Indebtedness" means, with respect to the
Issuer or a Guarantor, (i) the Bank Indebtedness and (ii) any other Senior
Indebtedness of the Issuer or such Guarantor which, at the date of
determination, has an aggregate principal amount outstanding of, or under which,
at the date of determination, the holders thereof, are committed to lend up to,
at least $15,000,000 and is specifically designated by the Issuer or such
Guarantor in the instrument evidencing or governing such Senior Indebtedness as
"Designated Senior Indebtedness" for purposes of this Indenture.
"Disqualified Stock" means, with respect to any Person, any
Capital Stock of such Person which, by its terms (or by the terms of any
security into which it is convertible or for which it is redeemable or
exchangeable), or upon the happening of any event, (i) matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise (other than as a
result of a change of control or asset sale), (ii) is convertible or
exchangeable for Indebtedness or Disqualified Stock, or (iii) is redeemable at
the option of the holder thereof, in whole or in part, in each case prior to 91
days after the maturity date of the Securities; provided, however, that only the
portion of Capital Stock which so matures or is mandatorily redeemable, is so
convertible or exchangeable or is so redeemable at the option of the holder
thereof prior to such date shall be deemed to be Disqualified Stock; provided
further, however, that if such Capital Stock is issued to any employee or to any
plan for the benefit of employees of the Issuer or its Subsidiaries or by any
such plan to such employees, such Capital Stock shall not constitute
Disqualified Stock solely because it may be required to be repurchased by the
Issuer in order to satisfy
<PAGE>
7
applicable statutory or regulatory obligations or as a result of such employee's
termination, death or disability.
"EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period plus, without
duplication, (i) provision for taxes based on income or profits of such Person
for such period deducted in computing Consolidated Net Income, plus (ii)
Consolidated Interest Expense of such Person for such period to the extent the
same was deducted in computing Consolidated Net Income, plus (iii) Consolidated
Depreciation and Amortization Expense of such Person for such period to the
extent such Consolidated Depreciation and Amortization Expense was deducted in
computing Consolidated Net Income, plus (iv) any non-recurring fees, expenses or
charges related to any Equity Offering, Permitted Investment, acquisition or
Indebtedness permitted to be Incurred by this Indenture (in each case, whether
or not successful), including any such fees, expenses or charges related to the
offering of the Original Securities and Holdings' initial public offering of
common stock, deducted in such period in computing Consolidated Net Income, plus
(v) any non-recurring charges related to one-time severance costs incurred in
connection with acquisitions consummated after the Closing Date deducted in such
period in computing Consolidated Net Income, plus (vi) any other noncash charges
reducing Consolidated Net Income for such period (excluding any such charge
which consists of or requires an accrual of, or cash reserve for, anticipated
cash charges for any future period), plus (vii) the amount of management,
monitoring, consulting and advisory fees and related expenses paid to Blackstone
during such period, provided that such amount shall not exceed the greater of
(a) $3,000,000 and (b) an amount equal to 1.0% of EBITDA for the most recently
completed four-fiscal-quarter period (excluding from the computation thereof any
amounts that would otherwise be included under this clause (vii)), less, without
duplication, (viii) noncash items increasing Consolidated Net Income of such
Person for such period (excluding any items which represent the reversal of any
accrual of, or cash reserve for, anticipated cash charges in any prior period).
In addition, with respect to the Issuer for the second and/or the third quarters
of fiscal year 1998, there shall be added to EBITDA the Issuer's good faith
estimate of the amount of EBITDA that the Issuer would have generated during
such quarter in excess of that actually generated if the General Motors
Corporation work stoppage that occurred in June and July of 1998 (and the
related start-up inefficiencies in the Issuer's operations in August 1998) had
not occurred. Notwithstanding the foregoing, the provision for taxes based on
the income or profits of, and the depreciation and amortization of, a Subsidiary
of the Issuer shall be added to Consolidated Net Income to compute EBITDA only
to the extent (and in the same proportion) that the Net Income of such
Subsidiary was included in calculating Consolidated Net Income and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Issuer by such Subsidiary without prior approval (that has not
been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to such Subsidiary or its stockholders.
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means any public or private sale of common
stock or Preferred Stock of the Issuer or Holdings (other than Disqualified
Stock), other than
<PAGE>
8
(i) public offerings with respect to the Issuer's common stock registered on
Form S-8 and (ii) any such public or private sale that constitutes an Excluded
Contribution.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Exchange Offer Registration Statement" has the meaning
assigned to it in the Registration Agreement dated the date hereof.
"Excluded Contributions" means the net cash proceeds received
by the Issuer after the Closing Date from (i) contributions to its common equity
capital and (ii) the sale (other than to a Subsidiary of the Issuer or to any
Issuer or Subsidiary management equity plan or stock option plan or any other
management or employee benefit plan or agreement) of Capital Stock (other than
Disqualified Stock and Designated Preferred Stock) of the Issuer, in each case
designated as Excluded Contributions pursuant to an Officers' Certificate
executed by an Officer of the Issuer, the cash proceeds of which are excluded
from the calculation set forth in Section 4.04(a)(3).
"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.
"Fixed Charge Coverage Ratio" means, with respect to any
Person for any period, the ratio of EBITDA of such Person for such period to the
Fixed Charges of such Person for such period. In the event that the Issuer or
any of its Restricted Subsidiaries Incurs or redeems any Indebtedness (other
than in the case of revolving credit borrowings, in which case interest expense
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period) or issues or redeems Preferred Stock subsequent to
the commencement of the period for which the Fixed Charge Coverage Ratio is
being calculated but prior to the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such Incurrence or
redemption of Indebtedness, or such issuance or redemption of Preferred Stock,
as if the same had occurred at the beginning of the applicable four-quarter
period. For purposes of making the computation referred to above, Investments,
acquisitions, dispositions, mergers, consolidations and discontinued operations
(as determined in accordance with GAAP), in each case with respect to an
operating unit of a business, that have been made by the Issuer or any of its
Restricted Subsidiaries during the four-quarter reference period or subsequent
to such reference period and on or prior to or simultaneously with the
Calculation Date shall be calculated on a pro forma basis assuming that all such
Investments, acquisitions, dispositions, discontinued operations, mergers and
consolidations (and the reduction of any associated fixed charge obligations and
the change in EBITDA resulting therefrom) had occurred on the first day of the
four-quarter reference period. If since the beginning of such period any Person
(that subsequently became a Restricted Subsidiary or was merged with or into the
Issuer or any Restricted Subsidiary since the beginning of such period) shall
have made any Investment, acquisition, disposition, discontinued operation,
merger or consolidation, in each case with respect to an operating unit of a
business, that would have required adjustment pursuant to this definition, then
the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
thereto for such period as if such Investment, acquisition,
<PAGE>
9
disposition, discontinued operation, merger or consolidation had occurred at the
beginning of the applicable four-quarter period. For purposes of this
definition, whenever pro forma effect is to be given to any transaction, the pro
forma calculations shall be made in good faith by a responsible financial or
accounting officer of the Issuer. If any Indebtedness bears a floating rate of
interest and is being given pro forma effect, the interest on such Indebtedness
shall be calculated as if the rate in effect on the Calculation Date had been
the applicable rate for the entire period (taking into account any Hedging
Obligations applicable to such Indebtedness if such Hedging Obligation has a
remaining term in excess of 12 months). Interest on a Capitalized Lease
Obligation shall be deemed to accrue at an interest rate reasonably determined
by a responsible financial or accounting officer of the Issuer to be the rate of
interest implicit in such Capitalized Lease Obligation in accordance with GAAP.
For purposes of making the computation referred to above, interest on any
Indebtedness under a revolving credit facility computed on a pro forma basis
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period. Interest on Indebtedness that may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rate, shall be deemed to have been
based upon the rate actually chosen, or, if none, then based upon such optional
rate chosen as the Issuer may designate. Any such pro forma calculation may
include adjustments appropriate, in the reasonable determination of the Issuer
as set forth in an Officers' Certificate, to reflect operating expense
reductions reasonably expected to result from any acquisition or merger.
Notwithstanding the foregoing, for the purposes of Section 4.03(a) and clause
(ix) of the definition of "Permitted Investments", in the event that a General
Motors Corporation work stoppage has occurred during the applicable four-quarter
period but is no longer continuing as of the Calculation Date, in calculating
the Fixed Charge Coverage Ratio for the applicable four-quarter period the
Issuer may exclude from the calculation the results of the Issuer and its
Restricted Subsidiaries for up to two quarters of such four-quarter period
during which such work stoppage occurred or was continuing and substitute in
place thereof the results of the Issuer and its Restricted Subsidiaries for the
one or two quarters, as applicable, immediately preceding the applicable
four-quarter period; provided that the Issuer may only make such exclusion and
substitution on one occasion in calculating the Fixed Charge Coverage Ratio;
provided further, however, that, for the purposes of Section 4.03(a) such
exclusion and substitution may not be made unless the proceeds of the
Indebtedness which is being Incurred are used either to make an Investment in a
Person permitted by clause (ix) of the definition of "Permitted Investment" or
to finance an acquisition of an operating unit of a business or of a Person that
becomes a Restricted Subsidiary.
"Fixed Charges" means, with respect to any Person for any
period, the sum of (i) Consolidated Interest Expense of such Person for such
period and (ii) all cash dividend payments (excluding items eliminated in
consolidation) on any series of Preferred Stock or Disqualified Stock of such
Person and its Subsidiaries.
"Foreign Subsidiary" means a Restricted Subsidiary not
organized or existing under the laws of the United States of America or any
state or territory thereof.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in
<PAGE>
10
effect on the Closing Date. For the purposes of this Indenture, the term
"consolidated" with respect to any Person shall mean such Person consolidated
with its Restricted Subsidiaries, and shall not include any Unrestricted
Subsidiary, but the interest of such Person in an Unrestricted Subsidiary will
be accounted for as an Investment.
"Government Securities" means securities that are (i) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in each
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian with respect to any such Government
Securities or a specific payment of principal of or interest on any such
Government Securities held by such custodian for the account of the holder of
such depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the Government Securities or the specific payment of principal of or
interest on the Government Securities evidenced by such depository receipt.
"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" means any guarantee of the obligations of the
Issuer under this Indenture and the Securities by any Person in accordance with
the provisions of this Indenture.
"Guarantor" means any Person that Incurs a Guarantee; provided
that upon the release or discharge of such Person from its Guarantee in
accordance with this Indenture, such Person ceases to be a Guarantor.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) currency exchange, interest rate or
commodity swap agreements, currency exchange, interest rate or commodity cap
agreements and currency exchange, interest rate or commodity collar agreements
and (ii) other agreements or arrangements designed to protect such Person
against fluctuations in currency exchange, interest rates or commodity prices.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Incur" means issue, assume, guarantee, incur or otherwise
become liable for; provided, however, that any Indebtedness or Capital Stock of
a Person existing at the time such Person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred
by such Person at the time it becomes a Subsidiary.
<PAGE>
11
"Indebtedness" means, with respect to any Person, (i) the
principal and premium (if any) of any indebtedness of such Person, whether or
not contingent, (a) in respect of borrowed money, (b) evidenced by bonds, notes,
debentures or similar instruments or letters of credit or bankers' acceptances
(or, without duplication, reimbursement agreements in respect thereof), (c)
representing the deferred and unpaid purchase price of any property, except any
such balance that constitutes a trade payable or similar obligation to a trade
creditor due within six months from the date on which it is Incurred, in each
case Incurred in the ordinary course of business, which purchase price is due
more than six months after the date of placing the property in service or taking
delivery and title thereto, (d) in respect of Capitalized Lease Obligations or
(e) representing any Hedging Obligations, if and to the extent that any of the
foregoing Indebtedness (other than letters of credit and Hedging Obligations)
would appear as a liability on a balance sheet (excluding the footnotes thereto)
of such Person prepared in accordance with GAAP, (ii) to the extent not
otherwise included, any obligation of such Person to be liable for, or to pay,
as obligor, guarantor or otherwise, on the Indebtedness of another Person (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), (iii) to the extent not otherwise included, Indebtedness of
another Person secured by a Lien on any asset owned by such Person (whether or
not such Indebtedness is assumed by such Person); provided, however, that the
amount of such Indebtedness will be the lesser of (a) the Fair Market Value of
such asset at such date of determination and (b) the amount of such Indebtedness
of such other Person; provided, further, that Contingent Obligations incurred in
the ordinary course of business shall be deemed not to constitute Indebtedness
and (iv) to the extent not otherwise included, with respect to the Issuer and
its Restricted Subsidiaries, the amount then outstanding (i.e., advanced, and
received by, and available for use by, the Issuer or any of its Restricted
Subsidiaries) under any Receivables Financing (as set forth in the books and
records of the Issuer or any Restricted Subsidiary and confirmed by the agent,
trustee or other representative of the institution or group providing such
Receivables Financing).
"Indenture" means this Indenture as amended or supplemented
from time to time.
"Independent Financial Advisor" means an accounting, appraisal
or investment banking firm or consultant to Persons engaged in a Similar
Business, in each case of nationally recognized standing that is, in the good
faith determination of the Issuer, qualified to perform the task for which it
has been engaged.
"Initial Purchasers" means Chase Securities Inc., Donaldson,
Lufkin & Jenrette Securities Corporation and Morgan Stanley & Co. Incorporated.
"Investment Grade Securities" means (i) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof (other than Cash Equivalents), (ii) debt
securities or debt instruments (other than those issued by Blackstone or its
Affiliates) with a rating of BBB- or higher by S&P or Baa3 or higher by Moody's
or the equivalent of such rating by such rating organization, or if no rating of
S&P or Moody's then exists, the equivalent of such rating by any other
nationally recognized securities rating agency, but excluding any debt
securities or instruments constituting loans or advances among the Issuer and
its Subsidiaries, and (iii) investments in any fund that invests exclusively in
investments of the type described in clauses (i) and (ii) which fund may also
hold immaterial amounts of cash pending investment and/or distribution.
<PAGE>
12
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the form
of loans (including guarantees), advances or capital contributions (excluding
accounts receivable, trade credit and advances to customers and commission,
travel and similar advances to officers, employees and consultants made in the
ordinary course of business), purchases or other acquisitions for consideration
of Indebtedness, Equity Interests or other securities issued by any other Person
and investments that are required by GAAP to be classified on the balance sheet
of the Issuer in the same manner as the other investments included in this
definition to the extent such transactions involve the transfer of cash or other
property. For purposes of the definition of "Unrestricted Subsidiary" and
Section 4.04, (i) "Investments" shall include the portion (proportionate to the
Issuer's equity interest in such Subsidiary) of the Fair Market Value of the net
assets of a Subsidiary of the Issuer at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Issuer shall be
deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (x) the Issuer's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Issuer's equity interest in such Subsidiary) of
the Fair Market Value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its Fair Market Value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"Issue Date", with respect to any Initial Securities, means
the date on which the Initial Securities are originally issued.
"Issuer" means the party named as such in this Indenture until
a successor replaces it and, thereafter, means the successor and, for purposes
of any provision contained herein and required by the TIA, each other obligor on
the indenture securities.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction); provided that in no event shall an operating lease be deemed to
constitute a Lien.
"liquidated damages" means any liquidated damages payable
under a Registration Agreement.
"Management Group" means the group consisting of the
directors, executive officers and other management personnel of the Issuer and
Holdings on the Closing Date.
"Moody's" means Moody's Investors Service, Inc.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of Preferred Stock dividends.
<PAGE>
13
"Net Proceeds" means the aggregate cash proceeds received by
the Issuer or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received in respect of or upon the sale
or other disposition of any Designated Noncash Consideration received in any
Asset Sale and any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding the assumption by the acquiring person of
Indebtedness relating to the disposed assets or other considerations received in
any other noncash form), net of the direct costs relating to such Asset Sale and
the sale or disposition of such Designated Noncash Consideration (including,
without limitation, legal, accounting and investment banking fees, and brokerage
and sales commissions), and any relocation expenses Incurred as a result
thereof, taxes paid or payable as a result thereof (after taking into account
any available tax credits or deductions and any tax sharing arrangements related
thereto), amounts required to be applied to the repayment of principal, premium
(if any) and interest on Indebtedness required (other than pursuant to Section
4.06(b)) to be paid as a result of such transaction, and any deduction of
appropriate amounts to be provided by the Issuer as a reserve in accordance with
GAAP against any liabilities associated with the asset disposed of in such
transaction and retained by the Issuer after such sale or other disposition
thereof, including, without limitation, pension and other post-employment
benefit liabilities and liabilities related to environmental matters or against
any indemnification obligations associated with such transaction.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements (including, without limitation, reimbursement
obligations with respect to letters of credit and bankers' acceptances), damages
and other liabilities payable under the documentation governing any
Indebtedness; provided that Obligations with respect to the Securities shall not
include fees or indemnifications in favor of the Trustee and other third parties
other than the Holders of the Securities.
"Offering Memorandum" means the Offering Memorandum dated
March 2, 1999 relating to the Issuer's 9 3/4% Senior Subordinated Notes due
2009.
"Officer" means the Chairman of the Board, Chief Executive
Officer, President, any Executive Vice President, Senior Vice President or Vice
President, the Treasurer or the Secretary of the Issuer.
"Officers' Certificate" means a certificate signed on behalf
of the Issuer by two Officers of the Issuer, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Issuer, that meets the requirements set
forth in this Indenture.
"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee. The counsel may be an employee of or
counsel to the Issuer or the Trustee.
"Pari Passu Indebtedness" means (i) with respect to the
Issuer, the Securities and any Indebtedness which ranks pari passu in right of
payment to the Securities and (ii) with respect to any Guarantor that is a
Subsidiary of the Issuer, its Guarantee and any Indebtedness which ranks pari
passu in right of payment to such Guarantor's Guarantee.
<PAGE>
14
"Permitted Holders" means Blackstone and the Management Group.
Any person or group whose acquisition of beneficial ownership constitutes a
Change of Control in respect of which a Change of Control Offer is made in
accordance with the requirements of this Indenture will thereafter, together
with its Affiliates, constitute an additional Permitted Holder.
"Permitted Investments" means (i) any Investment in the Issuer
or any Restricted Subsidiary; (ii) any Investment in Cash Equivalents or
Investment Grade Securities; (iii) any Investment by the Issuer or any
Restricted Subsidiary of the Issuer in a Person that is primarily engaged in a
Similar Business if as a result of such Investment (a) such Person becomes a
Restricted Subsidiary or (b) such Person, in one transaction or a series of
related transactions, is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Issuer or a Restricted Subsidiary; (iv) any Investment in securities or
other assets not constituting Cash Equivalents and received in connection with
an Asset Sale made pursuant to Section 4.06 or any other disposition of assets
not constituting an Asset Sale; (v) any Investment existing on the Closing Date;
(vi) advances to employees not in excess of $25,000,000 outstanding at any one
time in the aggregate; (vii) any Investment acquired by the Issuer or any of its
Restricted Subsidiaries (a) in exchange for any other Investment or accounts
receivable held by the Issuer or any such Restricted Subsidiary in connection
with or as a result of a bankruptcy, workout, reorganization or recapitalization
of the issuer of such other Investment or accounts receivable or (b) as a result
of a foreclosure by the Issuer or any of its Restricted Subsidiaries with
respect to any secured Investment or other transfer of title with respect to any
secured Investment in default; (viii) Hedging Obligations permitted under
Section 4.03(b)(x); (ix) any Investment in a Similar Business (other than an
Investment in an Unrestricted Subsidiary) having an aggregate Fair Market Value,
taken together with all other Investments made pursuant to this clause (ix), not
to exceed $175,000,000 at the time of such Investment (with the Fair Market
Value of each Investment being measured at the time made and without giving
effect to subsequent changes in value); provided, however, that, after giving
pro forma effect to any such Investment (including the Incurrence or assumption
of any Indebtedness in connection therewith) as if such Investment (and the
Incurrence or assumption of any such Indebtedness) had occurred on the first day
of the most recently completed four fiscal quarter period (subject to the last
sentence of the definition of "Fixed Charge Coverage Ratio") for which internal
financial statements are available, the Fixed Charge Coverage Ratio of the
Issuer for such period (subject to the last sentence of the definition of "Fixed
Charge Coverage Ratio") would have been at least 2.75 to 1.00; provided further,
however, that if any Investment pursuant to this clause (ix) is made in any
Person that is not a Restricted Subsidiary of the Issuer at the date of the
making of such Investment and such Person becomes a Restricted Subsidiary after
such date, such Investment shall thereafter be deemed to have been made pursuant
to clause (i) above and shall cease to have been made pursuant to this clause
(ix) for so long as such Person continues to be a Restricted Subsidiary; (x)
additional Investments having an aggregate Fair Market Value, taken together
with all other Investments made pursuant to this clause (x), not to exceed 10.0%
of Total Assets at the time of such Investment (with the Fair Market Value of
each Investment being measured at the time made and without giving effect to
subsequent changes in value); (xi) loans and advances to officers, directors and
employees for business-related travel expenses, moving expenses and other
similar expenses, in each case Incurred in the ordinary course of business;
(xii) Investments the payment for which consists of Equity Interests of the
Issuer (other than Disqualified Stock) or of Holdings; provided, however, that
such Equity Interests will not increase the
<PAGE>
15
amount available for Restricted Payments under Section 4.04(a)(3); (xiii) any
transaction to the extent it constitutes an Investment that is permitted by and
made in accordance with Section 4.07(b) (except transactions described in
Section 4.07(b)(ii), (vi) and (vii)); (xiv) Investments consisting of the
licensing or contribution of intellectual property pursuant to joint marketing
arrangements with other Persons; (xv) Guarantees issued in accordance with
Sections 4.03 and 4.13; (xvi) any Investment by Restricted Subsidiaries in other
Restricted Subsidiaries and Investments by Subsidiaries that are not Restricted
Subsidiaries in other Subsidiaries that are not Restricted Subsidiaries; (xvii)
Investments consisting of purchases and acquisitions of inventory, supplies,
materials and equipment or purchases of contract rights or licenses or leases of
intellectual property, in each case in the ordinary course of business; and
(xviii) any Investment in a Receivables Subsidiary or any Investment by a
Receivables Subsidiary in any other Person in connection with a Qualified
Receivables Financing, including Investments of funds held in accounts permitted
or required by the arrangements governing such Qualified Receivables Financing
or any related Indebtedness; provided, however, that any Investment in a
Receivables Subsidiary is in the form of a Purchase Money Note, contribution of
additional receivables or an equity interest.
"Permitted Junior Securities" shall mean debt or equity
securities of the Issuer or any successor corporation issued pursuant to a plan
of reorganization or readjustment of the Issuer that are subordinated to the
payment of all then-outstanding Senior Indebtedness of the Issuer at least to
the same extent that the Securities are subordinated to the payment of all
Senior Indebtedness of the Issuer on the Closing Date, so long as to the extent
that any Senior Indebtedness of the Issuer outstanding on the date of
consummation of any such plan of reorganization or readjustment is not paid in
full in cash or Cash Equivalents on such date, the holders of any such Senior
Indebtedness not so paid in full in cash have consented to the terms of such
plan of reorganization or readjustment.
"Permitted Liens" means, with respect to any Person, (a)
pledges or deposits by such Person under workmen's compensation laws,
unemployment insurance laws or similar legislation, or good faith deposits in
connection with bids, tenders, contracts (other than for the payment of
Indebtedness) or leases to which such Person is a party, or deposits to secure
public or statutory obligations of such Person or deposits of cash or United
States government bonds to secure surety or appeal bonds to which such Person is
a party, or deposits as security for contested taxes or import duties or for the
payment of rent, in each case Incurred in the ordinary course of business; (b)
Liens imposed by law, such as carriers', warehousemen's and mechanics' Liens, in
each case for sums not yet due or being contested in good faith by appropriate
proceedings or other Liens arising out of judgments or awards against such
Person with respect to which such Person shall then be proceeding with an appeal
or other proceedings for review; (c) Liens for taxes, assessments or other
governmental charges not yet due or payable or subject to penalties for
nonpayment or which are being contested in good faith by appropriate
proceedings; (d) Liens in favor of issuers of performance and surety bonds or
bid bonds or with respect to other regulatory requirements or letters of credit
issued pursuant to the request of and for the account of such Person in the
ordinary course of its business; (e) minor survey exceptions, minor
encumbrances, easements or reservations of, or rights of others for, licenses,
rights-of-way, sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning or other restrictions as to the use of real
properties or Liens incidental to the conduct of the business of such Person or
to the ownership of its properties which were not Incurred in connection with
Indebtedness and which do not in
<PAGE>
16
the aggregate materially adversely affect the value of said properties or
materially impair their use in the operation of the business of such Person; (f)
Liens securing Indebtedness permitted to be incurred pursuant to Section
4.03(b)(iv); (g) Liens existing on the Closing Date; (h) Liens on property or
shares of stock of a Person at the time such Person becomes a Subsidiary;
provided, however, such Liens are not created or Incurred in connection with, or
in contemplation of, such other Person becoming such a Subsidiary; provided
further, however, that such Liens may not extend to any other property owned by
the Issuer or any Restricted Subsidiary; (i) Liens on property at the time the
Issuer or a Restricted Subsidiary acquired the property, including any
acquisition by means of a merger or consolidation with or into the Issuer or any
Restricted Subsidiary; provided, however, that such Liens are not created or
Incurred in connection with, or in contemplation of, such acquisition; provided
further, however, that the Liens may not extend to any other property owned by
the Issuer or any Restricted Subsidiary; (j) Liens securing Indebtedness or
other obligations of a Restricted Subsidiary owing to the Issuer or another
Restricted Subsidiary permitted to be Incurred in accordance with Section 4.03;
(k) Liens securing Hedging Obligations so long as the related Indebtedness is,
and is permitted to be under this Indenture, secured by a Lien on the same
property securing such Hedging Obligations; (l) Liens on 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; (m) leases and subleases of real property which do not
materially interfere with the ordinary conduct of the business of the Issuer or
any of its Restricted Subsidiaries; (n) Liens arising from Uniform Commercial
Code financing statement filings regarding operating leases entered into by the
Issuer and its Restricted Subsidiaries in the ordinary course of business; (o)
Liens in favor the Issuer; (p) Liens on equipment of the Issuer granted in the
ordinary course of business to the Issuer's client at which such equipment is
located; (q) Liens on accounts receivable and related assets of the type
specified in the definition of "Receivables Financing" Incurred in connection
with a Qualified Receivables Financing; and (r) Liens to secure any refinancing,
refunding, extension, renewal or replacement (or successive refinancings,
refundings, extensions, renewals or replacements) as a whole, or in part, of any
Indebtedness secured by any Lien referred to in the foregoing clauses (f), (g),
(h), (i), (j), (k) and (o); provided, however, that (x) such new Lien shall be
limited to all or part of the same property that secured the original Lien (plus
improvements on such property) and (y) the Indebtedness secured by such Lien at
such time is not increased to any amount greater than the sum of (A) the
outstanding principal amount or, if greater, committed amount of the
Indebtedness described under clauses (f), (g), (h), (i), (j), (k) or (o) at the
time the original Lien became a Permitted Lien under this Indenture and (B) an
amount necessary to pay any fees and expenses, including premiums, related to
such refinancing, refunding, extension, renewal or replacement.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Preferred Stock" means any Equity Interest with preferential
right of payment of dividends or upon liquidation, dissolution, or winding up.
"Purchase Money Note" means a promissory note of a Receivables
Subsidiary evidencing a line of credit, which may be irrevocable, from the
Issuer or any
<PAGE>
17
Subsidiary of the Issuer to a Receivables Subsidiary in connection with a
Qualified Receivables Financing, which note (a) shall be repaid from cash
available to the Receivables Subsidiary, other than (i) amounts required to be
established as reserves, (ii) amounts paid to investors in respect of interest,
(iii) principal and other amounts owing to such investors and (iv) amounts paid
in connection with the purchase of newly generated receivables and (b) may be
subordinated to the payments described in clause (a).
"Qualified Receivables Financing" means any Receivables
Financing of a Receivables Subsidiary that meets the following conditions: (i)
the Board of Directors shall have determined in good faith that such Qualified
Receivables Financing (including financing terms, covenants, termination events
and other provisions) is in the aggregate economically fair and reasonable to
the Issuer and the Receivables Subsidiary, (ii) all sales of accounts receivable
and related assets to the Receivables Subsidiary are made at Fair Market Value
(as determined in good faith by the Issuer) and (iii) the financing terms,
covenants, termination events and other provisions thereof shall be market terms
(as determined in good faith by the Issuer) and may include Standard
Securitization Undertakings. The grant of a security interest in any accounts
receivable of the Issuer or any of its Restricted Subsidiaries (other than a
Receivables Subsidiary) to secure Bank Indebtedness shall not be deemed a
Qualified Receivables Financing. For purposes of this Indenture, the receivables
facility in existence on the Closing Date (and the initial replacement thereof
with substantially similar terms in the aggregate) shall be deemed to be a
Qualified Receivables Financing that is not recourse to the Issuer (except for
Standard Securitization Undertakings).
"Receivables Financing" means any transaction or series of
transactions that may be entered into by the Issuer or any of its Subsidiaries
pursuant to which the Issuer or any of its Subsidiaries may sell, convey or
otherwise transfer to (a) a Receivables Subsidiary (in the case of a transfer by
the Issuer or any of its Subsidiaries) and (b) any other Person (in the case of
a transfer by a Receivables Subsidiary), or may grant a security interest in,
any accounts receivable (whether now existing or arising in the future) of the
Issuer or any of its Subsidiaries, and any assets related thereto including,
without limitation, all collateral securing such accounts receivable, all
contracts and all guarantees or other obligations in respect of such accounts
receivable, proceeds of such accounts receivable and other assets which are
customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving accounts receivable.
"Receivables Repurchase Obligation" means any obligation of a
seller of receivables in a Qualified Receivables Financing to repurchase
receivables arising as a result of a breach of a representation, warranty or
covenant or otherwise, including as a result of a receivable or portion thereof
becoming subject to any asserted defense, dispute, off-set or counterclaim of
any kind as a result of any action taken by, any failure to take action by or
any other event relating to the seller.
"Receivables Subsidiary" means a Wholly Owned Restricted
Subsidiary of the Issuer (or another Person formed for the purposes of engaging
in a Qualified Receivables Financing with the Issuer in which the Issuer or any
Subsidiary of the Issuer makes an Investment and to which the Issuer or any
Subsidiary of the Issuer transfers accounts receivable and related assets) which
engages in no activities other than in connection with the financing of accounts
receivable of the Issuer and its Subsidiaries, all
<PAGE>
18
proceeds thereof and all rights (contractual or other), collateral and other
assets relating thereto, and any business or activities incidental or related to
such business, and which is designated by the Board of Directors (as provided
below) as a Receivables Subsidiary and (a) no portion of the Indebtedness or any
other obligations (contingent or otherwise) of which (i) is guaranteed by the
Issuer or any other Subsidiary of the Issuer (excluding guarantees of
obligations (other than the principal of, and interest on, Indebtedness)
pursuant to Standard Securitization Undertakings), (ii) is recourse to or
obligates the Issuer or any other Subsidiary of the Issuer in any way other than
pursuant to Standard Securitization Undertakings or (iii) subjects any property
or asset of the Issuer or any other Subsidiary of the Issuer, directly or
indirectly, contingently or otherwise, to the satisfaction thereof, other than
pursuant to Standard Securitization Undertakings, (b) with which neither the
Issuer nor any other Subsidiary of the Issuer has any material contract,
agreement, arrangement or understanding other than on terms which the Issuer
reasonably believes to be no less favorable to the Issuer or such Subsidiary
than those that might be obtained at the time from Persons that are not
Affiliates of the Issuer and (c) to which neither the Issuer nor any other
Subsidiary of the Issuer has any obligation to maintain or preserve such
entity's financial condition or cause such entity to achieve certain levels of
operating results. Any such designation by the Board of Directors shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
resolution of the Board of Directors giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions.
"Representative" means the trustee, agent or representative
(if any) for an issue of Senior Indebtedness.
"Restricted Investment" means an Investment other than a
Permitted Investment.
"Restricted Subsidiary" means any Subsidiary of the Issuer
other than an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired by the Issuer or a Restricted
Subsidiary whereby the Issuer or a Restricted Subsidiary transfers such property
to a Person and the Issuer or such Restricted Subsidiary leases it from such
Person, other than leases between the Issuer and a Restricted Subsidiary or
between Restricted Subsidiaries.
"S&P" means Standard and Poor's Ratings Group.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Issuer
secured by a Lien.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Senior Credit Documents" means the collective reference to
the Credit Agreement, the notes issued pursuant thereto and the guarantees
thereof, and the collateral documents relating thereto.
<PAGE>
19
"Senior Credit Facilities" means the term loan facilities and
revolving credit facility created and in effect pursuant to the Credit
Agreement.
"Senior Indebtedness" with respect to the Issuer or any
Guarantor means all Indebtedness and any Receivables Repurchase Obligation of
the Issuer or such Guarantor, including interest thereon (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Issuer or any Subsidiary of the Issuer at the
rate specified in the documentation with respect thereto whether or not a claim
for post-filing interest is allowed in such proceeding) and other amounts
(including fees, expenses, reimbursement obligations under letters of credit and
indemnities) owing in respect thereof, whether outstanding on the Closing Date
or thereafter Incurred, unless in the instrument creating or evidencing the same
or pursuant to which the same is outstanding it is provided that such
obligations are not superior, or are subordinated, in right of payment to the
Securities or such Guarantor's Guarantee, as applicable; provided, however, that
Senior Indebtedness shall not include, as applicable, (i) any obligation of the
Issuer to any Subsidiary of the Issuer (other than any Receivables Repurchase
Obligation), or of such Guarantor to the Issuer or any other Subsidiary of the
Issuer, (ii) any liability for Federal, state, local or other taxes owed or
owing by the Issuer or such Guarantor, (iii) any accounts payable or other
liability to trade creditors arising in the ordinary course of business
(including guarantees thereof or instruments evidencing such liabilities), (iv)
any Indebtedness or obligation of the Issuer or such Guarantor that by its terms
is subordinate or junior in any respect to any other Indebtedness or obligation
of the Issuer or such Guarantor, as applicable, including any Pari Passu
Indebtedness and any Subordinated Indebtedness, (v) any obligations with respect
to any Capital Stock, or (vi) any Indebtedness Incurred in violation of this
Indenture. If any Senior Indebtedness is disallowed, avoided or subordinated
pursuant to the provisions of Section 548 of Title 11 of the United States Code
or any applicable state fraudulent conveyance law, such Senior Indebtedness
nevertheless will constitute Senior Indebtedness.
"Shelf Registration Statement" has the meaning assigned to it
in the Registration Agreement dated the date hereof.
"Significant Subsidiary" means any Restricted Subsidiary that
would be a "Significant Subsidiary" of the Issuer within the meaning of Rule
1-02 under Regulation S-X promulgated by the SEC.
"Similar Business" means a business, the majority of whose
revenues are derived from the design and/or manufacture of driveline systems
and/or component parts for such systems, or the activities of the Issuer and its
Subsidiaries as of the Closing Date or any business or activity that is
reasonably similar thereto or a reasonable extension, development or expansion
thereof or ancillary thereto.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by the Issuer or any
Subsidiary of the Issuer which the Issuer has determined in good faith to be
customary in a Receivables Financing including, without limitation, those
relating to the servicing of the assets of a Receivables Subsidiary, it being
understood that any Receivables Repurchase Obligation shall be deemed to be a
Standard Securitization Undertaking.
"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the final payment of
principal of such security is
<PAGE>
20
due and payable, including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such security at the
option of the holder thereof upon the happening of any contingency beyond the
control of the issuer unless such contingency has occurred).
"Subordinated Indebtedness" means (a) with respect to the
Issuer, any Indebtedness of the Issuer which is by its terms subordinated in
right of payment to the Securities and (b) with respect to any Guarantor, any
Indebtedness of such Guarantor which is by its terms subordinated in right of
payment to its Guarantee.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity (other than a partnership,
joint venture or limited liability company) of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time of determination owned or controlled, directly
or indirectly, by such Person or one or more of the other Subsidiaries of that
Person or a combination thereof and (ii) any partnership, joint venture or
limited liability company of which (x) more than 50% of the capital accounts,
distribution rights, total equity and voting interests or general and limited
partnership interests, as applicable, are owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person or a combination thereof, whether in the form of membership, general,
special or limited partnership interests or otherwise and (y) such Person or any
Restricted Subsidiary of such Person is a controlling general partner or
otherwise controls such entity.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the Closing Date.
"Total Assets" means the total consolidated assets of the
Issuer and its Restricted Subsidiaries, as shown on the most recent balance
sheet of the Issuer.
"Trustee" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor.
"Trust Officer" means (i) any officer within the corporate
trust department of the Trustee, including any vice president, assistant vice
president, assistant secretary, assistant treasurer, trust officer or any other
officer of the Trustee who customarily performs functions similar to those
performed by the Persons who at the time shall be such officers, respectively,
or to whom any corporate trust matter is referred because of such person's
knowledge of and familiarity with the particular subject and (ii) who shall have
direct responsibility for the administration of this Indenture.
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Issuer that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Subsidiary of the Issuer (including any newly acquired or newly formed
Subsidiary of the Issuer) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Equity
<PAGE>
21
Interests or Indebtedness of, or owns or holds any Lien on any property of, the
Issuer or any other Subsidiary of the Issuer that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, that the Subsidiary to be so
designated and its Subsidiaries do not at the time of designation have and do
not thereafter Incur any Indebtedness pursuant to which the lender has recourse
to any of the assets of the Issuer or any of its Restricted Subsidiaries;
provided further, however, that either (a) the Subsidiary to be so designated
has total consolidated assets of $1,000 or less or (b) if such Subsidiary has
consolidated assets greater than $1,000, then such designation would be
permitted under Section 4.04. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
immediately after giving effect to such designation (x) (1) the Issuer could
Incur $1.00 of additional Indebtedness pursuant to Section 4.03(a) or (2) the
Fixed Charge Coverage Ratio for the Issuer and its Restricted Subsidiaries would
be greater than such ratio for the Issuer and its Restricted Subsidiaries
immediately prior to such designation, in each case on a pro forma basis taking
into account such designation and (y) no 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
resolution of the Board of Directors giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Stock" of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of the
Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness or Disqualified Stock, as the case may be, at any date, the
quotient obtained by dividing (i) the sum of the products of the number of years
from the date of determination to the date of each successive scheduled
principal payment of such Indebtedness or redemption or similar payment with
respect to such Disqualified Stock multiplied by the amount of such payment, by
(ii) the sum of all such payments.
"Wholly Owned Restricted Subsidiary" is any Wholly Owned
Subsidiary that is a Restricted Subsidiary.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of
such Person 100% of the outstanding Capital Stock or other ownership interests
of which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person and one
or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. Other Definitions.
Defined in
Term Section
---- ----------
<PAGE>
22
"Affiliate Transaction" ................................... 4.07(a)
"Asset Sale Offer" ........................................ 4.06(b)
"Bankruptcy Law" .......................................... 6.01
"Blockage Notice" ......................................... 10.03
"Change of Control Offer" ................................. 4.09(b)
"covenant defeasance option" .............................. 8.01(b)
"Custodian" ............................................... 6.01
"Event of Default" ........................................ 6.01
"Excess Proceeds" ......................................... 4.06(b)
"Guarantee Blockage Notice" ............................... 12.03
"Guaranteed Obligations" .................................. 11.01
"Guaranteed Payment Blockage Period" ...................... 12.03
"legal defeasance option" ................................. 8.01(b)
"Legal Holiday" ........................................... 13.08
"Offer Period" ............................................ 4.06(c)(2)
"pay its Guarantee" ....................................... 12.03
"pay the Securities" ...................................... 10.03
"Paying Agent" ............................................ 2.04
"Payment Blockage Period" ................................. 10.03
"protected purchaser" ..................................... 2.08
"Refinancing Indebtedness" ................................ 4.03(b)
"Refunding Capital Stock" ................................. 4.04(b)
"Registrar" ............................................... 2.04
"Restricted Payments" ..................................... 4.04(a)
"Retired Capital Stock" ................................... 4.04(b)
"Successor Company" ....................................... 5.01(a)
"Successor Guarantor" ..................................... 5.01(b)
SECTION 1.03. Incorporation by Reference of Trust Indenture
Act. This Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities and the
Guarantees.
"indenture security holder" means a Holder or Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Issuer, the
Guarantors and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
<PAGE>
23
SECTION 1.04. Rules of Construction. Unless the context
otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the
plural include the singular;
(6) unsecured Indebtedness shall not be deemed to be
subordinate or junior to Secured Indebtedness merely by virtue of its nature as
unsecured Indebtedness;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof that would
be shown on a balance sheet of the issuer dated such date prepared in accordance
with GAAP;
(8) the principal amount of any Preferred Stock shall be (i)
the maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE 2
The Securities
SECTION 2.01. Amount of Securities; Issuable in Series. The
aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is $400,000,000. All Securities shall mature on
March 1, 2009. The Securities may be issued in one or more series. All
Securities of any one series shall be substantially identical except as to
denomination.
With respect to any Additional Securities issued after the
Closing Date (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Securities
pursuant to Section 2.07, 2.08, 2.09, 2.10 or 3.06 or the Appendix), there shall
be (i) established in or pursuant to a resolution of the Board of Directors and
(ii) (A) set forth or determined in the manner provided in an Officers'
Certificate or (B) established in one or more indentures supplemental hereto,
prior to the issuance of such Additional Securities:
(1) whether such Additional Securities shall be issued as part
of a new or existing series of Securities and the title of such
Additional Securities (which, if a new series of Securities, shall
distinguish the Additional Securities of the series from Securities of
any other series);
<PAGE>
24
(2) the aggregate principal amount of such Additional
Securities which may be authenticated and delivered under this
Indenture, which shall be in an aggregate principal amount not to
exceed $100,000,000 (except for Securities authenticated and delivered
upon registration of transfer of, or in exchange for, or in lieu of,
other Securities of the same series pursuant to Section 2.07, 2.08,
2.09, 2.10 or 3.06 or the Appendix and except for Securities which,
pursuant to Section 2.03, are deemed never to have been authenticated
and delivered hereunder);
(3) the issue price and issuance date of such Additional
Securities, including the date from which interest on such Additional
Securities shall accrue;
(4) if applicable, that such Additional Securities shall be
issuable in whole or in part in the form of one or more Global
Securities (as defined in the Appendix) and, in such case, the
respective depositaries for such Global Securities, the form of any
legend or legends which shall be borne by such Global Securities in
addition to or in lieu of those set forth in Exhibit A hereto and any
circumstances in addition to or in lieu of those set forth in Section
2.3 of the Appendix in which any such Global Security may be exchanged
in whole or in part for Additional Securities registered, or any
transfer of such Global Security in whole or in part may be registered,
in the name or names of Persons other than the depositary for such
Global Security or a nominee thereof; and
(5) if applicable, that such Additional Securities which are
not Transfer Restricted Securities shall not be issued in the form of
Initial Securities as set forth in Exhibit A, but shall be issued in
the form of Exchange Securities as set forth in Exhibit B.
If any of the terms of any Additional Securities are
established by action taken pursuant to a resolution of the Board of Directors,
a copy of an appropriate record of such action shall be certified by the
Secretary or any Assistant Secretary of the Issuer and delivered to the Trustee
at or prior to the delivery of the Officers' Certificate or the indenture
supplemental hereto setting forth the terms of the Additional Securities.
SECTION 2.02. Form and Dating. Certain provisions relating to
the Original Securities, the Additional Securities, the Private Exchange
Securities and the Exchange Securities are set forth in the Appendix, which is
hereby incorporated in and expressly made a part of this Indenture. The (i)
Original Securities and the Trustee's certificate of authentication, (ii)
Private Exchange Securities and the Trustee's certificate of authentication and
(iii) any Additional Securities (if issued as Transfer Restricted Securities (as
defined in the Appendix)) and the Trustee's certificate of authentication shall
each be substantially in the form of Exhibit A hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The Exchange
Securities and any Additional Securities issued other than as Transfer
Restricted Securities and the Trustee's certificate of authentication shall each
be substantially in the form of Exhibit B hereto, which is hereby incorporated
in and expressly made a part of this Indenture. The Securities may have
notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Issuer or any Guarantor is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Issuer). Each Security shall be dated the date of its authentication. The
Securities shall
<PAGE>
25
be issuable only in registered form without interest coupons and only in
denominations of $1,000 and integral multiples thereof.
SECTION 2.03. Execution and Authentication. One or more
Officers shall sign the Securities for the Issuer by manual or facsimile
signature.
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate and make available for delivery
Securities as set forth in the Appendix.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Issuer to authenticate the Securities. Any such appointment
shall be evidenced by an instrument signed by a Trust Officer, a copy of which
shall be furnished to the Issuer. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as any Registrar, Paying Agent or agent for service of notices and
demands.
SECTION 2.04. Registrar and Paying Agent. The Issuer shall
maintain an office or agency where Securities may be presented for registration
of transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Issuer may have 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-registrars. The Issuer initially appoints the
Trustee as (i) Registrar and Paying Agent in connection with the Securities and
(ii) the Securities Custodian (as defined in the Appendix) with respect to the
Global Securities.
The Issuer shall enter into an appropriate agency agreement
with any Registrar or Paying Agent not a party to this Indenture, which shall
incorporate the terms of the TIA. The agreement shall implement the provisions
of this Indenture that relate to such agent. The Issuer shall notify the Trustee
of the name and address of any such agent. If the Issuer fails to maintain a
Registrar or Paying Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation therefor pursuant to Section 7.07. The Issuer or any
of its domestically organized Wholly Owned Subsidiaries may act as Paying Agent
or Registrar.
The Issuer may remove any Registrar or Paying Agent upon
written notice to such Registrar or Paying Agent and to the Trustee; provided,
however, that no such removal shall become effective until (1) acceptance of an
appointment by a successor as evidenced by an appropriate agreement entered into
by the Issuer and such successor Registrar or Paying Agent, as the case may be,
and delivered to the Trustee or (2) notification to the Trustee that the Trustee
shall serve as Registrar or Paying Agent
<PAGE>
26
until the appointment of a successor in accordance with clause (1) above. The
Registrar or Paying Agent may resign at any time upon written notice; provided,
however, that the Trustee may resign as Paying Agent or Registrar only if the
Trustee also resigns as Trustee in accordance with Section 7.08.
SECTION 2.05. Paying Agent To Hold Money in Trust. Prior to
each due date of the principal and interest on any Security, the Issuer shall
deposit with the Paying Agent (or if the Issuer or a Subsidiary is acting as
Paying Agent, segregate and hold in trust for the benefit of the Persons
entitled thereto) a sum sufficient to pay such principal and interest when so
becoming due. The Issuer shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Securityholders or the Trustee all money held by the Paying Agent for
the payment of principal of or interest on the Securities and shall notify the
Trustee of any default by the Issuer in making any such payment. If the Issuer
or a Subsidiary of the Issuer acts as Paying Agent, it shall segregate the money
held by it as Paying Agent and hold it as a separate trust fund. The Issuer at
any time may require a Paying Agent to pay all money held by it to the Trustee
and to account for any funds disbursed by the Paying Agent. Upon complying with
this Section, the Paying Agent shall have no further liability for the money
delivered to the Trustee.
SECTION 2.06. Securityholder Lists. The Trustee shall preserve
in as current a form as is reasonably practicable the most recent list available
to it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Issuer shall furnish, or cause the Registrar to furnish, to the
Trustee, in writing at least five Business Days before each interest payment
date and at such other times as the Trustee may request in writing, a list in
such form and as of such date as the Trustee may reasonably require of the names
and addresses of Securityholders.
SECTION 2.07. Transfer and Exchange. The Securities shall be
issued in registered form and shall be transferable only upon the surrender of a
Security for registration of transfer and in compliance with the Appendix. When
a Security is presented to the Registrar with a request to register a transfer,
the Registrar shall register the transfer as requested if the requirements of
Section 8-401(a)(l) of the Uniform Commercial Code are met. When Securities are
presented to the Registrar with a request to exchange them for an equal
principal amount of Securities of other denominations, the Registrar shall make
the exchange as requested if the same requirements are met. To permit
registration of transfers and exchanges, the Issuer shall execute and the
Trustee shall authenticate Securities at the Registrar's request. The Issuer may
require payment of a sum sufficient to pay all taxes, assessments or other
governmental charges in connection with any transfer or exchange pursuant to
this Section. The Issuer shall not be required to make and the Registrar need
not register transfers or exchanges of Securities selected for redemption
(except, in the case of Securities to be redeemed in part, the portion thereof
not to be redeemed) or any Securities for a period of 15 days before a selection
of Securities to be redeemed.
Prior to the due presentation for registration of transfer of
any Security, the Issuer, the Guarantors, the Trustee, the Paying Agent, and the
Registrar may deem and treat the Person in whose name a Security is registered
as the absolute owner of such Security for the purpose of receiving payment of
principal of and interest, if any, on such Security and for all other purposes
whatsoever, whether or not such Security is overdue,
<PAGE>
27
and none of the Issuer, any Guarantor, the Trustee, the Paying Agent, or the
Registrar shall be affected by notice to the contrary.
Any Holder of a Global Security shall, by acceptance of such
Global Security, agree that transfers of beneficial interest in such Global
Security may be effected only through a book-entry system maintained by (i) the
Holder of such Global Security (or its agent) or (ii) any Holder of a beneficial
interest in such Global Security, and that ownership of a beneficial interest in
such Global Security shall be required to be reflected in a book entry.
All Securities issued upon any transfer or exchange pursuant
to the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities surrendered
upon such transfer or exchange.
SECTION 2.08. Replacement Securities. If a mutilated Security
is surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Issuer shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met, such that the Holder (i)
satisfies the Issuer or the Trustee within a reasonable time after he has notice
of such loss, destruction or wrongful taking and the Registrar does not register
a transfer prior to receiving such notification, (ii) makes such request to the
Issuer or the Trustee prior to the Security being acquired by a protected
purchaser as defined in Section 8-303 of the Uniform Commercial Code (a
"protected purchaser") and (iii) satisfies any other reasonable requirements of
the Trustee. If required by the Trustee or the Issuer, such Holder shall furnish
an indemnity bond sufficient in the judgment of the Trustee to protect the
Issuer, the Trustee, the Paying Agent and the Registrar from any loss that any
of them may suffer if a Security is replaced. The Issuer and the Trustee may
charge the Holder for their expenses in replacing a Security. In the event any
such mutilated, lost, destroyed or wrongfully taken Security has become or is
about to become due and payable, the Issuer in its discretion may pay such
Security instead of issuing a new Security in replacement thereof.
Every replacement Security is an additional obligation of the
Issuer.
The provisions of this Section 2.08 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, lost, destroyed or wrongfully taken
Securities.
SECTION 2.09. Outstanding Securities. Securities outstanding
at any time are all Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancelation and those described in
this Section as not outstanding. Subject to Section 13.06, a Security does not
cease to be outstanding because the Issuer or an Affiliate of the Issuer holds
the Security.
If a Security is replaced pursuant to Section 2.08, it ceases
to be outstanding unless the Trustee and the Issuer receive proof satisfactory
to them that the replaced Security is held by a protected purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date money
sufficient to pay all principal and interest and liquidated damages payable on
that date with respect to the Securities (or
<PAGE>
28
portions thereof) to be redeemed or maturing, as the case may be, and the Paying
Agent is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture, then on and after that date such
Securities (or portions thereof) cease to be outstanding and interest on them
ceases to accrue.
SECTION 2.10. Temporary Securities. In the event that
Definitive Securities (as defined in the Appendix) are to be issued under the
terms of this Indenture, until such Definitive Securities are ready for
delivery, the Issuer may prepare and the Trustee shall authenticate temporary
Securities. Temporary Securities shall be substantially in the form of
Definitive Securities but may have variations that the Issuer considers
appropriate for temporary Securities. Without unreasonable delay, the Issuer
shall prepare and the Trustee shall authenticate Definitive Securities and
deliver them in exchange for temporary Securities upon surrender of such
temporary Securities at the office or agency of the Issuer, without charge to
the Holder.
SECTION 2.11. Cancelation. The Issuer at any time may deliver
Securities to the Trustee for cancelation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel all
Securities surrendered for registration of transfer, exchange, payment or
cancelation and deliver canceled Securities to the Issuer pursuant to written
direction by an Officer. The Issuer may not issue new Securities to replace
Securities it has redeemed, paid or delivered to the Trustee for cancelation.
The Trustee shall not authenticate Securities in place of canceled Securities
other than pursuant to the terms of this Indenture.
SECTION 2.12. Defaulted Interest. If the Issuer defaults in a
payment of interest on the Securities, the Issuer shall pay the defaulted
interest (plus interest on such defaulted interest to the extent lawful) in any
lawful manner. The Issuer may pay the defaulted interest to the Persons who are
Securityholders on a subsequent special record date. The Issuer shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail or cause to be
mailed to each Securityholder a notice that states the special record date, the
payment date and the amount of defaulted interest to be paid.
SECTION 2.13. CUSIP Numbers. The Issuer in issuing the
Securities may use "CUSIP" numbers (if then generally in use) and, if so, the
Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to
Holders; provided, however, that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Issuer, upon becoming aware of any change in such
"CUSIP" numbers, shall promptly notify the Trustee of such change.
<PAGE>
29
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee. If the Issuer elects to
redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date and the principal amount of Securities
to be redeemed.
The Issuer shall give each notice to the Trustee provided for
in this Section at least 30 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Issuer to the effect that such
redemption shall comply with the conditions herein. If fewer than all the
Securities are to be redeemed, the record date relating to such redemption shall
be selected by the Issuer and given to the Trustee, which record date shall be
not fewer than 15 days after the date of notice to the Trustee. Any such notice
may be canceled at any time prior to notice of such redemption being mailed to
any Holder and shall thereby be void and of no effect.
SECTION 3.02. Selection of Securities to be Redeemed. In the
case of any partial redemption, selection of the Securities for redemption shall
be made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which such Securities are listed, or if
such Securities are not so listed, on a pro rata basis, by lot or by such other
method as the Trustee shall deem fair and appropriate (and in such manner as
complies with applicable legal requirements); provided that no Securities of
$1,000 or less shall be redeemed in part. If any Security is to be redeemed in
part only, the notice of redemption relating to such Security shall state the
portion of its principal amount thereof to be redeemed. A new Security in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Security.
Provisions of this Indenture that apply to Securities called for redemption also
apply to portions of Securities called for redemption. The Trustee shall notify
the Issuer promptly of the Securities or portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not
more than 60 days before a date for redemption of Securities, the Issuer shall
mail a notice of redemption by first-class mail to each Holder of Securities to
be redeemed at such Holder's registered address.
The notice shall identify the Securities to be redeemed and
shall state:
(1) the redemption date;
(2) the redemption price and the amount of accrued interest to
the redemption date;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
<PAGE>
30
(5) if fewer than all the outstanding Securities are to be
redeemed, the certificate numbers and principal amounts of the particular
Securities to be redeemed;
(6) that, unless the Issuer defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment pursuant to
the terms of this Indenture, interest on Securities (or portion thereof) called
for redemption ceases to accrue on and after the redemption date;
(7) the CUSIP number, if any, printed on the Securities being
redeemed; and
(8) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Issuer's request, the Trustee shall give the notice of
redemption in the Issuer's name and at the Issuer's expense. In such event, the
Issuer shall provide the Trustee with the information required by this Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest and liquidated damages, if
any, to the redemption date; provided, however, that if the redemption date is
after a regular record date and on or prior to the interest payment date, the
accrued interest shall be payable to the Securityholder of the redeemed
Securities registered on the relevant record date. Failure to give notice or any
defect in the notice to any Holder shall not affect the validity of the notice
to any other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to 10:00 a.m.
Eastern Standard Time on the redemption date, the Issuer shall deposit with the
Paying Agent (or, if the Issuer or a Subsidiary is the Paying Agent, shall
segregate and hold in trust) money sufficient to pay the redemption price of and
accrued interest and liquidated damages, if any, on all Securities to be
redeemed on that date other than Securities or portions of Securities called for
redemption that have been delivered by the Issuer to the Trustee for
cancelation. On and after the redemption date, interest will cease to accrue on
Securities or portions thereof called for redemption so long as the Issuer has
deposited with the Paying Agent funds sufficient to pay the principal of, plus
accrued and unpaid interest and liquidated damages (if any) on, the Securities
to be redeemed.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Issuer shall execute and the Trustee
shall authenticate for the Holder (at the Issuer's expense) a new Security equal
in principal amount to the unredeemed portion of the Security surrendered.
<PAGE>
31
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities. The Issuer shall promptly
pay the principal of and interest on the Securities on the dates and in the
manner provided in the Securities and in this Indenture. Principal and interest
shall be considered paid on the date due if on such date the Trustee or the
Paying Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due and the Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture.
The Issuer shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. Reports and Other Information. Notwithstanding
that the Issuer may not be subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act or otherwise report on an annual and quarterly
basis on forms provided for such annual and quarterly reporting pursuant to
rules and regulations promulgated by the SEC, the Issuer shall file with the SEC
(and provide the Trustee and Holders with copies thereof, without cost to each
Holder, within 15 days after it files them with the SEC), (i) within 90 days
after the end of each fiscal year, annual reports on Form 10-K (or any successor
or comparable form) containing the information required to be contained therein
(or required in such successor or comparable form), (ii) within 45 days after
the end of each of the first three fiscal quarters of each fiscal year, reports
on Form 10-Q (or any successor or comparable form), (iii) promptly from time to
time after the occurrence of an event required to be therein reported, such
other reports on Form 8-K (or any successor or comparable form), and (iv) any
other information, documents and other reports which the Issuer would be
required to file with the SEC if it were subject to Section 13 or 15(d) of the
Exchange Act; provided, however, the Issuer shall not be so obligated to file
such reports with the SEC if the SEC does not permit such filing, in which event
the Issuer will make available such information to prospective purchasers of
Securities, in addition to providing such information to the Trustee and the
Holders, in each case within 15 days after the time the Issuer would be required
to file such information with the SEC if it were subject to Section 13 or 15(d)
of the Exchange Act. Notwithstanding the foregoing, such requirements shall be
deemed satisfied prior to the commencement of the Exchange Offer or the
effectiveness of the Shelf Registration Statement by the filing with the SEC of
the Exchange Offer Registration Statement and/or Shelf Registration Statement,
and any amendments thereto, with such financial information that satisfies
Regulation S-X of the Securities Act. In the event that (i) the rules and
regulations of the SEC permit the Issuer and Holdings to report at the Holdings'
level on a consolidated basis and (ii) Holdings is not engaged in any business
in any material respect other than incidental to its ownership of the Capital
Stock of the Issuer, such consolidated reporting at the Holdings' level in a
manner consistent with that described in this Section 4.02 for the Issuer will
satisfy the requirements of this Section 4.02.
SECTION 4.03. Limitation on Incurrence of Indebtedness and
Issuance of Disqualified Stock and Preferred Stock. (a)(i) The Issuer shall not,
and shall not permit any of its Restricted Subsidiaries to, directly or
indirectly, Incur any Indebtedness
<PAGE>
32
(including Acquired Indebtedness) or issue any shares of Disqualified Stock and
(ii) the Issuer shall not permit any of its Restricted Subsidiaries to issue any
shares of Preferred Stock; provided, however, that the Issuer and any Restricted
Subsidiary that is a Guarantor may Incur Indebtedness (including Acquired
Indebtedness) or issue shares of Disqualified Stock and any Restricted
Subsidiary that is a Guarantor may issue shares of Preferred Stock, in each case
if the Fixed Charge Coverage Ratio of the Issuer for the most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is Incurred
or such Disqualified Stock or Preferred Stock is issued would have been at least
2.00 to 1.00 determined on a pro forma basis (including a pro forma application
of the net proceeds therefrom), as if the additional Indebtedness had been
Incurred, or the Disqualified Stock or Preferred Stock had been issued, as the
case may be, and the application of proceeds therefrom had occurred at the
beginning of such four-quarter period.
(b) Section 4.03(a) will not apply to:
(i) the Incurrence by the Issuer or its Restricted
Subsidiaries of Indebtedness under the Credit Agreement and the
issuance and creation of letters of credit and bankers' acceptances
thereunder (with letters of credit and bankers' acceptances being
deemed to have a principal amount equal to the face amount thereof) up
to an aggregate principal amount of $850,000,000 outstanding at any one
time;
(ii) the Incurrence by the Issuer and the Guarantors of
Indebtedness represented by the Original Securities (not including any
Additional Securities) and any Exchange Securities in respect thereof
and the Guarantees, as applicable;
(iii) Indebtedness existing on the Closing Date (other than
Indebtedness described in clauses (i) and (ii) above);
(iv) Indebtedness (including Capitalized Lease Obligations)
Incurred by the Issuer or any of its Restricted Subsidiaries to finance
the purchase, lease or improvement of property (real or personal) or
equipment (whether through the direct purchase of assets or the Capital
Stock of any Person owning such assets) in an aggregate principal
amount which, when aggregated with the principal amount of all other
Indebtedness then outstanding and Incurred pursuant to this clause
(iv), does not exceed 5.0% of Total Assets at the time of Incurrence;
(v) Indebtedness Incurred by the Issuer or any of its
Restricted Subsidiaries constituting reimbursement obligations with
respect to letters of credit issued in the ordinary course of business,
including without limitation letters of credit in respect of workers'
compensation claims, health, disability or other employee benefits or
property, casualty or liability insurance or self-insurance, or other
Indebtedness with respect to reimbursement type obligations regarding
workers' compensation claims; provided, however, that upon the drawing
of such letters of credit, such obligations are reimbursed within 30
days following such drawing;
(vi) Indebtedness arising from agreements of the Issuer or a
Restricted Subsidiary providing for indemnification, adjustment of
purchase price or similar
<PAGE>
33
obligations, in each case, Incurred in connection with the disposition
of any business, assets or a Subsidiary of the Issuer in accordance
with the terms of this Indenture, other than guarantees of Indebtedness
Incurred by any Person acquiring all or any portion of such business,
assets or Subsidiary for the purpose of financing such acquisition;
(vii) Indebtedness of the Issuer to a Restricted
Subsidiary of the Issuer; provided that any such Indebtedness
is subordinated in right of payment to the Securities;
provided further that any subsequent issuance or transfer of
any Capital Stock or any other event which results in any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary of
the Issuer or any other subsequent transfer of any such
Indebtedness (except to the Issuer or another Restricted
Subsidiary) shall be deemed, in each case to be an Incurrence
of such Indebtedness;
(viii) shares of Preferred Stock of a Restricted
Subsidiary issued to the Issuer or another Restricted
Subsidiary of the Issuer; provided that any subsequent
issuance or transfer of any Capital Stock or any other event
which results in any such Restricted Subsidiary ceasing to be
a Restricted Subsidiary or any other subsequent transfer of
any such shares of Preferred Stock (except to the Issuer or
another Restricted Subsidiary of the Issuer) shall be deemed,
in each case, to be an issuance of shares of Preferred Stock;
(ix) Indebtedness of a Restricted Subsidiary to the
Issuer or another Restricted Subsidiary of the Issuer;
provided that (A) any such Indebtedness is made pursuant to an
intercompany note and (B) if a Guarantor incurs such
Indebtedness to a Restricted Subsidiary that is not a
Guarantor such Indebtedness is subordinated in right of
payment to the Guarantee of such Guarantor; provided further
that any subsequent issuance or transfer of any Capital Stock
or any other event which results in any Restricted Subsidiary
lending such Indebtedness ceasing to be a Restricted
Subsidiary or any other subsequent transfer of any such
Indebtedness (except to the Issuer or another Restricted
Subsidiary of the Issuer) shall be deemed, in each case, to be
an Incurrence of such Indebtedness;
(x) Hedging Obligations that are Incurred in the
ordinary course of business (A) for the purpose of fixing or
hedging interest rate risk with respect to any Indebtedness
that is permitted by the terms of this Indenture to be
outstanding, (B) for the purpose of fixing or hedging currency
exchange rate risk with respect to any currency exchanges or
(C) for the purpose of fixing or hedging commodity price risk
with respect to any commodity purchases;
(xi) obligations in respect of performance, bid and
surety bonds and completion guarantees provided by the Issuer
or any Restricted Subsidiary in the ordinary course of
business;
(xii) Indebtedness or Disqualified Stock of the
Issuer or any Restricted Subsidiary not otherwise permitted
hereunder in an aggregate principal amount, which when
aggregated with the principal amount or liquidation preference
of all other Indebtedness and Disqualified Stock then
outstanding and Incurred pursuant to this clause (xii), does
not exceed $125,000,000 at any one time outstanding (it being
understood that any Indebtedness Incurred under this clause
(xii) shall cease to be deemed Incurred or outstanding for
purposes of this clause (xii) but shall be
<PAGE>
34
deemed Incurred for purposes of Section 4.03(a) from and after
the first date on which the Issuer could have Incurred such
Indebtedness under Section 4.03(a) without reliance upon this
clause (xii));
(xiii) any guarantee by the Issuer or a Guarantor of
Indebtedness or other obligations of the Issuer or any of its
Restricted Subsidiaries so long as the Incurrence of such
Indebtedness Incurred by the Issuer or such Restricted
Subsidiary is permitted under the terms of this Indenture;
provided that if such Indebtedness is by its express terms
subordinated in right of payment to the Securities or the
Guarantee of such Restricted Subsidiary, as applicable, any
such guarantee of such Guarantor with respect to such
Indebtedness shall be subordinated in right of payment to such
Guarantor's Guarantee with respect to the Securities
substantially to the same extent as such Indebtedness is
subordinated to the Securities or the Guarantee of such
Restricted Subsidiary, as applicable;
(xiv) the Incurrence by the Issuer or any of its
Restricted Subsidiaries of Indebtedness which serves to refund
or refinance any Indebtedness Incurred as permitted under
Section 4.03(a) and clauses (ii), (iii), (iv) and (xv) of this
Section 4.03(b), or any Indebtedness issued to so refund or
refinance such Indebtedness (subject to the following proviso,
"Refinancing Indebtedness") prior to its respective maturity;
provided, however, that such Refinancing Indebtedness (A) has
a Weighted Average Life to Maturity at the time such
Refinancing Indebtedness is Incurred which is not less than
the remaining Weighted Average Life to Maturity of the
Indebtedness being refunded or refinanced, (B) has a Stated
Maturity which is no earlier than the Stated Maturity of the
Indebtedness being refunded or refinanced, (C) to the extent
such Refinancing Indebtedness refinances Indebtedness pari
passu with the Securities or the Guarantee of such Restricted
Subsidiary, as applicable, is pari passu with the Securities
or the Guarantee of such Restricted Subsidiary, as applicable,
(D) is Incurred in an aggregate principal amount (or if issued
with original issue discount, an aggregate issue price) that
is equal to or less than the aggregate principal amount (or if
issued with original issue discount, the aggregate accreted
value) then outstanding of the Indebtedness being refinanced
plus premium and fees Incurred in connection with such
refinancing, and (E) shall not include (x) Indebtedness of a
Restricted Subsidiary that is not a Guarantor that refinances
Indebtedness of the Issuer or (y) Indebtedness of the Issuer
or a Restricted Subsidiary that refinances Indebtedness of an
Unrestricted Subsidiary; and provided further that subclauses
(A) and (B) of this clause (xiv) will not apply to any
refunding or refinancing of any Senior Indebtedness;
(xv) Indebtedness or Disqualified Stock of Persons
that are acquired by the Issuer or any of its Restricted
Subsidiaries or merged into a Restricted Subsidiary in
accordance with the terms of this Indenture; provided,
however, that such Indebtedness or Disqualified Stock is not
Incurred in contemplation of such acquisition or merger or to
provide all or a portion of the funds or credit support
required to consummate such acquisition or merger; provided
further, however, that after giving effect to such acquisition
and the Incurrence of such Indebtedness either (A) the Issuer
would be permitted to Incur at least $1.00 of additional
Indebtedness pursuant to Section 4.03(a) or (B) the Fixed
Charge Coverage Ratio would be greater than immediately prior
to such acquisition;
<PAGE>
35
(xvi) Indebtedness Incurred by a Receivables
Subsidiary in a Qualified Receivables Financing that is not
recourse to the Issuer or any Restricted Subsidiary of the
Issuer (except for Standard Securitization Undertakings);
(xvii) Indebtedness arising from the honoring by a
bank or other financial institution of a check, draft or
similar instrument drawn against insufficient funds in the
ordinary course of business, provided that such Indebtedness
is extinguished within two Business Days of its Incurrence;
(xviii) Indebtedness of the Issuer or any Restricted
Subsidiary of the Issuer supported by a letter of credit
issued pursuant to the Credit Agreement, in a principal amount
not in excess of the stated amount of such letter of credit;
and
(xix) Contribution Indebtedness.
(c) Notwithstanding the foregoing, neither the Issuer nor any
Subsidiary that is a Guarantor may Incur any Indebtedness pursuant to Section
4.03(b) above if the proceeds thereof are used, directly or indirectly, to
repay, prepay, redeem, defease, retire, refund or refinance any Subordinated
Indebtedness unless such Indebtedness will be subordinated to the Securities or
such Guarantor's Guarantee, as applicable, to at least the same extent as such
Subordinated Indebtedness. For purposes of determining compliance with this
Section 4.03, in the event that an item of Indebtedness meets the criteria of
more than one of the categories of permitted Indebtedness described in clauses
4.03(b)(i) through (xix) above or is entitled to be Incurred pursuant to Section
4.03(a), the Issuer shall, in its sole discretion, classify or reclassify such
item of Indebtedness in any manner that complies with this covenant and such
item of Indebtedness will be treated as having been Incurred pursuant to only
one of such clauses of Section 4.03(b) or pursuant to Section 4.03(a), except as
otherwise set forth in clause (xii). Accrual of interest, the accretion of
accreted value and the payment of interest in the form of additional
Indebtedness will not be deemed to be an Incurrence of Indebtedness for purposes
of this Section 4.03.
SECTION 4.04. Limitation on Restricted Payments. (a) The
Issuer shall not, and shall not permit any of its Restricted Subsidiaries to,
directly or indirectly: (i) declare or pay any dividend or make any distribution
on account of the Issuer's or any of its Restricted Subsidiaries' Equity
Interests, including any payment made in connection with any merger or
consolidation involving the Issuer (other than (A) dividends or distributions by
the Issuer payable solely in Equity Interests (other than Disqualified Stock) of
the Issuer or (B) dividends or distributions by a Restricted Subsidiary so long
as, in the case of any dividend or distribution payable on or in respect of any
class or series of securities issued by a Restricted Subsidiary other than a
Wholly Owned Restricted Subsidiary, the Issuer or a Restricted Subsidiary
receives at least its pro rata share of such dividend or distribution in
accordance with its Equity Interests in such class or series of securities);
(ii) purchase or otherwise acquire or retire for value any Equity Interests of
Holdings or the Issuer; (iii) make any principal payment on, or redeem,
repurchase, defease or otherwise acquire or retire for value, in each case prior
to any scheduled repayment or scheduled maturity, any Subordinated Indebtedness
(other than the payment, redemption, repurchase, defeasance, acquisition or
retirement of (A) Subordinated Indebtedness in anticipation of satisfying a
sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of such payment, redemption, repurchase,
defeasance, acquisition or retirement and
<PAGE>
36
(B) Indebtedness permitted under clauses (vii) and (ix) of Section 4.03(b)); or
(iv) make any Restricted Investment (all such payments and other actions set
forth in clauses (i) through (iv) above being collectively referred to as
"Restricted Payments"), unless, at the time of such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(2) immediately after giving effect to such transaction on a
pro forma basis, the Issuer could Incur $1.00 of additional
Indebtedness under Section 4.03(a); and
(3) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Issuer and its
Restricted Subsidiaries after the Closing Date (including Restricted
Payments permitted by clauses (i), (iv) (only to the extent of one-half
of the amounts paid pursuant to such clause), (vi) and (viii) of
Section 4.04(b), but excluding all other Restricted Payments permitted
by Section 4.04(b)), is less than the sum of, without duplication, (A)
50% of the Consolidated Net Income of the Issuer for the period (taken
as one accounting period) from January 1, 1999 to the end of the
Issuer's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted
Payment (or, in the case such Consolidated Net Income for such period
is a deficit, minus 100% of such deficit), plus (B) 100% of the
aggregate net proceeds, including cash and the Fair Market Value (as
determined in accordance with the next succeeding sentence) of property
other than cash, received by the Issuer since the Closing Date from the
issue or sale of Equity Interests of the Issuer (excluding Refunding
Capital Stock (as defined below), Designated Preferred Stock, Excluded
Contributions and Disqualified Stock), including Equity Interests
issued upon conversion of Indebtedness or upon exercise of warrants or
options (other than an issuance or sale to a Subsidiary of the Issuer
or an employee stock ownership plan or trust established by the Issuer
or any of its Subsidiaries), plus (C) 100% of the aggregate amount of
contributions to the capital of the Issuer received in cash and the
Fair Market Value (as determined in accordance with the next succeeding
sentence) of property other than cash since the Closing Date (other
than Excluded Contributions, Refunding Capital Stock, Designated
Preferred Stock, Disqualified Stock and the Cash Contribution Amount),
plus (D) 100% of the aggregate amount received in cash and the Fair
Market Value (as determined in accordance with the next succeeding
sentence) of property (other than cash) received from (x) the sale or
other disposition (other than to the Issuer or a Restricted Subsidiary)
of Restricted Investments made by the Issuer and its Restricted
Subsidiaries and from repurchases and redemptions of such Restricted
Investments from the Issuer and its Restricted Subsidiaries by any
Person (other than the Issuer or any of its Subsidiaries) and from
repayments of loans or advances which constituted Restricted
Investments, (y) the sale (other than to the Issuer or a Restricted
Subsidiary) of the Capital Stock of an Unrestricted Subsidiary or (z) a
distribution or dividend from an Unrestricted Subsidiary, plus (E) in
the event any Unrestricted Subsidiary has been redesignated as a
Restricted Subsidiary or has been merged, consolidated or amalgamated
with or into, or transfers or conveys its assets to, or is liquidated
into, the Issuer or a Restricted Subsidiary, the Fair Market Value (as
determined in good faith by the Issuer) of
<PAGE>
37
the Investment of the Issuer in such Unrestricted Subsidiary at the
time of such redesignation, combination or transfer (or of the assets
transferred or conveyed, as applicable), after deducting any
Indebtedness associated with the Unrestricted Subsidiary so designated
or combined or any Indebtedness associated with the assets so
transferred or conveyed. The Fair Market Value of property other than
cash covered by clauses (B), (C), (D) and (E) above shall be determined
in good faith by the Issuer and (x) in the event of property with a
Fair Market Value in excess of $5,000,000, shall be set forth in an
Officers' Certificate or (y) in the event of property with a Fair
Market Value in excess of $10,000,000, shall be set forth in a
resolution approved by at least a majority of the Board of Directors.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) the payment of any dividend or distribution
within 60 days after the date of declaration thereof, if at
the date of declaration such payment would have complied with
the provisions of this Indenture;
(ii) (A) the repurchase, retirement or other
acquisition of any Equity Interests ("Retired Capital Stock")
or Subordinated Indebtedness of the Issuer or Holdings in
exchange for, or out of the proceeds of the substantially
concurrent sale of, Equity Interests of the Issuer or
contributions to the equity capital of the Issuer (other than
any Disqualified Stock or any Equity Interests sold to a
Subsidiary of the Issuer or to an employee stock ownership
plan or any trust established by the Issuer or any of its
Subsidiaries) (collectively, including any such contributions,
"Refunding Capital Stock") and (B) the declaration and payment
of accrued dividends on the Retired Capital Stock out of the
proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Issuer or to an employee stock ownership
plan or any trust established by the Issuer or any of its
Subsidiaries) of Refunding Capital Stock;
(iii) the redemption, repurchase or other acquisition
or retirement of Subordinated Indebtedness of the Issuer made
by exchange for, or out of the proceeds of the substantially
concurrent sale of, new Indebtedness of the Issuer which is
Incurred in accordance with Section 4.03 so long as (A) the
principal amount of such new Indebtedness does not exceed the
principal amount of the Subordinated Indebtedness being so
redeemed, repurchased, acquired or retired for value (plus the
amount of any premium required to be paid under the terms of
the instrument governing the Subordinated Indebtedness being
so redeemed, repurchased, acquired or retired), (B) such
Indebtedness is subordinated to Senior Indebtedness and the
Securities at least to the same extent as such Subordinated
Indebtedness so purchased, exchanged, redeemed, repurchased,
acquired or retired for value, (C) such Indebtedness has a
final scheduled maturity date equal to or later than the final
scheduled maturity date of the Subordinated Indebtedness being
so redeemed, repurchased, acquired or retired, and (D) such
Indebtedness has a Weighted Average Life to Maturity equal to
or greater than the remaining Weighted Average Life to
Maturity of the Subordinated Indebtedness being so redeemed,
repurchased, acquired or retired;
<PAGE>
38
(iv) the repurchase, retirement or other acquisition
(or dividends to Holdings to finance any such repurchase,
retirement or other acquisition) for value of Equity Interests
of the Issuer or Holdings held by any future, present or
former employee, director or consultant of the Issuer,
Holdings or any Subsidiary of the Issuer pursuant to any
management equity plan or stock option plan or any other
management or employee benefit plan or agreement; provided,
however, that the aggregate amounts paid under this clause
(iv) do not exceed $10,000,000 in any calendar year (with
unused amounts in any calendar year being permitted to be
carried over for the two succeeding calendar years); provided
further, however, that such amount in any calendar year may be
increased by an amount not to exceed (A) the cash proceeds
received by the Issuer or any of its Restricted Subsidiaries
from the sale of Equity Interests (other than Disqualified
Stock) of the Issuer or Holdings (to the extent contributed to
the Issuer) to members of management, directors or consultants
of the Issuer and its Restricted Subsidiaries or Holdings that
occurs after the Closing Date (provided that the amount of
such cash proceeds utilized for any such repurchase,
retirement, other acquisition or dividend will not increase
the amount available for Restricted Payments under Section
4.04(a)(3)) plus (B) the cash proceeds of key man life
insurance policies received by the Issuer and its Restricted
Subsidiaries after the Closing Date (provided that the Issuer
may elect to apply all or any portion of the aggregate
increase contemplated by clauses (A) and (B) above in any
single calendar year);
(v) the declaration and payment of dividends or
distributions to holders of any class or series of
Disqualified Stock of the Issuer or any of its Restricted
Subsidiaries issued or incurred in accordance with Section
4.03;
(vi) the declaration and payment of dividends or
distributions to holders of any class or series of Designated
Preferred Stock (other than Disqualified Stock) issued after
the Closing Date and the declaration and payment of dividends
to Holdings, the proceeds of which will be used to fund the
payment of dividends to holders of any class or series of
Designated Preferred Stock (other than Disqualified Stock) of
Holdings issued after the Closing Date; provided, however,
that (A) for the most recently ended four full fiscal quarters
for which internal financial statements are available
immediately preceding the date of issuance of such Designated
Preferred Stock, after giving effect to such issuance (and the
payment of dividends or distributions) on a pro forma basis,
the Issuer would have had a Fixed Charge Coverage Ratio of at
least 2.25 to 1.00 and (B) the aggregate amount of dividends
declared and paid pursuant to this clause (vi) does not exceed
the net cash proceeds actually received by the Issuer either
directly or as a contribution from Holdings from any such sale
of Designated Preferred Stock (other than Disqualified Stock)
issued after the Closing Date;
(vii) Investments in Unrestricted Subsidiaries having
an aggregate Fair Market Value, taken together with all other
Investments made pursuant to this clause (vii) that are at
that time outstanding, not to exceed $25,000,000 at the time
of such Investment (with the Fair Market Value of
<PAGE>
39
each Investment being measured at the time made and without
giving effect to subsequent changes in value);
(viii) the payment of dividends on the Issuer's
common stock (or the payment of dividends to Holdings to fund
the payment by Holdings of dividends on Holdings' common
stock) of up to 6.0% per annum of the net proceeds received by
the Issuer from any past or future public offering of common
stock or contributed to the Issuer by Holdings from any public
offering of common stock;
(ix) Investments that are made with Excluded
Contributions;
(x) other Restricted Payments in an aggregate amount
not to exceed $25,000,000;
(xi) the distribution, as a dividend or otherwise, of
shares of Capital Stock of, or Indebtedness owed to the Issuer
or a Restricted Subsidiary of the Issuer by, Unrestricted
Subsidiaries;
(xii) the payment of dividends, other distributions
or other amounts by the Issuer (A) to Holdings in amounts
equal to the amounts required for Holdings to pay fees and
expenses required to maintain its corporate existence,
customary salary, bonus and other benefits payable to officers
and employees of Holdings and general corporate overhead
expenses of Holdings, in each case to the extent such fees and
expenses are attributable to the ownership or operation of the
Issuer and its Subsidiaries, or (B) to Holdings in amounts
equal to amounts required for Holdings to pay franchise taxes
and federal, state and local income taxes to the extent such
income taxes are attributable to the income of the Issuer and
its Restricted Subsidiaries (and, to the extent of amounts
actually received from its Unrestricted Subsidiaries, in
amounts required to pay such taxes to the extent attributable
to the income of such Unrestricted Subsidiaries);
(xiii) cash dividends or other distributions on the
Issuer's Capital Stock used to, or the making of loans to
Holdings the proceeds of which will be used to, fund the
payment of fees and expenses incurred in connection with the
offering of the Original Securities or owed to Affiliates, in
each case to the extent permitted by Section 4.07;
(xiv) repurchases of Equity Interests deemed to occur
upon exercise of stock options if such Equity Interests
represent a portion of the exercise price of such options; and
(xv) purchases of receivables pursuant to a
Receivables Purchase Obligation in connection with a Qualified
Receivables Financing;
provided, however, that at the time of, and after giving effect to, any
Restricted Payment permitted under clauses (vi), (vii), (x) and (xi),
no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof.
<PAGE>
40
As of the Closing Date, all of the Issuer's Subsidiaries will
be Restricted Subsidiaries. The Issuer shall not permit any Unrestricted
Subsidiary to become a Restricted Subsidiary except pursuant to the definition
of "Unrestricted Subsidiary." For purposes of designating any Restricted
Subsidiary as an Unrestricted Subsidiary, all outstanding Investments by the
Issuer and its Restricted Subsidiaries (except to the extent repaid) in the
Subsidiary so designated will be deemed to be Restricted Payments in an amount
determined as set forth in the last sentence of the definition of "Investments."
Such designation will only be permitted if a Restricted Payment in such amount
would be permitted at such time and if such Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
SECTION 4.05. Dividend and Other Payment Restrictions
Affecting Subsidiaries. The Issuer shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or consensual
restriction on the ability of any Restricted Subsidiary to: (a) (i) pay
dividends or make any other distributions to the Issuer or any of its Restricted
Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest
or participation in, or measured by, its profits, or (ii) pay any Indebtedness
owed to the Issuer or any of its Restricted Subsidiaries; (b) make loans or
advances to the Issuer or any of its Restricted Subsidiaries; or (c) sell, lease
or transfer any of its properties or assets to the Issuer or any of its
Restricted Subsidiaries except in each case for such encumbrances or
restrictions existing under or by reason of:
(1) contractual encumbrances or restrictions in effect on the
Closing Date, including pursuant to the Credit Agreement and the other
Senior Credit Documents;
(2) this Indenture and the Securities;
(3) applicable law or any applicable rule, regulation or
order;
(4) any agreement or other instrument relating to Indebtedness
of a Person acquired by the Issuer or any Restricted Subsidiary which
was in existence at the time of such acquisition (but not created in
contemplation thereof or to provide all or any portion of the funds or
credit support utilized to consummate such acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired;
(5) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets of
such Restricted Subsidiary pending the closing of such sale or
disposition;
(6) Secured Indebtedness otherwise permitted to be Incurred
pursuant to Sections 4.03 and 4.08 that limit the right of the debtor
to dispose of the assets securing such Indebtedness;
(7) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary
course of business;
<PAGE>
41
(8) customary provisions in joint venture agreements and other
similar agreements entered into in the ordinary course of business;
(9) customary provisions contained in leases and other similar
agreements entered into in the ordinary course of business that impose
restrictions of the type described in clause (c) above;
(10) any encumbrance or restriction of a Receivables
Subsidiary effected in connection with a Qualified Receivables
Financing; provided, however, that such restrictions apply only to such
Receivables Subsidiary;
(11) other Indebtedness of Restricted Subsidiaries (i) that
are Guarantors that is Incurred subsequent to the Closing Date pursuant
to Section 4.03 or (ii) that is Incurred subsequent to the Closing Date
pursuant to clauses (iv) or (xii) of Section 4.03(b); or
(12) any encumbrances or restrictions of the type referred to
in clauses (a), (b) and (c) above imposed by any amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings of the contracts, instruments
or obligations referred to in clauses (1) through (11) above; provided
that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings are, in the good
faith judgment of the Issuer, no more restrictive with respect to such
dividend and other payment restrictions than those contained in the
dividend or other payment restrictions prior to such amendment,
modification, restatement, renewal, increase, supplement, refunding,
replacement or refinancing.
SECTION 4.06. Asset Sales. (a) The Issuer shall not, and shall
not permit any of its Restricted Subsidiaries to, cause or make an Asset Sale,
unless (x) the Issuer, or its Restricted Subsidiaries, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the Fair
Market Value (as determined in good faith by the Issuer) of the assets sold or
otherwise disposed of and (y) at least 75% of the consideration therefor
received by the Issuer, or such Restricted Subsidiary, as the case may be, is in
the form of Cash Equivalents; provided that the amount of (i) any liabilities
(as shown on the Issuer's or such Restricted Subsidiary's most recent balance
sheet or in the notes thereto) of the Issuer or any Restricted Subsidiary (other
than liabilities that are by their terms subordinated to the Securities) that
are assumed by the transferee of any such assets, (ii) any notes or other
obligations or other securities received by the Issuer or such Restricted
Subsidiary from such transferee that are converted by the Issuer or such
Restricted Subsidiary into cash within 180 days of the receipt thereof (to the
extent of the cash received), and (iii) any Designated Noncash Consideration
received by the Issuer or any of its Restricted Subsidiaries in such Asset Sale
having an aggregate Fair Market Value, taken together with all other Designated
Noncash Consideration received pursuant to this clause (iii) that is at that
time outstanding, not to exceed the greater of 5.0% of Total Assets or
$100,000,000 at the time of the receipt of such Designated Noncash Consideration
(with the Fair Market Value of each item of Designated Noncash Consideration
being measured at the time received and without giving effect to subsequent
changes in value) shall be deemed to be Cash Equivalents for the purposes of
this provision.
<PAGE>
42
(b) Within 365 days after the Issuer's or any Restricted
Subsidiary's receipt of the Net Proceeds of any Asset Sale, the Issuer or such
Restricted Subsidiary may apply the Net Proceeds from such Asset Sale, at its
option, (i) to permanently reduce Obligations under the Credit Agreement (and,
in the case of revolving Obligations, to correspondingly reduce commitments with
respect thereto) or other Senior Indebtedness or Pari Passu Indebtedness
(provided that if the Issuer shall so reduce Obligations under Pari Passu
Indebtedness, it will equally and ratably reduce Obligations under the
Securities by making an offer (in accordance with the procedures set forth below
for an Asset Sale Offer) to all Holders to purchase at a purchase price equal to
100% of the principal amount thereof, plus accrued and unpaid interest and
liquidated damages, if any, the pro rata principal amount of Securities) or
Indebtedness of a Restricted Subsidiary, in each case other than Indebtedness
owed to the Issuer or an Affiliate of the Issuer, (ii) to an investment in any
one or more businesses (provided that such investment in any business may be in
the form of the acquisition of Capital Stock so long as it results in the Issuer
or a Restricted Subsidiary, as the case may be, owning substantially all the
Capital Stock of such business), capital expenditures or acquisitions of other
assets in each case used or useful in a Similar Business, and/or (iii) to make
an investment in any one or more businesses (provided that such investment in
any business may be in the form of the acquisition of Capital Stock so long as
it results in the Issuer or a Restricted Subsidiary, as the case may be, owning
substantially all the Capital Stock of such business), properties or assets that
replace the properties and assets that are the subject of such Asset Sale.
Pending the final application of any such Net Proceeds, the Issuer or such
Restricted Subsidiary may temporarily reduce Indebtedness under a revolving
credit facility, if any, or otherwise invest such Net Proceeds in Cash
Equivalents or Investment Grade Securities. Any Net Proceeds from any Asset Sale
that are not applied as provided and within the time period set forth in the
first sentence of this paragraph (it being understood that any portion of such
Net Proceeds used to make an offer to purchase Securities, as described in
clause (i) above, shall be deemed to have been invested whether or not such
offer is accepted) will be deemed to constitute "Excess Proceeds". When the
aggregate amount of Excess Proceeds exceeds $20,000,000, the Issuer shall make
an offer to all Holders of Securities (an "Asset Sale Offer") to purchase the
maximum principal amount of Securities, that is an integral multiple of $1,000,
that may be purchased out of the Excess Proceeds at an offer price in cash in an
amount equal to 100% of the principal amount thereof, plus accrued and unpaid
interest and liquidated damages, if any, to the date fixed for the closing of
such offer, in accordance with the procedures set forth in this Indenture. The
Issuer will commence an Asset Sale Offer with respect to Excess Proceeds within
ten Business Days after the date that Excess Proceeds exceeds $20,000,000 by
mailing the notice required pursuant to Section 4.06(c), with a copy to the
Trustee. To the extent that the aggregate amount of Securities tendered pursuant
to an Asset Sale Offer is less than the Excess Proceeds, the Issuer may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Securities surrendered by Holders thereof exceeds the amount
of Excess Proceeds, the Trustee shall select the Securities to be purchased in
the manner described below. Upon completion of any such Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.
(c) (1) Promptly, and in any event within ten Business Days
after the Issuer becomes obligated to make an Asset Sale Offer, the Issuer shall
deliver to the Trustee and send, by first-class mail, postage prepaid, to each
Holder at such Holder's registered address, a written notice stating that the
Holder may elect to have his Securities purchased by the Issuer either in whole
or in part (subject to prorating as hereinafter
<PAGE>
43
described in the event the Asset Sale Offer is oversubscribed) in integral
multiples of $1,000 of principal amount, at the applicable purchase price. The
notice shall be mailed at least 30 but not more than 60 days before the purchase
date and shall contain such information concerning the business of the Issuer
which the Issuer in good faith believes will enable such Holders to make an
informed decision and all instructions and materials necessary to tender
Securities pursuant to the Asset Sale Offer, together with the address referred
to in Section 4.06(c)(3) below. If any Security is to be purchased in part only,
any notice of purchase that relates to such Security shall state the portion of
the principal amount thereof that has been or is to be purchased.
(2) Not later than the date upon which written notice of an
Asset Sale Offer is delivered to the Trustee as provided above, the Issuer shall
deliver to the Trustee an Officers' Certificate as to (i) the amount of the
Excess Proceeds, (ii) the allocation of the Net Proceeds from the Asset Sales
pursuant to which such Asset Sale Offer is being made and (iii) the compliance
of such allocation with the provisions of Section 4.06(b). On such date, the
Issuer shall also irrevocably deposit with the Trustee or with a paying agent
(or, if the Issuer is acting as its own paying agent, segregate and hold in
trust) an amount equal to the Excess Proceeds to be invested in Cash Equivalents
and to be held for payment in accordance with the provisions of this Section
4.06. Upon the expiration of the period for which the Offer remains open (the
"Offer Period"), the Issuer shall deliver to the Trustee for cancelation the
Securities or portions thereof that have been properly tendered to and are to be
accepted by the Issuer. The Trustee (or the Paying Agent, if not the Trustee)
shall, on the date of purchase, mail or deliver payment to each tendering Holder
in the amount of the purchase price. In the event that the Excess Proceeds
delivered by the Issuer to the Trustee is greater than the purchase price of the
Securities tendered, the Trustee shall deliver the excess to the Issuer
immediately after the expiration of the Offer Period for application in
accordance with Section 4.06 above.
(3) Holders electing to have a Security purchased shall be
required to surrender the Security, with an appropriate form duly completed, to
the Issuer at the address specified in the notice at least three Business Days
prior to the purchase date. Holders shall be entitled to withdraw their election
if the Trustee or the Issuer receives not later than one Business Day prior to
the Purchase Date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Security which was
delivered by the Holder for purchase and a statement that such Holder is
withdrawing his election to have such Security purchased. If at the expiration
of the Offer Period more Securities are tendered pursuant to an Asset Sale Offer
than the Issuer is required to purchase, selection of such Securities for
purchase shall be made by the Trustee in compliance with the requirements of the
principal national securities exchange, if any, on which such Securities are
listed, or if such Securities are not so listed, on a pro rata basis, by lot or
by such other method as the Trustee shall deem fair and appropriate (and in such
manner as complies with applicable legal requirements); provided that no
Securities of $1,000 or less shall be purchased in part. A new Security in
principal amount equal to the unpurchased portion of any Security purchased in
part will be issued in the name of the Holder thereof upon cancelation of the
original Security. On and after the purchase date, unless the Issuer defaults in
payment of the purchase price, interest shall cease to accrue on Securities or
portions thereof purchased.
(4) At the time the Issuer delivers Securities to the Trustee
which are to be accepted for purchase, the Issuer shall also deliver an
Officers' Certificate stating that such Securities are to be accepted by the
Issuer pursuant to and in accordance with the
<PAGE>
44
terms of this Section 4.06. A Security shall be deemed to have been accepted for
purchase at the time the Trustee, directly or through an agent, mails or
delivers payment therefor to the surrendering Holder.
(d) The Issuer shall comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations to
the extent such laws or regulations are applicable in connection with the
repurchase of the Securities pursuant to an Asset Sale Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Indenture, the Issuer shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations described in this Indenture by virtue thereof.
SECTION 4.07. Transactions with Affiliates. (a) The Issuer
shall not, and shall not permit any of its Restricted Subsidiaries to, directly
or indirectly, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction or series of
transactions, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate of the Issuer (each of the foregoing,
an "Affiliate Transaction") involving aggregate consideration in excess of
$5,000,000, unless (i) such Affiliate Transaction is on terms that are not
materially less favorable to the Issuer or the relevant Restricted Subsidiary
than those that could have been obtained in a comparable transaction by the
Issuer or such Restricted Subsidiary with an unrelated Person and (ii) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $10,000,000, the Issuer delivers
to the Trustee a resolution adopted by the majority of the Board of Directors of
the Issuer, approving such Affiliate Transaction and set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above.
(b) The provisions of Section 4.07(a) shall not apply to the
following: (i) transactions between or among the Issuer and/or any of its
Restricted Subsidiaries; (ii) Permitted Investments and Restricted Payments
permitted by Section 4.04; (iii) the payment of annual management, consulting,
monitoring and advisory fees to Blackstone in an amount in any fiscal year not
to exceed the greater of (A) $3,000,000 and (B) an amount equal to 1.0% of
EBITDA (without giving effect to clause (vii) of the definition of "EBITDA") for
the prior fiscal year; (iv) the payment of reasonable and customary fees paid
to, and indemnity provided on behalf of, officers, directors, employees or
consultants of the Issuer, Holdings or any Restricted Subsidiary; (v) payments
by the Issuer or any of its Restricted Subsidiaries to Blackstone made for any
financial advisory, financing, underwriting or placement services or in respect
of other investment banking activities, including, without limitation, in
connection with acquisitions or divestitures, which payments are approved by a
majority of the Board of Directors of the Issuer in good faith; (vi)
transactions in which the Issuer or any of its Restricted Subsidiaries, as the
case may be, delivers to the Trustee a letter from an Independent Financial
Advisor stating that such transaction is fair to the Issuer or such Restricted
Subsidiary from a financial point of view or meets the requirements of clause
(i) of Section 4.07(a); (vii) payments or loans to employees or consultants in
the ordinary course of business which are approved by a majority of the Board of
Directors of the Issuer in good faith; (viii) any agreement as in effect as of
the Closing Date or any amendment thereto (so long as any such amendment is not
disadvantageous to the holders of the Securities in any material respect) or any
transaction contemplated thereby; (ix) the existence of, or the performance by
the Issuer or any of its Restricted Subsidiaries of its obligations under the
terms of, any stockholders
<PAGE>
45
agreement (including any registration rights agreement or purchase agreement
related thereto) to which it is a party as of the Closing Date and any similar
agreements which it may enter into thereafter; provided, however, that the
existence of, or the performance by the Issuer or any of its Restricted
Subsidiaries of its obligations under any future amendment to any such existing
agreement or under any similar agreement entered into after the Closing Date
shall only be permitted by this clause (ix) to the extent that the terms of any
such amendment or new agreement are not otherwise disadvantageous to the Holders
of the Securities in any material respect; (x) the payment of all fees and
expenses related to the offering of the Original Securities, including fees to
Blackstone, which are described in the Offering Memorandum; (xi) 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 terms of this Indenture, which are fair to the Issuer and
its Restricted Subsidiaries in the reasonable determination of the Board of
Directors or the senior management of the Issuer, and are on terms at least as
favorable as might reasonably have been obtained at such time from an
unaffiliated party; (xii) any transaction effected as part of a Qualified
Receivables Financing; and (xiii) the issuance of Equity Interests (other than
Disqualified Stock) of the Issuer or Holdings to any Permitted Holder.
SECTION 4.08. Liens. The Issuer shall not, and shall not
permit any of its Restricted Subsidiaries to, directly or indirectly, create,
Incur or suffer to exist any Lien on any asset or property of the Issuer or such
Restricted Subsidiary, or any income or profits therefrom, or assign or convey
any right to receive income therefrom, that secures any Obligations of the
Issuer or any of its Subsidiaries (other than Senior Indebtedness) unless the
Securities are equally and ratably secured with (or on a senior basis to, in the
case of Obligations subordinated in right of payment to the Securities) the
Obligations so secured or until such time as such Obligations are no longer
secured by a Lien. The preceding sentence will not require the Issuer or any
Restricted Subsidiary to secure the Securities if the Lien consists of a
Permitted Lien.
No Restricted Subsidiary that is a Guarantor shall directly or
indirectly create, Incur or suffer to exist any Lien on any asset or property of
such Guarantor or any income or profits therefrom, or assign or convey any right
to receive income therefrom, that secures any Obligation of such Guarantor
(other than Senior Indebtedness of such Guarantor) unless the Guarantee of such
Guarantor is equally and ratably secured with (or on a senior basis to, in the
case of Obligations subordinated on right of payment to such Guarantor's
Guarantee) the Obligations so secured or until such time as such Obligations are
no longer secured by a Lien. The preceding sentence will not require any
Restricted Subsidiary that is a Guarantor to secure its Guarantee if the Lien
consists of a Permitted Lien.
SECTION 4.09. Change of Control. (a) Upon a Change of Control,
each Holder shall have the right to require the Issuer to repurchase all or any
part of such Holder's Securities at a purchase price in cash equal to 101% of
the principal amount thereof, plus accrued and unpaid interest and liquidated
damages, if any, to the date of repurchase (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), in accordance with the terms contemplated in Section
4.09(b); provided, however, that notwithstanding the occurrence of a Change of
Control, the Issuer shall not be obligated to purchase the Securities pursuant
to this Section 4.09 in the event that it has exercised its right to redeem all
the Securities under paragraph 5 of the Securities. In the event that at the
time of such Change of
<PAGE>
46
Control the terms of the Bank Indebtedness restrict or prohibit the repurchase
of Securities pursuant to this Section 4.09, then prior to the mailing of the
notice to Holders provided for in Section 4.09(b) below but in any event within
30 days following any Change of Control, the Issuer shall (i) repay in full all
Bank Indebtedness or offer to repay in full all Bank Indebtedness and repay the
Bank Indebtedness of each lender who has accepted such offer or (ii) obtain the
requisite consent under the agreements governing the Bank Indebtedness to permit
the repurchase of the Securities as provided for in Section 4.09(b).
(b) Within 30 days following any Change of Control (except as
provided in Section 4.09(a)), the Issuer shall mail a notice to each Holder with
a copy to the Trustee (the "Change of Control Offer") stating:
(1) that a Change of Control has occurred and that such Holder
has the right to require the Issuer to purchase such Holder's
Securities at a purchase price in cash equal to 101% of the principal
amount thereof, plus accrued and unpaid interest and liquidated
damages, if any, to the date of purchase (subject to the right of
Holders of record on the relevant record date to receive interest due
on the relevant interest payment date);
(2) the circumstances and relevant facts and financial
information regarding such Change of Control;
(3) the repurchase date (which shall be no earlier than 30
days nor later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Issuer, consistent with
this Section, that a Holder must follow in order to have its Securities
purchased.
(c) Holders electing to have a Security purchased shall be
required to surrender the Security, with an appropriate form duly completed, to
the Issuer at the address specified in the notice at least three Business Days
prior to the purchase date. Holders shall be entitled to withdraw their election
if the Trustee or the Issuer receives not later than one Business Day prior to
the purchase date a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Security which was
delivered for purchase by the Holder and a statement that such Holder is
withdrawing his election to have such Security purchased.
(d) On the purchase date, all Securities purchased by the
Issuer under this Section shall be delivered to the Trustee for cancelation, and
the Issuer shall pay the purchase price plus accrued and unpaid interest, if
any, to the Holders entitled thereto.
(e) Notwithstanding the foregoing provisions of this Section
4.09, the Issuer shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in Section 4.09 (b) applicable to a Change of Control Offer made by the Issuer
and purchases all Securities validly tendered and not withdrawn under such
Change of Control Offer.
(f) The Issuer shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or
<PAGE>
47
regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Section, the Issuer shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section by virtue thereof.
SECTION 4.10. Limitation on Other Pari Passu Indebtedness. The
Issuer shall not, and shall not permit any Restricted Subsidiary that is a
Guarantor to, directly or indirectly, Incur any Indebtedness (including Acquired
Indebtedness) that is subordinate in right of payment to any Indebtedness of the
Issuer or any Indebtedness of any such Guarantor, as the case may be, unless
such Indebtedness is either (i) pari passu in right of payment with the
Securities or such Guarantor's Guarantee, as the case may be, or (ii)
subordinate in right of payment to the Securities or such Guarantor's Guarantee,
as the case may be.
SECTION 4.11. Compliance Certificate. The Issuer shall deliver
to the Trustee within 120 days after the end of each fiscal year (commencing
with the year ended December 31, 1999) of the Issuer an Officers' Certificate
stating that in the course of the performance by the signers of their duties as
Officers of the Issuer they would normally have knowledge of any Default and
whether or not the signers know of any Default that occurred during such period.
If they do, the certificate shall describe the Default, its status and what
action the Issuer is taking or proposes to take with respect thereto. The Issuer
also shall comply with Section 314(a)(4) of the TIA.
SECTION 4.12. Further Instruments and Acts. Upon request of
the Trustee, the Issuer shall execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.13. Future Guarantors. The Issuer shall cause each
Restricted Subsidiary (unless such Subsidiary is a Receivables Subsidiary)
organized under the laws of the United States of America or any state or
territory thereof that (a) guarantees any Indebtedness of Holdings, the Issuer
or any of its Restricted Subsidiaries (other than any Senior Indebtedness) or
(b) Incurs any Indebtedness (other than Senior Indebtedness) or issues any
shares of Disqualified Stock or Preferred Stock (i) permitted to be Incurred or
issued pursuant to Section 4.03(a) or clauses (xii) or (xix) of Section 4.03(b)
or (ii) that is not permitted to be Incurred pursuant to Section 4.03, to
execute and deliver to the Trustee a supplemental indenture in the form of
Exhibit C hereto pursuant to which such Subsidiary shall guarantee payment of
the Securities.
ARTICLE 5
Successor Company
SECTION 5.01. Merger, Consolidation, or Sale of All or
Substantially All Assets. (a) The Issuer shall not consolidate or merge with or
into or wind up into (whether or not the Issuer is the surviving corporation),
or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions, to any Person unless:
<PAGE>
(i) the Issuer is the surviving corporation or the Person
formed by or surviving any such consolidation or merger (if other than
the Issuer) or to which such sale, assignment, transfer, lease,
conveyance or other disposition will have been made is a corporation,
partnership or limited liability company organized or existing under
the laws of the United States, any state thereof, the District of
Columbia, or any territory thereof (the Issuer or such Person, as the
case may be, being herein called the "Successor Company");
(ii) the Successor Company (if other than the Issuer)
expressly assumes all the obligations of the Issuer under this
Indenture and the Securities pursuant to a supplemental indenture or
other documents or instruments in form reasonably satisfactory to the
Trustee;
(iii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any of its Restricted Subsidiaries as a result of such
transaction as having been Incurred by the Successor Company or such
Restricted Subsidiary at the time of such transaction) no Default or
Event of Default shall have occurred and be continuing;
(iv) immediately after giving pro forma effect to such
transaction, as if such transaction had occurred at the beginning of
the applicable four-quarter period, either (A) the Successor Company
would be permitted to Incur at least $1.00 of additional Indebtedness
pursuant to Section 4.03(a) or (B) the Fixed Charge Coverage Ratio for
the Successor Company and its Restricted Subsidiaries would be greater
than such ratio for the Issuer and its Restricted Subsidiaries
immediately prior to such transaction;
(v) each Guarantor, unless it is the other party to the
transactions described above, shall have by supplemental indenture
confirmed that its Guarantee shall apply to such Person's obligations
under this Indenture and the Securities; and
(vi) the Issuer shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if
any) comply with this Indenture.
The Successor Company shall succeed to, and be substituted
for, the Issuer under this Indenture and the Securities. Notwithstanding the
foregoing clauses (iii) and (iv), (A) any Restricted Subsidiary may consolidate
with, merge into or transfer all or part of its properties and assets to the
Issuer or to another Restricted Subsidiary and (B) the Issuer may merge with an
Affiliate incorporated solely for the purpose of reincorporating the Issuer in
another state of the United States so long as the amount of Indebtedness of the
Issuer and its Restricted Subsidiaries is not increased thereby.
(b) Subject to Section 11.02(b) governing the release of a
Guarantee upon the sale or disposition of a Restricted Subsidiary that is a
Guarantor, each such Guarantor shall not, and the Issuer shall not permit such a
Guarantor to, consolidate or merge with or into or wind up into (whether or not
such Guarantor is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to, any Person unless:
<PAGE>
49
(i) such Guarantor is the surviving corporation or the Person
formed by or surviving any such consolidation or merger (if other than
such Guarantor) or to which such sale, assignment, transfer, lease,
conveyance or other disposition will have been made is a corporation,
partnership or limited liability company organized or existing under
the laws of the United States, any state thereof, the District of
Columbia, or any territory thereof (such Guarantor or such Person, as
the case may be, being herein called the "Successor Guarantor");
(ii) the Successor Guarantor (if other than such Guarantor)
expressly assumes all the obligations of such Guarantor under this
Indenture and such Guarantors's Guarantee pursuant to a supplemental
indenture or other documents or instruments in form reasonably
satisfactory to the Trustee;
(iii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Guarantor or any of its Subsidiaries as a result of such transaction as
having been Incurred by the Successor Guarantor or such Subsidiary at
the time of such transaction) no Default or Event of Default shall have
occurred and be continuing; and
(iv) such Guarantor shall have delivered or caused to be
delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger or transfer and
such supplemental indenture (if any) comply with this Indenture.
Subject to Section 11.02(b), the Successor Guarantor will
succeed to, and be substituted for, such Guarantor under this Indenture and such
Guarantor's Guarantee. Notwithstanding the foregoing clause (iii), any Guarantor
may merge into or transfer all or part of its properties and assets to another
Guarantor and a Guarantor may merge with an Affiliate incorporated solely for
the purpose of reincorporating such Guarantor in another state of the United
States so long as the amount of Indebtedness of the Guarantor is not increased
thereby.
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default" occurs
if:
(1) the Issuer defaults in any payment of interest on any
Security when the same becomes due and payable, whether or not such
payment shall be prohibited by Article 10, and such default continues
for a period of 30 days;
(2) the Issuer defaults in the payment of the principal or
premium, if any, of any Security when the same becomes due and payable
at its Stated Maturity, upon optional redemption, upon required
repurchase, upon declaration or otherwise, whether or not such payment
shall be prohibited by Article 10;
(3) the Issuer fails to comply with Section 5.01;
<PAGE>
50
(4) the Issuer fails to comply with Section 4.02, 4.03, 4.04,
4.05, 4.06, 4.07, 4.08, 4.09, 4.10 or 4.13 (other than a failure to
purchase Securities when required under Section 4.06 or 4.09) and such
failure continues for 30 days after the notice specified below;
(5) the Issuer fails to comply with any of its agreements in
the Securities or this Indenture (other than those referred to in (1),
(2), (3) or (4) above) and such failure continues for 60 days after the
notice specified below;
(6) the failure by the Issuer or any Significant Subsidiary to
pay any Indebtedness (other than Indebtedness owing to the Issuer or a
Restricted Subsidiary) within any applicable grace period after its
stated final maturity or the acceleration of any such Indebtedness by
the holders thereof because of a default if the total amount of such
Indebtedness unpaid or accelerated exceeds $25,000,000 or its foreign
currency equivalent;
(7) the Issuer or any Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case;
(C) consents to the appointment of a Custodian of it
or for any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Issuer or any
Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of the Issuer or any
Significant Subsidiary or for any substantial part of its
property; or
(C) orders the winding up or liquidation of the
Issuer or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order
or decree remains unstayed and in effect for 60 days;
(9) any judgment or decree for the payment of money (other
than judgments which are covered by enforceable insurance policies
issued by solvent carriers) in excess of $25,000,000 or its foreign
currency equivalent is rendered against the Issuer or a Significant
Subsidiary and either (A) an enforcement proceeding thereon has been
commenced or (B) such judgment or decree remains
<PAGE>
51
outstanding for a period of 60 days following such judgment and is not
discharged, waived or stayed; or
(10) any Guarantee ceases to be in full force and effect
(except as contemplated by the terms hereof) or any Guarantor or Person
acting by or on behalf of such Guarantor denies or disaffirms its
obligations under this Indenture or any Guarantee and such Default
continues for 10 days.
The foregoing shall constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, United States Code,
or any similar Federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
A Default under clause (4) or (5) above is not an Event of
Default until the Trustee or the Holders of at least 25% in principal amount of
the outstanding Securities notify the Issuer of the Default and the Issuer does
not cure such Default within the time specified in clause (4) or (5), as the
case may be, after receipt of such notice. Such notice must specify the Default,
demand that it be remedied and state that such notice is a "Notice of Default".
The Issuer shall deliver to the Trustee, within 30 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any Event of Default under clause (6) or (10) and any event which with the
giving of notice or the lapse of time would become an Event of Default under
clause (4), (5) or (9), its status and what action the Issuer is taking or
proposes to take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than
an Event of Default specified in Section 6.01(7) or (8) with respect to the
Issuer) occurs and is continuing, the Trustee by notice to the Issuer, or the
Holders of at least 25% in principal amount of the outstanding Securities by
notice to the Issuer, may declare the principal of, premium, if any, and accrued
but unpaid interest on all the Securities to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable immediately.
If an Event of Default specified in Section 6.01(7) or (8) with respect to the
Issuer occurs, the principal of, premium, if any, and interest on all the
Securities shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Securityholders.
The Holders of a majority in principal amount of the Securities by notice to the
Trustee may rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
<PAGE>
52
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Securityholder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a
majority in principal amount of the Securities by notice to the Trustee may
waive an existing Default and its consequences except (i) a Default in the
payment of the principal of or interest on a Security, (ii) a Default arising
from the failure to redeem or purchase any Security when required pursuant to
the terms of this Indenture or (iii) a Default in respect of a provision that
under Section 9.02 cannot be amended without the consent of each Securityholder
affected. In the event of any Event of Default specified in Section 6.01(6),
such Event of Default and all consequences thereof (including without limitation
any acceleration or resulting payment default) shall be annulled, waived and
rescinded, automatically and without any action by the Trustee or the Holders,
if within 20 days after such Event of Default arose (x) the Indebtedness that is
the basis for such Event of Default has been discharged, (y) the holders thereof
have rescinded or waived the acceleration, notice or action (as the case may be)
giving rise to such Event of Default, or (z) if the default that is the basis
for such Event of Default has been cured. When a Default is waived, it is deemed
cured, but no such waiver shall extend to any subsequent or other Default or
impair any consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority
in principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
SECTION 6.06. Limitation on Suits. Except to enforce the right
to receive payment of principal, premium (if any) or interest when due, no
Securityholder may pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or
indemnity; and
<PAGE>
53
(5) the Holders of a majority in principal amount of the
Securities do not give the Trustee a direction inconsistent with the
request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
another Securityholder.
SECTION 6.07. 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 liquidated damages and interest on the
Securities held by such Holder, on or after the respective due dates expressed
in the Securities, or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of
Default specified in Section 6.01(1) or (2) occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Issuer for the whole amount then due and owing (together with
interest on any unpaid interest to the extent lawful) and the amounts provided
for in Section 7.07.
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 and the Securityholders
allowed in any judicial proceedings relative to the Issuer, any Subsidiary or
Guarantor, their creditors or their property and, unless prohibited by law or
applicable regulations, may vote on behalf of the Holders in any election of a
trustee in bankruptcy or other Person performing similar functions, and any
Custodian in any such judicial proceeding is hereby authorized by each Holder to
make payments to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to holders of Senior Indebtedness of the Issuer to the
extent required by Article 10;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, and any liquidated
damages without preference or priority of any kind, according to the
amounts due and payable on the Securities for principal, any liquidated
damages and interest, respectively; and
FOURTH: to the Issuer.
The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section. At least 15 days before
such record date, the
<PAGE>
54
Trustee shall mail to each Securityholder and the Issuer a notice that states
the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section does not apply to a
suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by
Holders of more than 10% in principal amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. Neither the
Issuer nor any Guarantor (to the extent it may lawfully do so) shall at any time
insist upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Issuer and each Guarantor (to the extent that it may lawfully
do so) hereby expressly waives all benefit or advantage of any such law, and
shall not hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee. (a) If an Event of Default
has occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b)
of this Section;
<PAGE>
55
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuer.
(f) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on
any document believed by it to be genuine and to have been signed or presented
by the proper person. The Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute wilful misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report,
<PAGE>
56
notice, request, consent, order, approval, bond, debenture, note or other paper
or document unless requested in writing to do so by the Holders of not less than
a majority in principal amount of the Securities at the time outstanding, 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 Issuer, personally or by agent or
attorney.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Trustee. Any Paying Agent, Registrar or co-paying
agent may do the same with like rights. However, the Trustee must comply with
Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Issuer's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Issuer in this Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and is actually known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within the earlier of 90 days after it
occurs or 30 days after it is actually known to a Trust Officer or written
notice of it is received by the Trustee. Except in the case of a Default in
payment of principal of, premium (if any) or interest on any Security, the
Trustee may withhold notice if and so long as a committee of its Trust Officers
in good faith determines that withholding notice is in the interests of
Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
practicable after each March 1 beginning with the March 1 following the date of
this Indenture, and in any event prior to May 1 in each year, the Trustee shall
mail to each Securityholder a brief report dated as of March 1 that complies
with Section 313(a) of the TIA. The Trustee shall also comply with Section
313(b) of the TIA.
A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock exchange (if any) on
which the Securities are listed. The Issuer agrees to notify promptly the
Trustee whenever the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Issuer shall pay
to the Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuer shall reimburse the Trustee upon request
for all reasonable out-of-pocket expenses incurred or made by it, including
costs of collection, in addition to the compensation for its services. Such
expenses shall include the reasonable compensation and expenses, disbursements
and advances of the Trustee's agents, counsel, accountants and experts. The
Issuer and each Guarantor, jointly and severally shall indemnify the Trustee
against any and all loss, liability or expense (including reasonable attorneys'
fees) incurred by or in connection with the administration of this trust and the
performance of its duties hereunder. The Trustee shall notify the Issuer of any
claim for which it may
<PAGE>
57
seek indemnity promptly upon obtaining actual knowledge thereof; provided,
however, that any failure so to notify the Issuer shall not relieve the Issuer
or any Guarantor of its indemnity obligations hereunder. The Issuer shall defend
the claim and the indemnified party shall provide reasonable cooperation at the
Issuer's expense in the defense. Such indemnified parties may have separate
counsel and the Issuer and the Guarantors, as applicable shall pay the fees and
expenses of such counsel; provided, however, that the Issuer shall not be
required to pay such fees and expenses if it assumes such indemnified parties'
defense and, in such indemnified parties' reasonable judgment, there is no
conflict of interest between the Issuer and the Guarantors, as applicable, and
such parties in connection with such defense. The Issuer need not reimburse any
expense or indemnify against any loss, liability or expense incurred by an
indemnified party through such party's own wilful misconduct, negligence or bad
faith.
To secure the Issuer's payment obligations in this Section,
the Trustee shall have a lien prior to the Securities on all money or property
held or collected by the Trustee other than money or property held in trust to
pay principal of and interest and any liquidated damages on particular
Securities.
The Issuer's payment obligations pursuant to this Section
shall survive the satisfaction or discharge of this Indenture, any rejection or
termination of this Indenture under any bankruptcy law or the resignation or
removal of the Trustee. When the Trustee incurs expenses after the occurrence of
a Default specified in Section 6.01(7) or (8) with respect to the Issuer, the
expenses are intended to constitute expenses of administration under the
Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign
at any time by so notifying the Issuer. The Holders of a majority in principal
amount of the Securities may remove the Trustee by so notifying the Trustee and
may appoint a successor Trustee. The Issuer shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Issuer or by the
Holders of a majority in principal amount of the Securities and such Holders do
not reasonably promptly appoint a successor Trustee, or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Issuer shall promptly appoint a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Thereupon the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Securityholders. The retiring Trustee shall promptly transfer
<PAGE>
58
all property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee or the
Holders of 10% in principal amount of the Securities may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to
this Section, the Issuer's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall
at all times satisfy the requirements of TIA Section 310(a). The Trustee shall
have a combined capital and surplus of at least $100,000,000 as set forth in its
most recent published annual report of condition. The Trustee shall comply with
TIA Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
the Issuer are outstanding if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against
Issuer. 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.
<PAGE>
59
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities;
Defeasance. (a) When (i) the Issuer delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.08) for
cancelation or (ii) all outstanding Securities have become due and payable,
whether at maturity or as a result of the mailing of a notice of redemption
pursuant to Article 3, and the Issuer irrevocably deposits with the Trustee
funds or U.S. Government Obligations on which payment of principal and interest
when due will be sufficient to pay at maturity or upon redemption all
outstanding Securities, including interest thereon to maturity or such
redemption date (other than Securities replaced pursuant to Section 2.08), and
if in either case the Issuer pays all other sums payable hereunder by the
Issuer, then this Indenture shall, subject to Section 8.01(c), cease to be of
further effect. The Trustee shall acknowledge satisfaction and discharge of this
Indenture on demand of the Issuer accompanied by an Officers' Certificate and an
Opinion of Counsel and at the cost and expense of the Issuer.
(b) Subject to Sections 8.01(c) and 8.02, the Issuer at any
time may terminate (i) all of its obligations under the Securities and this
Indenture ("legal defeasance option") or (ii) its obligations under Sections
4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12 and 4.13 and
the operation of Section 5.01, 6.01(4), 6.01(5), 6.01(6), 6.01(7) (with respect
to Significant Subsidiaries of the Issuer only), 6.01(8) (with respect to
Significant Subsidiaries of the Issuer only) 6.01(9) and 6.01(10) ("covenant
defeasance option"). The Issuer may exercise its legal defeasance option
notwithstanding its prior exercise of its covenant defeasance option. In the
event that the Issuer terminates all of its obligations under the Securities and
this Indenture by exercising its legal defeasance option or its covenant
defeasance option, the obligations under the Guarantees shall each be terminated
simultaneously with the termination of such obligations.
If the Issuer exercises its legal defeasance option, payment
of the Securities may not be accelerated because of an Event of Default. If the
Issuer exercises its covenant defeasance option, payment of the Securities may
not be accelerated because of an Event of Default specified in Section 6.01(4),
6.01(5), 6.01(6), 6.01(7) (with respect to Significant Subsidiaries of the
Issuer only), 6.01(8) (with respect to Significant Subsidiaries of the Issuer
only) 6.01(9), 6.01(10) or because of the failure of the Issuer to comply with
Section 5.01.
Upon satisfaction of the conditions set forth herein and upon
request of the Issuer, the Trustee shall acknowledge in writing the discharge of
those obligations that the Issuer terminates.
(c) Notwithstanding clauses (a) and (b) above, the Issuer's
obligations in Sections 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 7.07, 7.08 and in
this Article 8 shall survive until the Securities have been paid in full.
Thereafter, the Issuer's obligations in Sections 7.07, 8.04 and 8.05 shall
survive.
<PAGE>
60
SECTION 8.02. Conditions to Defeasance. The Issuer may
exercise its legal defeasance option or its covenant defeasance option only if:
(1) the Issuer irrevocably deposits in trust with the Trustee
money or U.S. Government Obligations for the payment of principal,
premium (if any) and interest on the Securities to maturity or
redemption, as the case may be;
(2) the Issuer delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and
without reinvestment on the deposited U.S. Government Obligations plus
any deposited money without investment will provide cash at such times
and in such amounts as will be sufficient to pay principal and interest
when due on all the Securities to maturity or redemption, as the case
may be;
(3) 91 days pass after the deposit is made and during the
91-day period no Default specified in Section 6.01(7) or (8) with
respect to the Issuer occurs which is continuing at the end of the
period;
(4) the deposit does not constitute a default under any other
agreement binding on the Issuer and is not prohibited by Article 10;
(5) the Issuer delivers to the Trustee an Opinion of Counsel
to the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under
the Investment Company Act of 1940;
(6) in the case of the legal defeasance option, the Issuer
shall have delivered to the Trustee an Opinion of Counsel confirming
that, subject to customary assumptions and exclusions, (i) the Issuer
has received from, or there has been published by, the Internal Revenue
Service a ruling, or (ii) 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, subject to customary assumptions and exclusions, the
Securityholders will not recognize income, gain or loss for Federal
income tax purposes as a result of such defeasance and will be subject
to Federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such defeasance had not
occurred;
(7) in the case of the covenant defeasance option, the Issuer
shall have delivered to the Trustee an Opinion of Counsel confirming
that, subject to customary assumptions and exclusions, the
Securityholders will not recognize income, gain or loss for Federal
income tax purposes as a result of such covenant defeasance and will be
subject to Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such covenant
defeasance had not occurred; and
(8) the Issuer delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance and discharge of the Securities as
contemplated by this Article 8 have been complied with.
<PAGE>
61
Before or after a deposit, the Issuer may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall
hold in trust money or U.S. Government Obligations deposited with it pursuant to
this Article 8. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities. Money
and securities so held in trust are not subject to Article 10.
SECTION 8.04. Repayment to Issuer. The Trustee and the Paying
Agent shall promptly turn over to the Issuer upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee
and the Paying Agent shall pay to the Issuer upon written request any money held
by them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Securityholders entitled to the money must look to the
Issuer for payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations. The Issuer
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Issuer's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; provided, however, that, if the
Issuer has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Issuer shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
money or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders. The Issuer and the
Trustee may amend this Indenture or the Securities without notice to or consent
of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
<PAGE>
62
(3) to provide for uncertificated Securities in addition to or
in place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to make any change in Article 10 or Article 12 that would
limit or terminate the benefits available to any holder of Senior
Indebtedness (or Representatives therefor) under Article 10 or Article
12;
(5) to add additional Guarantees with respect to the
Securities or to secure the Securities;
(6) to add to the covenants of the Issuer for the benefit of
the Holders or to surrender any right or power herein conferred upon
the Issuer;
(7) to comply with any requirements of the SEC in connection
with qualifying, or maintaining the qualification of, this Indenture
under the TIA;
(8) to make any change that does not adversely affect the
rights of any Securityholder; or
(9) to provide for the issuance of the Exchange Securities,
Private Exchange Securities or Additional Securities, which shall have
terms substantially identical in all material respects to the Original
Securities (except that the transfer restrictions contained in the
Original Securities shall be modified or eliminated, as appropriate),
and which may be treated, together with any outstanding Original
Securities, as a single issue of securities.
An amendment under this Section may not make any change that
adversely affects the rights under Article 10 or Article 12 of any holder of
Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.
After an amendment under this Section becomes effective, the
Issuer shall mail to Securityholders a notice briefly describing such amendment.
The failure to give such notice to all Securityholders, or any defect therein,
shall not impair or affect the validity of an amendment under this Section.
SECTION 9.02. With Consent of Holders. The Issuer, the
Guarantors and the Trustee may amend this Indenture or the Securities without
notice to any Securityholder but with the written consent of the Holders of at
least a majority in principal amount of the Securities then outstanding
(including consents obtained in connection with a tender offer or exchange for
the Securities). However, without the consent of each Securityholder affected,
an amendment may not:
(1) reduce the amount of Securities whose Holders must consent
to an amendment;
(2) reduce the rate of or extend the time for payment of
interest or any liquidated damages on any Security;
<PAGE>
63
(3) reduce the principal of or extend the Stated Maturity of
any Security;
(4) reduce the premium payable upon the redemption of any
Security or change the time at which any Security may be redeemed in
accordance with Article 3;
(5) make any Security payable in money other than that stated
in the Security;
(6) make any change in Article 10 or Article 12 that adversely
affects the rights of any Securityholder under Article 10 or Article
12;
(7) make any change in Section 6.04 or 6.07 or the second
sentence of this Section 9.02; or
(8) modify the Guarantees in any manner adverse to the
Holders.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
An amendment under this Section 9.02 may not make any change
that adversely affects the rights under Article 10 or Article 12 of any holder
of Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.
After an amendment under this Section becomes effective, the
Issuer shall mail to Securityholders a notice briefly describing such amendment.
The failure to give such notice to all Securityholders, or any defect therein,
shall not impair or affect the validity of an amendment under this Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Securities shall comply with the TIA as then
in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any such
Holder or subsequent Holder may revoke the consent or waiver as to such Holder's
Security or portion of the Security if the Trustee receives the notice of
revocation before the date on which the Trustee receives an Officers'
Certificate from the Issuer certifying that the requisite number of consents
have been received. After an amendment or waiver becomes effective, it shall
bind every Securityholder. An amendment or waiver becomes effective upon the (i)
receipt by the Issuer or the Trustee of the requisite number of consents, (ii)
satisfaction of conditions to effectiveness as set forth in this Indenture and
any indenture supplemental hereto containing such amendment or waiver and (iii)
execution of such amendment or waiver (or supplemental indenture) by the Issuer
and the Trustee.
The Issuer may, but shall not be obligated to, fix a record
date for the purpose of determining the Securityholders entitled to give their
consent or take any other
<PAGE>
64
action described above or required or permitted to be taken pursuant to this
Indenture. If a record date is fixed, then notwithstanding the immediately
preceding paragraph, those Persons who were Securityholders at such record date
(or their duly designated proxies), and only those Persons, shall be entitled to
give such consent or to revoke any consent previously given or to take any such
action, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 120 days after
such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an
amendment changes the terms of a Security, the Trustee may require the Holder of
the Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Issuer or the Trustee so determines, the Issuer in
exchange for the Security shall issue and the Trustee shall authenticate a new
Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall
sign any amendment authorized pursuant to this Article 9 if the amendment does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may but need not sign it. In signing such
amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.01) shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
stating that such amendment is authorized or permitted by this Indenture and
that such amendment is the legal, valid and binding obligation of the Issuer and
the Guarantors enforceable against them in accordance with its terms, subject to
customary exceptions, and complies with the provisions hereof (including Section
9.03).
SECTION 9.07. Payment for Consent. Neither the Issuer nor any
Affiliate of the Issuer shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 10
Subordination
SECTION 10.01. Agreement To Subordinate. The Issuer agrees,
and each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities is subordinated in right of payment, to the extent
and in the manner provided in this Article 10, to the prior payment in full of
all Senior Indebtedness of the Issuer and that the subordination is for the
benefit of and enforceable by the holders of such Senior Indebtedness. The
Securities shall in all respects rank pari passu in right of payment with all
future Pari Passu Indebtedness of the Issuer and shall rank senior in right of
payment to all existing and future Subordinated Indebtedness of the Issuer. Only
Indebtedness of the Issuer that is Senior Indebtedness of the Issuer shall rank
senior to the Securities in accordance with the provisions set forth herein. For
purposes of this
<PAGE>
65
Article 10, the Indebtedness evidenced by the Securities shall be deemed to
include the liquidated damages payable pursuant to the provisions set forth in
the Securities and the Registration Agreement. All provisions of this Article 10
shall be subject to Section 10.12.
SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of the Issuer upon a total or partial
liquidation or dissolution or reorganization of or similar proceeding relating
to the Issuer or its property:
(1) holders of Senior Indebtedness of the Issuer shall be
entitled to receive payment in full in cash or Cash Equivalents of such
Senior Indebtedness (including interest accruing after, or which would
accrue but for, the commencement of any such proceeding at the rate
specified in the applicable Senior Indebtedness, whether or not a claim
for such interest would be allowed) before Securityholders shall be
entitled to receive any payment; and
(2) until the Senior Indebtedness of the Issuer is paid in
full in cash or Cash Equivalents, any payment or distribution to which
Securityholders would be entitled but for this Article 10 shall be made
to holders of the Senior Indebtedness of the Issuer as their interests
may appear (except that Securityholders may receive and retain (A)
Permitted Junior Securities, and (B) payments made from the trust
described under Section 8.01 so long as, on the date or dates the
respective amounts were paid into the trust, such payments were made
with respect to the Securities without violating this Article 10). If a
distribution is made to Securityholders that due to this Article 10
should not have been made to them, such Securityholders are required to
hold it in trust for the holders of Senior Indebtedness of the Issuer
and pay it over to them as their interests may appear.
SECTION 10.03. Default on Designated Senior Indebtedness of
the Issuer. The Issuer may not pay the principal of, premium (if any) or
interest on, the Securities or make any deposit pursuant to Section 8.01 and may
not otherwise purchase, redeem or otherwise retire any Securities (except that
Holders may receive and retain (A) Permitted Junior Securities and (B) payments
made from the trust described in Section 8.01) (collectively, "pay the
Securities") if (i) a default in the payment of the principal of, premium, if
any, or interest on any Designated Senior Indebtedness of the Issuer occurs and
is continuing or any other amount owing in respect of any Designated Senior
Indebtedness of the Issuer is not paid when due, or (ii) any other default on
Designated Senior Indebtedness of the Issuer occurs and the maturity of such
Designated Senior Indebtedness of the Issuer is accelerated in accordance with
its terms unless, in either case, (x) the default has been cured or waived and
any such acceleration has been rescinded or (y) such Designated Senior
Indebtedness of the Issuer has been paid in full in cash or Cash Equivalents.
However, the Issuer may pay the Securities without regard to the foregoing if
the Issuer and the Trustee receive written notice approving such payment from
the Representative of the Designated Senior Indebtedness of the Issuer with
respect to which either of the events set forth in clause (i) or (ii) of the
immediately preceding sentence has occurred and is continuing. During the
continuance of any default (other than a default described in clause (i) or (ii)
of the second preceding sentence) with respect to any Designated Senior
Indebtedness of the Issuer pursuant to which the maturity thereof may be
accelerated immediately without further notice (except such notice as may be
required to effect such acceleration) or the expiration of any applicable grace
periods, the Issuer may not pay the Securities for a period (a "Payment Blockage
<PAGE>
66
Period") commencing upon the receipt by the Trustee (with a copy to the Issuer)
of written notice (a "Blockage Notice") of such default from the Representative
of the holders of such Designated Senior Indebtedness of the Issuer specifying
an election to effect a Payment Blockage Period and ending 179 days thereafter
(or earlier if such Payment Blockage Period is terminated (i) by written notice
to the Trustee and the Issuer from the Person or Persons who gave such Blockage
Notice, (ii) by repayment in full in cash or Cash Equivalents of such Designated
Senior Indebtedness of the Issuer or (iii) because the default giving rise to
such Blockage Notice is no longer continuing). Notwithstanding the provisions
described in the immediately preceding sentence (but subject to the provisions
contained in the first sentence of this Section 10.03 and Section 10.02), unless
the holders of such Designated Senior Indebtedness of the Issuer or the
Representative of such holders shall have accelerated the maturity of such
Designated Senior Indebtedness of the Issuer, the Issuer may resume payments on
the Securities after the end of such Payment Blockage Period, including any
missed payments. Not more than one Blockage Notice may be given in any
consecutive 360-day period, irrespective of the number of defaults with respect
to Designated Senior Indebtedness of the Issuer during such period. However, if
any Blockage Notice within such 360-day period is given by or on behalf of any
holders of Designated Senior Indebtedness of the Issuer other than the Bank
Indebtedness of the Issuer, the Representative of the Bank Indebtedness of the
Issuer may give one additional Blockage Notice within such period. In no event,
however, may the total number of days during which any Payment Blockage Period
or Periods is in effect exceed 179 days in the aggregate during any 360
consecutive day period. For purposes of this Section 10.03, no default or event
of default that existed or was continuing on the date of the commencement of any
Payment Blockage Period with respect to the Designated Senior Indebtedness of
the Issuer initiating such Payment Blockage Period shall be, or be made, the
basis of the commencement of a subsequent Payment Blockage Period by the
Representative of such Designated Senior Indebtedness of the Issuer, whether or
not within a period of 360 consecutive days, unless such default or event of
default shall have been cured or waived for a period of not less than 90
consecutive days.
SECTION 10.04. Acceleration of Payment of Securities. If
payment of the Securities is accelerated because of an Event of Default, the
Issuer or the Trustee shall promptly notify the holders of the Designated Senior
Indebtedness of the Issuer (or their Representative) of the acceleration. If any
Designated Senior Indebtedness of the Issuer is outstanding, the Issuer may not
pay the Securities until five Business Days after such holders or the
Representative of such holders receive notice of such acceleration and,
thereafter, may pay the Securities only if this Article 10 otherwise permits
payment at that time.
SECTION 10.05. When Distribution Must Be Paid Over. If a
payment or distribution is made to Securityholders that because of this Article
10 should not have been made to them, the Securityholders who receive the
payment or distribution shall hold it in trust for holders of Senior
Indebtedness of the Issuer and pay it over to them as their respective interests
may appear.
SECTION 10.06. Subrogation. After all Senior Indebtedness of
the Issuer is paid in full and until the Securities are paid in full in cash,
Securityholders shall be subrogated to the rights of holders of Senior
Indebtedness to receive distributions applicable to Senior Indebtedness. A
distribution made under this Article 10 to holders of such Senior Indebtedness
which otherwise would have been made to Securityholders is
<PAGE>
67
not, as between the Issuer and Securityholders, a payment by the Issuer on such
Senior Indebtedness.
SECTION 10.07. Relative Rights. This Article 10 defines the
relative rights of Securityholders and holders of Senior Indebtedness of the
Issuer. Nothing in this Indenture shall:
(1) impair, as between the Issuer and Securityholders, the
obligation of the Issuer, which is absolute and unconditional, to pay
principal of and interest on and liquidated damages in respect of, the
Securities in accordance with their terms; or
(2) prevent the Trustee or any Securityholder from exercising
its available remedies upon a Default, subject to the rights of holders
of Senior Indebtedness of the Issuer to receive distributions otherwise
payable to Securityholders.
SECTION 10.08. Subordination May Not Be Impaired by the
Issuer. No right of any holder of Senior Indebtedness of the Issuer to enforce
the subordination of the Indebtedness evidenced by the Securities shall be
impaired by any act or failure to act by the Issuer or by its failure to comply
with this Indenture.
SECTION 10.09. Rights of Trustee and Paying Agent.
Notwithstanding Section 10.03, the Trustee or Paying Agent may continue to make
payments on the Securities and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than two Business Days prior to the date of such payment, a Trust
Officer of the Trustee receives notice satisfactory to it that payments may not
be made under this Article 10. The Issuer, the Registrar, the Paying Agent, a
Representative or a holder of Senior Indebtedness of the Issuer may give the
notice; provided, however, that, if an issue of Senior Indebtedness of the
Issuer has a Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold
Senior Indebtedness of the Issuer with the same rights it would have if it were
not Trustee. The Registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article 10 with respect to any Senior Indebtedness of the Issuer which may at
any time be held by it, to the same extent as any other holder of such Senior
Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its
rights as such holder. Nothing in this Article 10 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.07.
SECTION 10.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of Senior
Indebtedness of the Issuer, the distribution may be made and the notice given to
their Representative (if any).
SECTION 10.11. Article 10 Not To Prevent Events of Default or
Limit Right To Accelerate. The failure of the Issuer to make a payment pursuant
to the Securities by reason of any provision in this Article 10 shall not be
construed as preventing the occurrence of a Default. Nothing in this Article 10
shall have any effect on the right of the Securityholders or the Trustee to
accelerate the maturity of the Securities.
SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S.
<PAGE>
68
Government Obligations held in trust under Article 8 by the Trustee for the
payment of principal of and interest on the Securities shall not be subordinated
to the prior payment of any Senior Indebtedness of the Issuer or subject to the
restrictions set forth in this Article 10, and none of the Securityholders shall
be obligated to pay over any such amount to the Issuer or any holder of Senior
Indebtedness of the Issuer or any other creditor of the Issuer.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 10, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to *the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness of the Issuer for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of such Senior
Indebtedness and other Indebtedness of the Issuer, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article 10. In the event that the Trustee
determines, in good faith, that evidence is required with respect to the right
of any Person as a holder of Senior Indebtedness of the Issuer to participate in
any payment or distribution pursuant to this Article 10, the Trustee may request
such Person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of such Senior Indebtedness held by such Person, the extent to
which such Person is entitled to participate in such payment or distribution and
other facts pertinent to the rights of such Person under this Article 10, and,
if such evidence is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to
all actions or omissions of actions by the Trustee pursuant to this Article 10.
SECTION 10.14. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness of the Issuer as provided in this Article 10 and appoints
the Trustee as attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness of the Issuer and shall not be liable to any such
holders if it shall mistakenly pay over or distribute to Securityholders or the
Issuer or any other Person, money or assets to which any holders of Senior
Indebtedness of the Issuer shall be entitled by virtue of this Article 10 or
otherwise.
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness of the Issuer, whether such Senior Indebtedness was created or
acquired before or after the issuance of the Securities, to acquire and continue
to hold, or to continue to hold, such Senior Indebtedness and such holder of
such Senior Indebtedness shall be deemed conclusively
<PAGE>
69
to have relied on such subordination provisions in acquiring and continuing to
hold, or in continuing to hold, such Senior Indebtedness.
SECTION 10.17. Trustee's Compensation Not Prejudiced. Nothing
in this Article shall apply to amounts due to the Trustee pursuant to other
sections of this Indenture.
ARTICLE 11
Guarantees
SECTION 11.01. Guarantees. Each Guarantor hereby jointly and
severally unconditionally and irrevocably guarantees, as a primary obligor and
not merely as a surety, to each Holder and to the Trustee and its successors and
assigns (a) the full and punctual payment when due, whether at Stated Maturity,
by acceleration, by redemption or otherwise, of all obligations of the Issuer
under this Indenture (including obligations to the Trustee) and the Securities,
whether for payment of principal of, interest on or liquidated damages in
respect of the Securities and all other monetary obligations of the Issuer under
this Indenture and the Securities and (b) the full and punctual performance
within applicable grace periods of all other obligations of the Issuer whether
for expenses, indemnification or otherwise under this Indenture and the
Securities (all the foregoing being hereinafter collectively called the
"Guaranteed Obligations"). Each Guarantor further agrees that the Guaranteed
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from each such Guarantor, and that each such Guarantor shall
remain bound under this Article 11 notwithstanding any extension or renewal of
any Guaranteed Obligation.
Each Guarantor waives presentation to, demand of, payment from
and protest to the Issuer of any of the Guaranteed Obligations and also waives
notice of protest for nonpayment. Each Guarantor waives notice of any default
under the Securities or the Guaranteed Obligations. The obligations of each
Guarantor hereunder shall not be affected by (a) the failure of any Holder or
the Trustee to assert any claim or demand or to enforce any right or remedy
against the Issuer or any other Person under this Indenture, the Securities or
any other agreement or otherwise; (b) any extension or renewal of any thereof;
(c) any rescission, waiver, amendment or modification of any of the terms or
provisions of this Indenture, the Securities or any other agreement; (d) the
release of any security held by any Holder or the Trustee for the Guaranteed
Obligations or any of them; (e) the failure of any Holder or Trustee to exercise
any right or remedy against any other guarantor of the Guaranteed Obligations;
or (f) any change in the ownership of such Guarantor, except as provided in
Section 11.02(b).
Each Guarantor hereby waives any right to which it may be
entitled to have its obligations hereunder divided among the Guarantors, such
that such Guarantor's obligations would be less than the full amount claimed.
Each Guarantor hereby waives any right to which it may be entitled to have the
assets of the Issuer first be used and depleted as payment of the Issuer's or
such Guarantor's obligations hereunder prior to any amounts being claimed from
or paid by such Guarantor hereunder. Each Guarantor hereby waives any right to
which it may be entitled to require that the Issuer be sued prior to an action
being initiated against such Guarantor.
<PAGE>
70
Each Guarantor further agrees that its Guarantee herein
constitutes a guarantee of payment, performance and compliance when due (and not
a guarantee of collection) and waives any right to require that any resort be
had by any Holder or the Trustee to any security held for payment of the
Guaranteed Obligations.
The Guarantee of each Guarantor is, to the extent and in the
manner set forth in Article 12, subordinated and subject in right of payment to
the prior payment in full of the principal of and premium, if any, and interest
on all Senior Indebtedness of the relevant Guarantor and is made subject to such
provisions of this Indenture.
Except as expressly set forth in Sections 8.01(b), 11.02 and
11.06, the obligations of each Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense of setoff, counterclaim, recoupment or termination
whatsoever or by reason of the invalidity, illegality or unenforceability of the
Guaranteed Obligations or otherwise. Without limiting the generality of the
foregoing, the obligations of each Guarantor herein shall not be discharged or
impaired or otherwise affected by the failure of any Holder or the Trustee to
assert any claim or demand or to enforce any remedy under this Indenture, the
Securities or any other agreement, by any waiver or modification of any thereof,
by any default, failure or delay, wilful or otherwise, in the performance of the
obligations, or by any other act or thing or omission or delay to do any other
act or thing which may or might in any manner or to any extent vary the risk of
any Guarantor or would otherwise operate as a discharge of any Guarantor as a
matter of law or equity.
Each Guarantor agrees that its Guarantee shall remain in full
force and effect until payment in full of all the Guaranteed Obligations. Each
Guarantor further agrees that its Guarantee herein shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal of or interest on any Guaranteed Obligation is
rescinded or must otherwise be restored by any Holder or the Trustee upon the
bankruptcy or reorganization of the Issuer or otherwise.
In furtherance of the foregoing and not in limitation of any
other right which any Holder or the Trustee has at law or in equity against any
Guarantor by virtue hereof, upon the failure of the Issuer to pay the principal
of or interest on any Guaranteed Obligation when and as the same shall become
due, whether at maturity, by acceleration, by redemption or otherwise, or to
perform or comply with any other Guaranteed Obligation, each Guarantor hereby
promises to and shall, upon receipt of written demand by the Trustee, forthwith
pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal
to the sum of (i) the unpaid principal amount of such Guaranteed Obligations,
(ii) accrued and unpaid interest on such Guaranteed Obligations (but only to the
extent not prohibited by law) and (iii) all other monetary obligations of the
Issuer to the Holders and the Trustee.
Each Guarantor agrees that it shall not be entitled to any
right of subrogation in relation to the Holders in respect of any Guaranteed
Obligations guaranteed hereby until payment in full of all Guaranteed
Obligations and all obligations to which the Guaranteed Obligations are
subordinated as provided in Article 12. Each Guarantor further agrees that, as
between it, on the one hand, and the Holders and the Trustee, on the other hand,
(x) the maturity of the Guaranteed Obligations guaranteed hereby may be
accelerated as provided in Article 6 for the purposes of any Guarantee
<PAGE>
71
herein, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the Guaranteed Obligations guaranteed hereby,
and (y) in the event of any declaration of acceleration of such Guaranteed
Obligations as provided in Article 6, such Guaranteed Obligations (whether or
not due and payable) shall forthwith become due and payable by such Guarantor
for the purposes of this Section 11.01.
Each Guarantor also agrees to pay any and all costs and
expenses (including reasonable attorneys' fees and expenses) incurred by the
Trustee or any Holder in enforcing any rights under this Section 11.01.
Upon request of the Trustee, each Guarantor shall execute and
deliver such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the purpose of this Indenture.
SECTION 11.02. Limitation on Liability. (a) Any term or
provision of this Indenture to the contrary notwithstanding, the maximum,
aggregate amount of the Guaranteed Obligations guaranteed hereunder by any
Guarantor shall not exceed the maximum amount that can be hereby guaranteed
without rendering this Indenture, as it relates to such Guarantor, voidable
under applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally.
(b) A Guarantee of any Guarantor that is a Subsidiary of the
Issuer shall terminate and be of no further force or effect and such Guarantor
shall be deemed to be released from all obligations under this Article 11 upon
(i) (A) the sale (including through merger or consolidation) by the Issuer or
any Subsidiary of the Issuer (or any pledgee of the Issuer) of the Capital Stock
of such Guarantor, where, after such sale, such Guarantor is no longer a
Subsidiary of the Issuer or (B) the sale of all or substantially all the assets
of such Guarantor; provided, however, that each such sale (or, in the case of a
sale by such pledgee, the disposition of the proceeds of such sale) shall comply
with Section 4.06 and (ii) such Guarantor being released from its guarantee of,
and all pledges and security interests granted in connection with, the Credit
Agreement and any other Indebtedness of the Issuer or any Subsidiary of the
Issuer.
(c) In addition, a Guarantee of any Guarantor that is a
Subsidiary of the Issuer shall terminate and be of no further force or effect
and such Guarantor shall be deemed to be released from all obligations under
this Article 11 upon (i) such Guarantor ceasing to be a Subsidiary of the Issuer
as a result of any foreclosure of any pledge or security interest securing Bank
Indebtedness or other exercise of remedies in respect thereof if such Guarantor
is released from its guarantee of, and all pledges and security interests
granted in connection with, the Credit Agreement or (ii) the Issuer's
designation of such Guarantor as an Unrestricted Subsidiary, provided that such
designation complies with the other applicable provisions of this Indenture.
At the request of the Issuer, the Trustee shall execute and
deliver an appropriate instrument evidencing such release.
SECTION 11.03. Successors and Assigns. This Article 11 shall
be binding upon each Guarantor and its successors and assigns and shall inure to
the benefit of the successors and assigns of the Trustee and the Holders and, in
the event of any transfer or assignment of rights by any Holder or the Trustee,
the rights and privileges
<PAGE>
72
conferred upon that party in this Indenture and in the Securities shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions of this Indenture.
SECTION 11.04. No Waiver. Neither a failure nor a delay on the
part of either the Trustee or the Holders in exercising any right, power or
privilege under this Article 11 shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of any
right, power or privilege. The rights, remedies and benefits of the Trustee and
the Holders herein expressly specified are cumulative and not exclusive of any
other rights, remedies or benefits which either may have under this Article 11
at law, in equity, by statute or otherwise.
SECTION 11.05. Modification. No modification, amendment or
waiver of any provision of this Article 11, nor the consent to any departure by
any Guarantor therefrom, shall in any event be effective unless the same shall
be in writing and signed by the Trustee, and then such waiver or consent shall
be effective only in the specific instance and for the purpose for which given.
No notice to or demand on any Guarantor in any case shall entitle such Guarantor
to any other or further notice or demand in the same, similar or other
circumstances.
SECTION 11.06. Execution of Supplemental Indenture for Future
Guarantors. Each Subsidiary which is required to become a Guarantor pursuant to
Section 4.13 shall promptly execute and deliver to the Trustee a supplemental
indenture in the form of Exhibit C hereto pursuant to which such Subsidiary
shall become a Guarantor under this Article 11 and shall guarantee the
Guaranteed Obligations. Concurrently with the execution and delivery of such
supplemental indenture, the Issuer shall deliver to the Trustee an Opinion of
Counsel and an Officers' Certificate to the effect that such supplemental
indenture has been duly authorized, executed and delivered by such Subsidiary
and that, subject to the application of bankruptcy, insolvency, moratorium,
fraudulent conveyance or transfer and other similar laws relating to creditors'
rights generally and to the principles of equity, whether considered in a
proceeding at law or in equity, the Guarantee of such Guarantor is a legal,
valid and binding obligation of such Guarantor, enforceable against such
Guarantor in accordance with its terms.
ARTICLE 12
Subordination of the Guarantees
SECTION 12.01. Agreement To Subordinate. Each Guarantor
agrees, and each Securityholder by accepting a Security agrees, that the
obligations of a Guarantor hereunder are subordinated in right of payment, to
the extent and in the manner provided in this Article 12, to the prior payment
in full of all Senior Indebtedness of such Guarantor and that the subordination
is for the benefit of and enforceable by the holders of such Senior Indebtedness
of such Guarantor. The obligations hereunder with respect to a Guarantor shall
in all respects rank pari passu in right of payment with all future Pari Passu
Indebtedness of such Guarantor and shall rank senior in right of payment to all
existing and future Subordinated Indebtedness of such Guarantor. Only
Indebtedness of such Guarantor that is Senior Indebtedness of such Guarantor
shall rank senior to the obligations of such Guarantor in accordance with the
provisions set forth herein.
<PAGE>
73
SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of a Guarantor upon a total or partial
liquidation or dissolution or reorganization of or similar proceeding relating
to such Guarantor or its property:
(1) the holders of Senior Indebtedness of such Guarantor shall
be entitled to receive payment in full in cash or Cash Equivalents of
such Senior Indebtedness (including interest accruing after, or which
would accrue but for, the commencement of any such proceeding at the
rate specified in the applicable Senior Indebtedness, whether or not a
claim for such interest would be allowed) before Securityholders are
entitled to receive any payment; and
(2) until the Senior Indebtedness of such Guarantor is paid in
full in cash or Cash Equivalents, any payment or distribution to which
Securityholders would be entitled but for this Article 12 shall be made
to holders of such Senior Indebtedness as their interests may appear
(except that Securityholders may receive and retain (A) Permitted
Junior Securities, and (B) payments made from the trust described under
Section 8.01 so long as, on the date or dates the respective amounts
were paid into the trust, such payments were made with respect to the
Securities without violating this Article 12). If a distribution is
made to Securityholders that due to this Article 12 should not have
been made to them, such Securityholders are required to hold it in
trust for the holders of Senior Indebtedness of such Guarantor and pay
it over to them as their interests may appear.
SECTION 12.03. Default on Designated Senior Indebtedness of a
Guarantor. A Guarantor may not make any payment pursuant to any of the
Guaranteed Obligations and may not otherwise purchase, redeem or otherwise
retire any Securities (except that Holders may receive and retain (A) Permitted
Junior Securities and (B) payments made from the trust described in Section
8.01) (collectively, "pay its Guarantee") if (i) a default in the payment of the
principal of, premium, if any, or interest on any Designated Senior Indebtedness
of such Guarantor occurs and is continuing or any other amount owing in respect
of any Designated Senior Indebtedness of such Guarantor is not paid when due, or
(ii) any other default on Designated Senior Indebtedness of such Guarantor
occurs and the maturity of such Designated Senior Indebtedness of such Guarantor
is accelerated in accordance with its terms unless, in either case, (x) the
default has been cured or waived and any such acceleration has been rescinded or
(y) such Designated Senior Indebtedness of such Guarantor has been paid in full
in cash or Cash Equivalents. However, such Guarantor may pay its Guarantee
without regard to the foregoing if such Guarantor and the Trustee receive
written notice approving such payment from the Representative of the Designated
Senior Indebtedness of such Guarantor with respect to which either of the events
in clause (i) or (ii) of the immediately preceding sentence has occurred and is
continuing. During the continuance of any default (other than a default
described in clause (i) or (ii) of the second preceding sentence) with respect
to any Designated Senior Indebtedness of a Guarantor pursuant to which the
maturity thereof may be accelerated immediately without further notice (except
such notice as may be required to effect such acceleration) or the expiration of
any applicable grace periods, such Guarantor may not pay its Guarantee for a
period (a "Guarantee Payment Blockage Period") commencing upon the receipt by
the Trustee (with a copy to such Guarantor and the Issuer) of written notice (a
"Guarantee Blockage Notice") of such default from the Representative of the
holders of such Designated Senior
<PAGE>
74
Indebtedness of such Guarantor specifying an election to effect a Guarantee
Payment Blockage Period and ending 179 days thereafter (or earlier if such
Guarantee Payment Blockage Period is terminated (i) by written notice to the
Trustee (with a copy to such Guarantor and the Issuer) from the Person or
Persons who gave such Guarantee Blockage Notice, (ii) by repayment in full in
cash or Cash Equivalents of such Designated Senior Indebtedness of such
Guarantor or (iii) because the default giving rise to such Guarantee Blockage
Notice is no longer continuing). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the provisions contained in the
first sentence of this Section 12.03 and in Section 12.02), unless the holders
of such Designated Senior Indebtedness of such Guarantor or the Representative
of such holders shall have accelerated the maturity of such Designated Senior
Indebtedness of such Guarantor, such Guarantor may resume payments on its
Guarantee after the end of such Guarantee Payment Blockage Period, including any
missed payments. Not more than one Guarantee Blockage Notice may be given with
respect to a Guarantor in any consecutive 360-day period, irrespective of the
number of defaults with respect to Designated Senior Indebtedness of such
Guarantor during such period.
SECTION 12.04. Demand for Payment. If payment of the
Securities is accelerated because of an Event of Default and a demand for
payment is made on a Guarantor pursuant to Article 11, such Guarantor or the
Trustee shall promptly notify the holders of the Designated Senior Indebtedness
of such Guarantor (or the Representative of such holders) of such demand. If any
Designated Senior Indebtedness of such Guarantor is outstanding, such Guarantor
may not pay its Guarantee until five Business Days after such holders or the
Representative of such holders receive notice of such demand and, thereafter,
may pay its Guarantee only if this Article 12 otherwise permits payment at that
time.
SECTION 12.05. When Distribution Must Be Paid Over. If a
payment or distribution is made to Securityholders that because of this Article
12 should not have been made to them, the Securityholders who receive the
payment or distribution shall hold it in trust for holders of Senior
Indebtedness of the relevant Guarantor and pay it over to them as their
respective interests may appear.
SECTION 12.06. Subrogation. After all Senior Indebtedness of a
Guarantor is paid in full and until the Securities are paid in full in cash,
Securityholders shall be subrogated to the rights of holders of Senior
Indebtedness of such Guarantor to receive distributions applicable to Senior
Indebtedness of such Guarantor. A distribution made under this Article 12 to
holders of Senior Indebtedness of such Guarantor which otherwise would have been
made to Securityholders is not, as between such Guarantor and Securityholders, a
payment by such Guarantor on Senior Indebtedness of such Guarantor.
SECTION 12.07. Relative Rights. This Article 12 defines the
relative rights of Securityholders and holders of Senior Indebtedness of a
Guarantor. Nothing in this Indenture shall:
(1) impair, as between a Guarantor and Securityholders, the
obligation of a Guarantor which is absolute and unconditional, to make
payments with respect to the Guaranteed Obligations to the extent set
forth in Article 11; or prevent the Trustee or any Securityholder from
exercising its available remedies upon a default by a Guarantor under
its obligations with respect to the Guaranteed
<PAGE>
75
Obligations, subject to the rights of holders of Senior Indebtedness of
such Guarantor to receive distributions otherwise payable to
Securityholders.
SECTION 12.08. Subordination May Not Be Impaired by a
Guarantor. No right of any holder of Senior Indebtedness of a Guarantor to
enforce the subordination of the Guaranteed Obligations of such Guarantor
hereunder shall be impaired by any act or failure to act by such Guarantor or by
its failure to comply with this Indenture.
SECTION 12.09. Rights of Trustee and Paying Agent.
Notwithstanding Section 12.03, the Trustee or the Paying Agent may continue to
make payments on the Securities and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than two Business Days prior to the date of such payment, a Trust
Officer of the Trustee receives notice satisfactory to it that payments may not
be made under this Article 12. A Guarantor, the Registrar or co-registrar, the
Paying Agent, a Representative or a holder of Senior Indebtedness of a Guarantor
may give the notice; provided, however, that, if an issue of Senior Indebtedness
of a Guarantor has a Representative, only the Representative may give the
notice.
The Trustee in its individual or any other capacity may hold
Senior Indebtedness of a Guarantor with the same rights it would have if it were
not Trustee. The Registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article 12 with respect to any Senior Indebtedness of a Guarantor which may at
any time be held by it, to the same extent as any other holder of Senior
Indebtedness of such Guarantor; and nothing in Article 7 shall deprive the
Trustee of any of its rights as such holder. Nothing in this Article 12 shall
apply to claims of, or payments to, the Trustee under or pursuant to Section
7.07.
SECTION 12.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of Senior
Indebtedness of a Guarantor, the distribution may be made and the notice given
to their Representative (if any).
SECTION 12.11. Article 12 Not To Prevent Events of Default or
Limit Right To Accelerate. The failure of a Guarantor to make a payment on any
of its Guaranteed Obligations by reason of any provision in this Article 12
shall not be construed as preventing the occurrence of a default by such
Guarantor under such obligations. Nothing in this Article 12 shall have any
effect on the right of the Securityholders or the Trustee to make a demand for
payment on a Guarantor pursuant to Article 11.
SECTION 12.12. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 12, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 12.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness of a Guarantor for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of the Senior
Indebtedness of a Guarantor and other Indebtedness of a Guarantor, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts
<PAGE>
76
pertinent thereto or to this Article 12. In the event that the Trustee
determines, in good faith, that evidence is required with respect to the right
of any Person as a holder of Senior Indebtedness of a Guarantor to participate
in any payment or distribution pursuant to this Article 12, the Trustee may
request such Person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of Senior Indebtedness of such Subsidiary Guarantor
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and other facts pertinent to the rights of such
Person under this Article 12, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment. The provisions of Sections
7.01 and 7.02 shall be applicable to all actions or omissions of actions by the
Trustee pursuant to this Article 12.
SECTION 12.13. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
or her behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination between the Securityholders and the
holders of Senior Indebtedness of each of the Guarantors as provided in this
Article 12 and appoints the Trustee as attorney-in-fact for any and all such
purposes.
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior
Indebtedness of a Guarantor. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness of a Guarantor and shall
not be liable to any such holders if it shall mistakenly pay over or distribute
to Securityholders or the relevant Guarantor or any other Person, money or
assets to which any holders of Senior Indebtedness of such Guarantor shall be
entitled by virtue of this Article 12 or otherwise.
SECTION 12.15. Reliance by Holders of Senior Indebtedness of a
Guarantor on Subordination Provisions. Each Securityholder by accepting a
Security acknowledges and agrees that the foregoing subordination provisions
are, and are intended to be, an inducement and a consideration to each holder of
any Senior Indebtedness of a Guarantor, whether such Senior Indebtedness of such
Guarantor was created or acquired before or after the issuance of the
Securities, to acquire and continue to hold, or to continue to hold, such Senior
Indebtedness of such Guarantor and such holder of Senior Indebtedness of such
Guarantor shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness of such Guarantor.
SECTION 12.16. Defeasance. The terms of this Article 12 shall
not apply to payments from money or the proceeds of U.S. Government Obligations
held in trust by the Trustee for the payment of principal of and interest on the
Securities pursuant to the provisions described in Section 8.03.
ARTICLE 13
Miscellaneous
SECTION 13.01. Trust Indenture Act Controls. If any provision
of this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
<PAGE>
77
SECTION 13.02. Notices. Any notice or communication shall be
in writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Issuer:
American Axle & Manufacturing, Inc.
1840 Holbrook Avenue
Detroit, Michigan 48212
Attention of: Secretary
if to the Trustee:
IBJ Whitehall Bank & Trust Company
1 State Street
10th Floor
New York, NY 10004
Attention of:
Corporate Trust Department
The Issuer or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall
be mailed to the Securityholder at the Securityholder's address as it appears on
the registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Issuer, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Issuer to the Trustee to take
or refrain from taking any action under this Indenture, the Issuer shall furnish
to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
<PAGE>
78
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 13.06. When Securities Disregarded. In determining
whether the Holders of the required principal amount of Securities have
concurred in any direction, waiver or consent, Securities owned by the Issuer,
any Guarantor or by any Person directly or indirectly controlling or controlled
by or under direct or indirect common control with the Issuer or any Guarantor
shall be disregarded and deemed not to be outstanding, except that, for the
purpose of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Securities which the Trustee knows are
so owned shall be so disregarded. Subject to the foregoing, only Securities
outstanding at the time shall be considered in any such determination.
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar and the Paying Agent may make reasonable rules
for their functions.
SECTION 13.08. Legal Holidays. A "Legal Holiday" is a
Saturday, a Sunday or a day on which banking institutions are not required to be
open in the State of New York. If a payment date is a Legal Holiday, payment
shall be made on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period. If a regular record date is a
Legal Holiday, the record date shall not be affected.
SECTION 13.09. GOVERNING LAW. THIS INDENTURE AND THE
SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.
SECTION 13.10. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of the Issuer shall not have any
liability for any obligations of the Issuer under the Securities or this
Indenture or for any claim based on,
<PAGE>
79
in respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder shall waive and release all such liability. The
waiver and release shall be part of the consideration for the issue of the
Securities.
SECTION 13.11. Successors. All agreements of the Issuer and
each Guarantor in this Indenture and the Securities shall bind its successors.
All agreements of the Trustee in this Indenture shall bind its successors.
SECTION 13.12. Multiple Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement. One signed copy is enough to
prove this Indenture.
SECTION 13.13. Table of Contents; Headings. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
<PAGE>
80
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
AMERICAN AXLE & MANUFACTURING, INC.,
by _________________________________
Name:
Title:
AMERICAN AXLE & MANUFACTURING HOLDINGS,
INC.,
by _________________________________
Name:
Title:
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
by /s/ Stephen J. Giurlando
----------------------------------
Name: Stephen J. Giurlando
Title: Vice President
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
AMERICAN AXLE & MANUFACTURING, INC.,
by /s/ Gary J. Witosky
----------------------------------
Name:
Title:
AMERICAN AXLE & MANUFACTURING HOLDINGS,
INC.,
by /s/ Patrick S. Lancaster
----------------------------------
Name:
Title:
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
by _________________________________
Name:
Title:
<PAGE>
APPENDIX A
PROVISIONS RELATING TO ORIGINAL SECURITIES,
ADDITIONAL SECURITIES, EXCHANGE SECURITIES
AND PRIVATE EXCHANGE SECURITIES
1. Definitions
1.1 Definitions
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Regulation S Global Security or beneficial interest
therein, the rules and procedures of the Depositary for such Global Security,
Euroclear and Cedel, in each case to the extent applicable to such transaction
and as in effect from time to time.
"Cedel" means Cedel Bank, S.A., or any successor securities
clearing agency.
"Definitive Security" means a certificated Initial Security or
Exchange Security (bearing the Restricted Securities Legend if the transfer of
such Security is restricted by applicable law) that does not include the Global
Securities Legend.
"Depositary" means The Depository Trust Company, its nominees
and their respective successors.
"Euroclear" means the Euroclear Clearance System or any
successor securities clearing agency.
"Global Securities Legend" means the legend set forth under
that caption in Exhibit A to this Indenture.
"IAI" means an institutional "accredited investor" as
described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchasers" means Chase Securities Inc., Donald,
Lufkin & Jenrette Securities Corporation and Morgan Stanley & Co. Incorporated.
"Private Exchange" means an offer by the Issuer, pursuant to a
Registration Agreement, to issue and deliver to certain purchasers, in exchange
for the Initial Securities held by such purchasers as part of their initial
distribution, a like aggregate principal amount of Private Exchange Securities.
"Private Exchange Securities" means the Securities of the
Issuer issued in exchange for Initial Securities pursuant to this Indenture in
connection with a Private Exchange pursuant to a Registration Agreement.
"Purchase Agreement" means (i) the Purchase Agreement dated
March 2, 1999, among the Issuer, Holdings and the Initial Purchasers and (ii)
any other similar Purchase Agreement relating to Additional Securities.
<PAGE>
2
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Registered Exchange Offer" means an offer by the Issuer,
pursuant to a Registration Agreement, to certain Holders of Initial Securities,
to issue and deliver to such Holders, in exchange for their Initial Securities,
a like aggregate principal amount of Exchange Securities registered under the
Securities Act.
"Registration Agreement" means (i) the Exchange and
Registration Rights Agreement dated March 5, 1999, among the Issuer, Holdings
and the Initial Purchasers and (ii) any other similar Exchange and Registration
Rights Agreement relating to Additional Securities.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Securities" means all Initial Securities offered
and sold outside the United States in reliance on Regulation S.
"Restricted Period", with respect to any Securities, means the
period of 40 consecutive days beginning on and including the later of (i) the
day on which such Securities are first offered to persons other than
distributors (as defined in Regulation S under the Securities Act) in reliance
on Regulation S and (ii) the Issue Date with respect to such Securities.
"Restricted Securities Legend" means the legend set forth in
Section 2.3(e)(i) herein.
"Rule 501" means Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Securities" means all Initial Securities offered
and sold to QIBs in reliance on Rule 144A.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a
Global Security (as appointed by the Depositary) or any successor person
thereto, who shall initially be the Trustee.
"Shelf Registration Statement" means a registration statement
filed by the Issuer in connection with the offer and sale of Initial Securities
pursuant to a Registration Agreement.
"Transfer Restricted Securities" means Definitive Securities
and any other Securities that bear or are required to bear the Restricted
Securities Legend.
<PAGE>
3
1.2 Other Definitions
Term: Defined in Section:
----- -------------------
"Agent Members" ..................................................... 2.1(b)
"IAI Global Security" ............................................... 2.1(a)
"Global Security" ................................................... 2.1(a)
"Regulation S Global Security" ...................................... 2.1(a)
"Rule 144A Global Security" ......................................... 2.1(a)
2. The Securities
2.1 Form and Dating
The Initial Securities issued on the date hereof will be (i)
offered and sold by the Issuer pursuant to a Purchase Agreement and (ii) resold,
initially only to (A) QIBs in reliance on Rule 144A and (B) Persons other than
U.S. Persons (as defined in Regulation S) in reliance on Regulation S. Such
Initial Securities may thereafter be transferred to, among others, QIBs,
purchasers in reliance on Regulation S and, except as set forth below, IAIs in
accordance with Rule 501. Additional Securities offered after the date hereof
may be offered and sold by the Issuer from time to time pursuant to one or more
Purchase Agreement[s] in accordance with applicable law.
(a) Global Securities. Rule 144A Securities shall be issued
initially in the form of one or more permanent global Securities in definitive,
fully registered form (collectively, the "Rule 144A Global Security") and
Regulation S Securities shall be issued initially in the form of one or more
global Securities (collectively, the "Regulation S Global Security"), in each
case without interest coupons and bearing the Global Securities Legend and
Restricted Securities Legend, which shall be deposited on behalf of the
purchasers of the Securities represented thereby with the Securities Custodian,
and registered in the name of the Depositary or a nominee of the Depositary,
duly executed by the Issuer and authenticated by the Trustee as provided in this
Indenture. One or more global securities in definitive, fully registered form
without interest coupons and bearing the Global Securities Legend and the
Restricted Securities Legend (collectively, the "IAI Global Security") shall
also be issued on the Closing Date, deposited with the Securities Custodian, and
registered in the name of the Depositary or a nominee of the Depositary, duly
executed by the Issuer and authenticated by the Trustee as provided in this
Indenture to accommodate transfers of beneficial interests in the Securities to
IAIs subsequent to the initial distribution. Beneficial ownership interests in
the Regulation S Global Security shall not be exchangeable for interests in the
Rule 144A Global Security, the IAI Global Security or any other Security without
a Restricted Securities Legend until the expiration of the Restricted Period.
The Rule 144A Global Security, the IAI Global Security and the Regulation S
Global Security are each referred to herein as a "Global Security" and are
collectively referred to herein as "Global Securities." The aggregate principal
amount of the Global Securities may from time to time be increased or decreased
by adjustments made on the records of the Trustee and the Depositary or its
nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply
only to a Global Security deposited with or on behalf of the Depositary.
<PAGE>
4
The Issuer shall execute and the Trustee shall, in accordance
with this Section 2.1(b) and pursuant to an order of the Issuer, authenticate
and deliver initially one or more Global Securities that (a) shall be registered
in the name of the Depositary for such Global Security or Global Securities or
the nominee of such Depositary and (b) shall be delivered by the Trustee to such
Depositary or pursuant to such Depositary's instructions or held by the Trustee
as Securities Custodian.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depositary or by the Trustee as Securities
Custodian or under such Global Security, and the Depositary may be treated by
the Issuer, the Trustee and any agent of the Issuer or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Issuer, the
Trustee or any agent of the Issuer 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 its Agent Members, the operation of
customary practices of such Depositary governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.
(c) Definitive Securities. Except as provided in Section 2.3
or 2.4, owners of beneficial interests in Global Securities will not be entitled
to receive physical delivery of certificated Securities.
2.2 Authentication. The Trustee shall authenticate and make available
for delivery upon a written order of the Issuer signed by two Officers (1)
Original Securities for original issue on the date hereof in an aggregate
principal amount of $300,000,000 (2) subject to the terms of this Indenture,
Additional Securities in an aggregate principal amount of up to $100,000,000 and
(3) the (A) Exchange Securities for issue only in a Registered Exchange Offer
and (B) Private Exchange Securities for issue only in a Private Exchange, in the
case of each of (A) and (B) pursuant to a Registration Agreement and for a like
principal amount of Initial Securities exchanged pursuant thereto. Such order
shall specify the amount of the Securities to be authenticated, the date on
which the original issue of Securities is to be authenticated and whether the
Securities are to be Initial Securities, Exchange Securities or Private Exchange
Securities. The aggregate principal amount of Securities outstanding at any time
may not exceed $400,000,000 except as provided in Section 2.08 of this
Indenture.
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
Securities. When Definitive Securities are presented to the Registrar with a
request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal
principal amount of Definitive Securities of other authorized
denominations,
<PAGE>
5
the Registrar shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; provided, however,
that the Definitive Securities surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Issuer
and the Registrar, duly executed by the Holder thereof or his attorney
duly authorized in writing; and
(ii) are accompanied by the following additional information
and documents, as applicable:
(A) if such Definitive Securities are being delivered
to the Registrar by a Holder for registration in the name of
such Holder, without transfer, a certification from such
Holder to that effect (in the form set forth on the reverse
side of the Initial Security); or
(B) if such Definitive Securities are being
transferred to the Issuer, a certification to that effect (in
the form set forth on the reverse side of the Initial
Security); or
(C) if such Definitive Securities are being
transferred pursuant to an exemption from registration in
accordance with Rule 144 under the Securities Act or in
reliance upon another exemption from the registration
requirements of the Securities Act, (i) a certification to
that effect (in the form set forth on the reverse side of the
Initial Security) and (ii) if the Issuer so requests, an
opinion of counsel or other evidence reasonably satisfactory
to it as to the compliance with the restrictions set forth in
the legend set forth in Section 2.3(e)(i).
(b) Restrictions on Transfer of a Definitive Security for a
Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee of
a Definitive Security, duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Issuer and the Registrar,
together with:
(i) certification (in the form set forth on the reverse side
of the Initial Security) that such Definitive Security is being
transferred (A) to a QIB in accordance with Rule 144A, (B) to an IAI
that has furnished to the Trustee a signed letter substantially in the
form of Exhibit D or (C) outside the United States in an offshore
transaction within the meaning of Regulation S and in compliance with
Rule 904 under the Securities Act; and
(ii) written instructions directing the Trustee to make, or to
direct the Securities Custodian to make, an adjustment on its books and
records with respect to such Global Security to reflect an increase in
the aggregate principal amount of the Securities represented by the
Global Security, such instructions to contain information regarding the
Depositary account to be credited with such increase,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing
<PAGE>
6
between the Depositary and the Securities Custodian, the aggregate principal
amount of Securities represented by the Global Security to be increased by the
aggregate principal amount of the Definitive Security to be exchanged and shall
credit or cause to be credited to the account of the Person specified in such
instructions a beneficial interest in the Global Security equal to the principal
amount of the Definitive Security so canceled. If no Global Securities are then
outstanding and the Global Security has not been previously exchanged for
certificated securities pursuant to Section 2.4, the Issuer shall issue and the
Trustee shall authenticate, upon written order of the Issuer in the form of an
Officers' Certificate, a new Global Security in the appropriate principal
amount.
(c) Transfer and Exchange of Global Securities. (i) The
transfer and exchange of Global Securities or beneficial interests therein shall
be effected through the Depositary, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if any) and the procedures
of the Depositary therefor. A transferor of a beneficial interest in a Global
Security shall deliver a written order given in accordance with the Depositary's
procedures containing information regarding the participant account of the
Depositary to be credited with a beneficial interest in such Global Security or
another Global Security and such account shall be credited in accordance with
such order with a beneficial interest in the applicable Global Security and the
account of the Person making the transfer shall be debited by an amount equal to
the beneficial interest in the Global Security being transferred. Transfers by
an owner of a beneficial interest in the Rule 144A Global Security or the IAI
Global Security to a transferee who takes delivery of such interest through the
Regulation S Global Security, whether before or after the expiration of the
Restricted Period, shall be made only upon receipt by the Trustee of a
certification from the transferor to the effect that such transfer is being made
in accordance with Regulation S or (if available) Rule 144 under the Securities
Act and that, if such transfer is being made prior to the expiration of the
Restricted Period, the interest transferred shall be held immediately thereafter
through Euroclear or Cedel. In the case of a transfer of a beneficial interest
in either the Regulation S Global Security or the Rule 144A Global Security for
an interest in the IAI Global Security, the transferee must furnish a signed
letter substantially in the form of Exhibit D to the Trustee.
(ii) If the proposed transfer is a transfer of a beneficial
interest in one Global Security to a beneficial interest in another
Global Security, the Registrar shall reflect on its books and records
the date and an increase in the principal amount of the Global Security
to which such interest is being transferred in an amount equal to the
principal amount of the interest to be so transferred, and the
Registrar shall reflect on its books and records the date and a
corresponding decrease in the principal amount of Global Security from
which such interest is being transferred.
(iii) Notwithstanding any other provisions of this Appendix
(other than the provisions set forth in Section 2.4), a Global Security
may not be transferred as a whole except 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.
(iv) In the event that a Global Security is exchanged for
Definitive Securities pursuant to Section 2.4 prior to the consummation
of a Registered
<PAGE>
7
Exchange Offer or the effectiveness of a Shelf Registration Statement
with respect to such Securities, such Securities may be exchanged only
in accordance with such procedures as are substantially consistent with
the provisions of this Section 2.3 (including the certification
requirements set forth on the reverse of the Initial Securities
intended to ensure that such transfers comply with Rule 144A,
Regulation S or such other applicable exemption from registration under
the Securities Act, as the case may be) and such other procedures as
may from time to time be adopted by the Issuer.
(d) Restrictions on Transfer of Regulation S Global Security.
(i) Prior to the expiration of the Restricted Period, interests in the
Regulation S Global Security may only be held through Euroclear or Cedel. During
the Restricted Period, beneficial ownership interests in the Regulation S Global
Security may only be sold, pledged or transferred through Euroclear or Cedel in
accordance with the Applicable Procedures and only (A) to the Issuer, (B) so
long as such security is eligible for resale pursuant to Rule 144A, to a person
whom the selling Holder reasonably believes is a QIB that purchases for its own
account or for the account of a QIB to whom notice is given that the resale,
pledge or transfer is being made in reliance on Rule 144A, (C) in an offshore
transaction in accordance with Regulation S, (D) pursuant to an exemption from
registration under the Securities Act provided by Rule 144 (if applicable) under
the Securities Act, (E) to an IAI purchasing for its own account, or for the
account of such an IAI, in a minimum principal amount of Securities of $250,000
or (F) pursuant to an effective registration statement under the Securities Act,
in each case in accordance with any applicable securities laws of any state of
the United States. Prior to the expiration of the Restricted Period, transfers
by an owner of a beneficial interest in the Regulation S Global Security to a
transferee who takes delivery of such interest through the Rule 144A Global
Security or the IAI Global Security shall be made only in accordance with
Applicable Procedures and upon receipt by the Trustee of a written certification
from the transferor of the beneficial interest in the form provided on the
reverse of the Initial Security to the effect that such transfer is being made
to (i) a person whom the transferor reasonably believes is a QIB within the
meaning of Rule 144A in a transaction meeting the requirements of Rule 144A or
(ii) an IAI purchasing for its own account, or for the account of such an IAI,
in a minimum principal amount of the Securities of $250,000. Such written
certification shall no longer be required after the expiration of the Restricted
Period. In the case of a transfer of a beneficial interest in the Regulation S
Global Security for an interest in the IAI Global Security, the transferee must
furnish a signed letter substantially in the form of Exhibit D to the Trustee.
(ii) Upon the expiration of the Restricted Period, beneficial
ownership interests in the Regulation S Global Security shall be
transferable in accordance with applicable law and the other terms of
this Indenture.
(e) Legend.
(i) Except as permitted by the following paragraphs (ii),
(iii) or (iv), each Security certificate evidencing the Global
Securities and the Definitive Securities (and all Securities issued in
exchange therefor or in substitution thereof) shall bear
<PAGE>
8
a legend in substantially the following form (each defined term in the
legend being defined as such for purposes of the legend only):
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY 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, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, 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
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B)
PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A"), 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 "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED
INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM
PRINCIPAL AMOUNT OF THE SECURITIES 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 ANY
OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR
TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (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>
9
Each Definitive Security shall bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS
SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER
COMPLIES WITH THE FOREGOING RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted
Security that is a Definitive Security, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted Security for a
Definitive Security that does not bear the legends set forth above and
rescind any restriction on the transfer of such Transfer Restricted
Security if the Holder certifies in writing to the Registrar that its
request for such exchange was made in reliance on Rule 144 (such
certification to be in the form set forth on the reverse of the Initial
Security).
(iii) After a transfer of any Original or Additional
Securities or Private Exchange Securities during the period of the
effectiveness of a Shelf Registration Statement with respect to such
Original or Additional Securities or Private Exchange Securities, as
the case may be, all requirements pertaining to the Restricted
Securities Legend on such Original or Additional Securities or such
Private Exchange Securities shall cease to apply and the requirements
that any such Original or Additional Securities or such Private
Exchange Securities be issued in global form shall continue to apply.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Original or Additional Securities pursuant to which
Holders of such Original or Additional Securities are offered Exchange
Securities in exchange for their Original or Additional Securities, all
requirements pertaining to Original or Additional Securities that
Original or Additional Securities be issued in global form shall
continue to apply, and Exchange Securities in global form without the
Restricted Securities Legend shall be available to Holders that
exchange such Initial Securities in such Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange with respect
to the Original or Additional Securities pursuant to which Holders of
such Original or Additional Securities are offered Private Exchange
Securities in exchange for their Original or Additional Securities, all
requirements pertaining to such Original or Additional Securities that
Original or Additional Securities be issued in global form shall
continue to apply, and Private Exchange Securities in global form with
the Restricted Securities Legend shall be available to Holders that
exchange such Original or Additional Securities in such Private
Exchange.
(vi) Upon a sale or transfer after the expiration of the
Restricted Period of any Initial Security acquired pursuant to
Regulation S, all requirements that such Initial Security bear the
Restricted Securities Legend shall cease to apply and the requirements
requiring any such Initial Security be issued in global form shall
continue to apply.
(vii) Any Additional Securities sold in a registered offering
shall not be required to bear the Restricted Securities Legend.
<PAGE>
10
(f) Cancelation or Adjustment of Global Security. At such time
as all beneficial interests in a Global Security have either been exchanged for
Definitive Securities, transferred, redeemed, repurchased or canceled, such
Global Security shall be returned by the Depositary to the Trustee for
cancelation or retained and canceled by the Trustee. At any time prior to such
cancelation, if any beneficial interest in a Global Security is exchanged for
Definitive Securities, transferred in exchange for an interest in another Global
Security, redeemed, repurchased or canceled, the principal amount of Securities
represented by such Global Security shall be reduced and an adjustment shall be
made on the books and records of the Trustee (if it is then the Securities
Custodian for such Global Security) with respect to such Global Security, by the
Trustee or the Securities Custodian, to reflect such reduction.
(g) Obligations with Respect to Transfers and Exchanges of
Securities.
(i) To permit registrations of transfers and exchanges, the
Issuer shall execute and the Trustee shall authenticate, Definitive
Securities and Global Securities at the Registrar's request.
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Issuer may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith (other than any
such transfer taxes, assessments or similar governmental charge payable
upon exchange or transfer pursuant to Sections 3.06, 4.06, 4.08 and
9.05 of this Indenture).
(iii) Prior to the due presentation for registration of
transfer of any Security, the Issuer, the Trustee, the Paying Agent or
the Registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of
receiving payment of principal of and interest on such Security and for
all other purposes whatsoever, whether or not such Security is overdue,
and none of the Issuer, the Trustee, the Paying Agent or the Registrar
shall be affected by notice to the contrary.
(iv) All Securities issued upon any transfer or exchange
pursuant to the terms of this Indenture shall evidence the same debt
and shall be entitled to the same benefits under this Indenture as the
Securities surrendered upon such transfer or exchange.
(h) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to
any beneficial owner of a Global Security, a member of, or a
participant in the Depositary or any other Person with respect to the
accuracy of the records of the Depositary or its nominee or of any
participant or member thereof, with respect to any ownership interest
in the Securities or with respect to the delivery to any participant,
member, beneficial owner or other Person (other than the Depositary) of
any notice (including any notice of redemption or repurchase) or the
payment of any amount, under or with respect to such Securities. All
notices and communications to be given to the Holders and all payments
to be made to Holders under the Securities shall be given or made only
to the registered Holders (which shall be the Depositary or its nominee
in the case of a Global Security). The rights of
<PAGE>
11
beneficial owners in any Global Security shall be exercised only
through the Depositary subject to the applicable rules and procedures
of the Depositary. The Trustee may rely and shall be fully protected in
relying upon information furnished by the Depositary with respect to
its members, participants and any beneficial owners.
(ii) The Trustee shall have no 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 Security (including any transfers
between or among Depositary participants, members or beneficial owners
in any Global Security) other than 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.
2.4 Definitive Securities
(a) A Global Security deposited with the Depositary or with
the Trustee as Securities Custodian pursuant to Section 2.1 shall be transferred
to the beneficial owners thereof in the form of Definitive Securities in an
aggregate principal amount equal to the principal amount of such Global
Security, in exchange for such Global Security, only if such transfer complies
with Section 2.3 and (i) the Depositary notifies the Issuer that it is unwilling
or unable to continue as a Depositary for such Global Security or if at any time
the Depositary ceases to be a "clearing agency" registered under the Exchange
Act, and a successor depositary is not appointed by the Issuer within 90 days of
such notice, or (ii) an Event of Default has occurred and is continuing or (iii)
the Issuer, in its sole discretion, notifies the Trustee in writing that it
elects to cause the issuance of certificated Securities under this Indenture.
(b) Any Global Security that is transferable to the beneficial
owners thereof pursuant to this Section 2.4 shall be surrendered by the
Depositary to the Trustee, to be so transferred, in whole or from time to time
in part, without charge, and the Trustee shall authenticate and deliver, upon
such transfer of each portion of such Global Security, an equal aggregate
principal amount of Definitive Securities of authorized denominations. Any
portion of a Global Security transferred pursuant to this Section shall be
executed, authenticated and delivered only in denominations of $1,000 and any
integral multiple thereof and registered in such names as the Depositary shall
direct. Any certificated Initial Security in the form of a Definitive Security
delivered in exchange for an interest in the Global Security shall, except as
otherwise provided by Section 2.3(e), bear the Restricted Securities Legend.
(c) Subject to the provisions of Section 2.4(b), the
registered Holder of a Global Security may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(d) In the event of the occurrence of any of the events
specified in Section 2.4(a)(i), (ii) or (iii), the Issuer will promptly make
available to the Trustee a reasonable supply of Definitive Securities in fully
registered form without interest coupons.
<PAGE>
EXHIBIT A
FORM OF FACE OF INITIAL SECURITY
Global Securities Legend
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
Restricted Securities Legend
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY 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, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, 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
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B)
PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A"), 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 "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2),
(3) OR (7) UNDER THE
<PAGE>
2
SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING
THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL
AMOUNT OF THE SECURITIES 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 ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR
TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (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.
Each Definitive Security shall bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER. THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS
SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER
COMPLIES WITH THE FOREGOING RESTRICTIONS."
<PAGE>
No.
9 3/4% Senior Subordinated Note due 2009
CUSIP No. ______________
AMERICAN AXLE & MANUFACTURING, INC., a Delaware corporation,
promises to pay to Cede & Co., or registered assigns, the principal sum listed
on the Schedule of Increases or Decreases in Global Security attached hereto on
March 1, 2009.
Interest Payment Dates: March 1 and September 1
Record Dates: February 15 and August 15
<PAGE>
2
Additional provisions of this Security are set forth on the other side
of this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
AMERICAN AXLE & MANUFACTURING, INC.,
by _________________________________
Name:
Title:
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
By: ___________________________________
Authorized Signatory
<PAGE>
3
FORM OF REVERSE SIDE OF INITIAL SECURITY
9 3/4% Senior Subordinated Note due 2009
1. Interest
(a) AMERICAN AXLE & MANUFACTURING, INC., a Delaware
corporation (such corporation, and its successors and assigns under the
Indenture hereinafter referred to, being herein called the "Issuer"), promises
to pay interest on the principal amount of this Security at the rate per annum
shown above. The Issuer shall pay interest semiannually on March 1 and September
1 of each year. Interest on the Securities shall accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from
March 5, 1999. Interest shall be computed on the basis of a 360-day year of
twelve 30-day months.
(b) Liquidated Damages. The holder of this Security is
entitled to the benefits of an Exchange and Registration Rights Agreement, dated
as of March 5, 1999, among the Issuer, American Axle & Manufacturing Holdings,
Inc. ("Holdings") and the Initial Purchasers named therein (the "Registration
Agreement"). Capitalized terms used in this paragraph (b) but not defined herein
have the meanings assigned to them in the Registration Agreement. If (i) the
Shelf Registration Statement or Exchange Offer Registration Statement, as
applicable under the Registration Agreement, is not filed with the Commission on
or prior to 90 days after the Issue Date (or, in the case of a Shelf
Registration Statement required to be filed in response to a change in law or
applicable interpretations of the Staff of the Commission, if later, within 45
days after publication of such change in law or interpretation, but in no event
before 90 days after the Issue Date), (ii) the Exchange Offer Registration
Statement or the Shelf Registration Statement, as the case may be, is not
declared effective within 180 days after the Issue Date (or, in the case of a
Shelf Registration Statement required to be filed in response to a change in law
or applicable interpretations of the Staff of the Commission, if later, within
60 days after publication of such change in law or interpretation, but in no
event before 180 days after the Issue Date), (iii) the Registered Exchange Offer
is not consummated on or prior to 210 days after the Issue Date (other than in
the event the Issuer files a Shelf Registration Statement), or (iv) the Shelf
Registration Statement is filed and declared effective within the time periods
specified in clause (ii) above but shall thereafter cease to be effective (at
any time that the Issuer and Holdings are obligated to maintain the
effectiveness thereof) without being succeeded within 30 days by an additional
Registration Statement filed and declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), the Issuer and Holdings
will be obligated to pay liquidated damages to each holder of Transfer
Restricted Securities, during the period of one or more such Registration
Defaults, with respect to the first 90-day period immediately following the
occurrence of the first Registration Default in an amount equal to one-quarter
of one percent per annum (which rate will be increased by an additional
one-quarter of one percent per annum for each subsequent 90-day period that any
liquidated damages continue to accrue, provided that the rate at which
liquidated damages accrue may in no event exceed 1.0% per annum) in respect of
the Securities constituting Transfer Restricted Securities held by such holder
until the applicable Registration Statement is filed, the Exchange Offer
Registration Statement declared effective and the Exchange Offer is consummated
or the Shelf Registration Statement is declared effective or again becomes
effective, as the case may be. All accrued liquidated damages shall be paid to
holders in the same manner as interest
<PAGE>
4
payments on the Securities on semi-annual payment dates which correspond to
interest payment dates for the Securities. Following the cure of all
Registration Defaults, the accrual of liquidated damages shall cease. The
Trustee shall have no responsibility with respect to the determination of the
amount of any such liquidated damages. For purposes of the foregoing, "Transfer
Restricted Securities" means (i) each Initial Security until the date on which
such Initial Security has been exchanged for a freely transferable Exchange
Security in the Registered Exchange Offer, (ii) each Initial Security or Private
Exchange Security until the date on which such Initial Security or Private
Exchange Security has been effectively registered under the Securities Act and
disposed of in accordance with a Shelf Registration Statement or (iii) each
Initial Security or Private Exchange Security until the date on which such
Initial Security or Private Exchange Security is distributed to the public
pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule
144(k) under the Securities Act.
2. Method of Payment
The Issuer shall pay interest on the Securities (except
defaulted interest) to the Persons who are registered holders of Securities at
the close of business on the February 15 or August 15 next preceding the
interest payment date even if Securities are canceled after the record date and
on or before the interest payment date. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Issuer shall pay principal,
premium, liquidated damages and interest in money of the United States of
America that at the time of payment is legal tender for payment of public and
private debts. Payments in respect of the Securities represented by a Global
Security (including principal, premium, liquidated damages and interest) shall
be made by wire transfer of immediately available funds to the accounts
specified by The Depository Trust Company. The Issuer will make all payments in
respect of a certificated Security (including principal, premium and interest),
and the Securities may be exchanged or transferred, at the office or agency of
the Issuer in the Borough of Manhattan, The City of New York (which initially
shall be the office of the Trustee at 1 State Street, 10th Floor, New York, NY
10004), except that, at the option of the Issuer, payment of interest may be
made by check mailed to the Holders at their registered addresses; provided,
however, that payments on the Securities may also be made, in the case of a
Holder of at least $1,000,000 aggregate principal amount of Securities, by wire
transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such Holder elects payment by wire transfer by giving written
notice to the Trustee or the Paying Agent to such effect designating such
account no later than 30 days immediately preceding the relevant due date for
payment (or such other date as the Trustee may accept in its discretion).
3. Paying Agent and Registrar
Initially, IBJ WHITEHALL BANK & TRUST COMPANY, a New York
banking corporation (the "Trustee"), will act as Paying Agent and Registrar. The
Issuer may appoint and change any Paying Agent, Registrar or co-registrar
without notice. The Issuer or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
<PAGE>
5
4. Indenture
The Issuer issued the Securities under an Indenture dated as
of March 5, 1999 (the "Indenture"), among the Issuer, Holdings and the Trustee.
The terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA").
Terms defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all terms and provisions
of the Indenture, and Securityholders are referred to the Indenture and the TIA
for a statement of such terms and provisions.
The Securities are senior subordinated unsecured obligations
of the Issuer limited to $400,000,000 aggregate principal amount at any one time
outstanding (subject to Sections 2.01 and 2.08 of the Indenture ) of which
$300,000,000 in aggregate principal amount shall be initially issued on the
Closing Date. Subject to the conditions set forth in the Indenture, the Issuer
may issue up to an additional $100,000,000 aggregate principal amount of
Additional Securities. This Security is one of the [Original] [Additional]
Securities referred to in the Indenture issued in an aggregate principal amount
of $[ ]. The Securities include the Initial Securities and any Exchange
Securities and Private Exchange Securities issued in exchange for Initial
Securities. The Initial Securities, the Exchange Securities and the Private
Exchange Securities are treated as a single class of securities under the
Indenture. The Indenture imposes certain limitations on the ability of the
Issuer and its Restricted Subsidiaries to, among other things, incur
Indebtedness and issue Disqualified and Preferred Stock; pay dividends on, and
redeem, capital stock and redeem Indebtedness that is subordinate in right of
payment to the Securities; make certain other Restricted Payments including
Investments; enter into consensual restrictions on the payment of certain
dividends and distributions by Restricted Subsidiaries; enter into or permit
certain transactions with Affiliates; create or incur Liens; and make Asset
Sales. The Indenture also imposes limitations on the ability of the Issuer to
consolidate or merge with or into any other Person or convey, transfer or lease
all or substantially all of the property of the Issuer.
To guarantee the due and punctual payment of the principal and
interest on the Securities and all other amounts payable by the Issuer under the
Indenture and the Securities when and as the same shall be due and payable,
whether at maturity, by acceleration or otherwise, according to the terms of the
Securities and the Indenture, Holdings has unconditionally guaranteed the
Guaranteed Obligations on a senior subordinated basis pursuant to the terms of
the Indenture.
5. Optional Redemption
Except as set forth in the next two paragraphs, the Securities
shall not be redeemable at the option of the Issuer prior to March 1, 2004.
Thereafter, the Securities shall be redeemable at the option of the Issuer, in
whole or in part, on not less than 30 nor more than 60 days' prior notice mailed
by first-class mail to each Holder's registered address, at the following
redemption prices (expressed as percentages of principal amount), plus accrued
and unpaid interest and liquidated damages (if any) to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date), if redeemed during
the 12-month period commencing on March 1 of the years set forth below:
<PAGE>
6
Redemption
Year Price
- ---- ----------
2004 104.875%
2005 103.250%
2006 101.625%
2007 and thereafter 100.000%
In addition, at any time and from time to time prior to March
1, 2002, the Issuer may redeem in the aggregate up to 35% of the original
aggregate principal amount of the Securities (calculated after giving effect to
any issuance of Additional Securities) with the net cash proceeds of one or more
Equity Offerings (i) by the Issuer or (ii) by Holdings to the extent the net
cash proceeds thereof are contributed to the Issuer or used to purchase Capital
Stock (other than Disqualified Stock) of the Issuer from the Issuer, at a
redemption price (expressed as a percentage of principal amount thereof) of
109.75% plus accrued and unpaid interest and liquidated damages, if any, to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date);
provided, however, that at least 65% of the original aggregate principal amount
of the Securities (calculated after giving effect to any issuance of Additional
Securities) must remain outstanding after each such redemption and provided
further that such redemption shall be made within 90 days after the date on
which any such Equity Offering is consummated upon not less than 30 nor more
than 60 days' notice mailed to each holder of Securities being redeemed and
otherwise in accordance with the procedures set forth in the Indenture.
6. Sinking Fund
The Securities are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption will be mailed by first-class mail at
least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at his or her registered address. Securities
in denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued and unpaid interest and liquidated damages, if any, on all Securities
(or portions thereof) to be redeemed on the redemption date is deposited with
the Paying Agent on or before the redemption date and certain other conditions
are satisfied, on and after such date interest ceases to accrue on such
Securities (or such portions thereof) called for redemption.
8. Repurchase of Securities at the Option of Holders upon Change of Control
Upon a Change of Control, any Holder of Securities will have
the right, subject to certain conditions specified in the Indenture, to cause
the Issuer to repurchase all or any part of the Securities of such Holder at a
purchase price equal to 101% of the principal amount of the Securities to be
repurchased plus accrued and unpaid interest and liquidated damages, if any, to
the date of repurchase (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
<PAGE>
7
date that is on or prior to the date of purchase) as provided in, and subject to
the terms of, the Indenture.
9. Subordination
The Securities are subordinated to Senior Indebtedness, as
defined in the Indenture. To the extent provided in the Indenture, Senior
Indebtedness of the Issuer must be paid before the Securities may be paid. The
Issuer and each Guarantor agrees, and each Securityholder by accepting a
Security agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purpose.
10. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $ 1,000 and whole multiples of $ 1,000. A Holder may transfer
or exchange Securities in accordance with the Indenture. Upon any transfer or
exchange, the Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements or transfer documents and to pay any
taxes required by law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange any Securities selected for redemption
(except, in the case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) or to transfer or exchange any Securities for a
period of 15 days prior to a selection of Securities to be redeemed.
11. Persons Deemed Owners
The registered Holder of this Security may be treated as the
owner of it for all purposes.
12. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Issuer at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Issuer and not to the Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, the Issuer at any time may
terminate some of or all its obligations under the Securities and the Indenture
if the Issuer deposits with the Trustee money or U.S. Government Obligations for
the payment of principal and interest on the Securities to redemption or
maturity, as the case may be.
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended without prior notice to any
Securityholder but with the written consent of the Holders of at least a
majority in principal amount of the outstanding Securities and (ii) any default
or noncompliance with any provision may be waived with the written consent of
the Holders of at least a majority in principal amount
<PAGE>
8
of the outstanding Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Holder of Securities, the Issuer and the
Trustee may amend the Indenture or the Securities (i) to cure any ambiguity,
omission, defect or inconsistency; (ii) to comply with Article 5 of the
Indenture; (iii) to provide for uncertificated Securities in addition to or in
place of certificated Securities; (iv) to add Guarantees with respect to the
Securities; (v) to secure the Securities; (vi) to add additional covenants or to
surrender rights and powers conferred on the Issuer; (vii) to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the TIA; (viii) to make any change that does not adversely
affect the rights of any Securityholder; (ix) to make any change in the
subordination provisions of the Indenture that would limit or terminate the
benefits available to any holder of Senior Indebtedness of the Issuer (or any
representative thereof) under such subordination provisions; or (x) to provide
for the issuance of the Exchange Securities, Private Exchange Securities, or
Additional Securities.
15. Defaults and Remedies
If an Event of Default occurs (other than an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Issuer) and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the outstanding Securities may declare the principal of and
accrued but unpaid interest on all the Securities to be due and payable. If an
Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Issuer occurs, the principal of and interest on all the
Securities shall become immediately due and payable without any declaration or
other act on the part of the Trustee or any Holders. Under certain
circumstances, the Holders of a majority in principal amount of the outstanding
Securities may rescind any such acceleration with respect to the Securities and
its consequences.
If an Event of Default occurs and is continuing, the Trustee
shall be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Securities unless (i) such Holder
has previously given the Trustee notice that an Event of Default is continuing,
(ii) Holders of at least 25% in principal amount of the outstanding Securities
have requested the Trustee in writing to pursue the remedy, (iii) such Holders
have offered the Trustee reasonable security or indemnity against any loss,
liability or expense, (iv) the Trustee has not complied with such request within
60 days after the receipt of the request and the offer of security or indemnity
and (v) the Holders of a majority in principal amount of the outstanding
Securities have not given the Trustee a direction inconsistent with such request
within such 60-day period. Subject to certain restrictions, the Holders of a
majority in principal amount of the outstanding Securities are given the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or of exercising any trust or power conferred on the
Trustee. The Trustee, however, may refuse to follow any direction that conflicts
with law or the Indenture or that the Trustee determines is unduly prejudicial
to the rights of any other Holder or that would involve the Trustee in personal
liability. Prior to taking any action under the Indenture, the Trustee shall be
entitled to indemnification
<PAGE>
9
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
16. Trustee Dealings with the Issuer
Subject to certain limitations imposed by the TIA, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Issuer or its Affiliates and may otherwise deal
with the Issuer or its Affiliates with the same rights it would have if it were
not Trustee.
17. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Issuer or any Guarantor shall not have any liability for any obligations of the
Issuer under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.
18. Authentication
This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
19. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
20. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
21. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Issuer has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
The Issuer will furnish to any Holder of Securities upon
written request and without charge to the Holder a copy of the Indenture which
has in it the text of this Security.
<PAGE>
10
<PAGE>
11
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint __________________ agent to transfer this Security on
the books of the Issuer. The agent may substitute another to act for him.
________________________________________________________________________________
Date: _____________________ Your Signature: _______________________________
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
<PAGE>
12
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED SECURITIES
This certificate relates to $________ principal amount of Securities held in
(check applicable space) _________ book-entry or ________________ definitive
form by the undersigned.
The undersigned (check one box below):
/_/ has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Security held by the Depositary a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial
interest in such Global Security (or the portion thereof indicated
above);
/_/ has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act, the undersigned confirms that such Securities
are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) /_/ to the Issuer; or
(2) /_/ pursuant to an effective registration statement under the Securities
Act of 1933; or
(3) /_/ inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933) that purchases
for its own account or for the account of a qualified institutional
buyer to whom notice is given that such transfer is being made in
reliance on Rule 144A, in each case pursuant to and in compliance
with Rule 144A under the Securities Act of 1933; or
(4) /_/ outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance with
Rule 904 under the Securities Act of 1933; or
(5) /_/ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that has
furnished to the Trustee a signed letter containing certain
representations and agreements; or
(6) /_/ pursuant to another available exemption from registration provided by
Rule 144 under the Securities Act of 1933.
<PAGE>
13
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any Person other
than the registered holder thereof; provided, however, that if box (4), (5) or
(6) is checked, the Trustee may require, prior to registering any such transfer
of the Securities, such legal opinions, certifications and other information as
the Issuer has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933.
________________________________
Your Signature
Signature Guarantee:
Date: __________________________ ________________________________
Signature must be guaranteed Signature of Signature
by a participant in a Guarantee
recognized signature guaranty
medallion program or other
signature guarantor acceptable
to the Trustee
________________________________________________________________________________
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Issuer as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: ___________________ _____________________________________
NOTICE: To be executed by an
executive officer
<PAGE>
14
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $[ ].
The following increases or decreases in this Global Security have been made:
<TABLE>
<S> <C> <C> <C> <C>
Date of Amount of decrease Amount of Principal amount of Signature of
Exchange in Principal Amount increase in this Global Security authorized signatory
of this Principal Amount of following such of Trustee or
Global Security this Global Security decrease or increase Securities Custodian
</TABLE>
<PAGE>
15
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Issuer pursuant to Section 4.06 (Asset Sale) or 4.09 (Change of Control) of the
Indenture, check the box:
Asset Sale /_/ Change of Control /_/
If you want to elect to have only part of this Security
purchased by the Issuer pursuant to Section 4.06 or 4.09 of the Indenture, state
the amount:
$_____________
Date: _____________________ Your Signature ________________________________
(Sign exactly as your name appears on the other side of the Security)
Signature Guarantee: ___________________________________________________________
Signature must be guaranteed by a participant in a
recognized signature guaranty medallion program or other
signature guarantor acceptable to the Trustee
<PAGE>
EXHIBIT B
FORM OF FACE OF EXCHANGE SECURITY
No.
9 3/4% Senior Subordinated Note due 2009
CUSIP No. ___________
AMERICAN AXLE & MANUFACTURING, INC., a Delaware corporation,
promises to pay to Cede & Co., or registered assigns, the principal sum [of
____________ Dollars][listed on the Schedule of Increases or Decreases in Global
Security attached hereto](1) on March 1, 2009.
Interest Payment Dates: March 1 and September 1
Record Dates: February 15 and August 15
- ----------
(1) Use the Schedule of Increases and Decreases language if Note is in Global
Form.
<PAGE>
2
Additional provisions of this Security are set forth on the
other side of this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to
be duly executed.
AMERICAN AXLE & MANUFACTURING, INC.,
by ____________________________________
____________________________________
Name:
Title:
Dated: _______________
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
By: ___________________________________
Authorized Signatory
- ----------
*/ If the Security is to be issued in global form, add the Global Notes Legend
and the attachment from Exhibit A captioned "TO BE ATTACHED TO GLOBAL
NOTES-SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE".
<PAGE>
3
FORM OF REVERSE SIDE OF EXCHANGE SECURITY
9 3/4% Senior Subordinated Note due 2009
1. Interest
AMERICAN AXLE & MANUFACTURING, INC., a Delaware corporation
(such corporation, and its successors and assigns under the Indenture
hereinafter referred to, being herein called the "Issuer"), promises to pay
interest on the principal amount of this Security at the rate per annum shown
above. The Issuer shall pay interest semiannually on March 1 and September 1 of
each year. Interest on the Securities shall accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from March 5,
1999. Interest shall be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment
The Issuer shall pay interest on the Securities (except
defaulted interest) to the Persons who are registered holders of Securities at
the close of business on the February 15 or August 15 next preceding the
interest payment date even if Securities are canceled after the record date and
on or before the interest payment date. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Issuer shall pay principal,
premium, liquidated damages and interest in money of the United States of
America that at the time of payment is legal tender for payment of public and
private debts. Payments in respect of the Securities represented by a Global
Security (including principal, premium, liquidated damages and interest) shall
be made by wire transfer of immediately available funds to the accounts
specified by The Depository Trust Company. The Issuer will make all payments in
respect of a certificated Security (including principal, premium and interest),
and the Securities may be exchanged or transferred, at the office or agency of
the Issuer in the Borough of Manhattan, The City of New York (which initially
shall be the office of the Trustee at 1 State Street, 10th Floor, New York, NY
10004), except that, at the option of the Issuer, payment of interest may be
made by check mailed to the Holders at their registered addresses; provided,
however, that payments on the Securities may also be made, in the case of a
Holder of at least $1,000,000 aggregate principal amount of Securities, by wire
transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such Holder elects payment by wire transfer by giving written
notice to the Trustee or the Paying Agent to such effect designating such
account no later than 30 days immediately preceding the relevant due date for
payment (or such other date as the Trustee may accept in its discretion).
3. Paying Agent and Registrar
Initially, IBJ WHITEHALL BANK & TRUST COMPANY, a New York
banking corporation (the "Trustee"), will act as Paying Agent and Registrar. The
Issuer may appoint and change any Paying Agent, Registrar or co-registrar
without notice. The Issuer or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
<PAGE>
4
4. Indenture
The Issuer issued the Securities under an Indenture dated as
of March 5, 1999 (the "Indenture"), among the Issuer, Holdings and the Trustee.
The terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
Section 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA").
Terms defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all terms and provisions
of the Indenture, and Securityholders are referred to the Indenture and the TIA
for a statement of such terms and provisions.
The Securities are senior subordinated unsecured obligations
of the Issuer limited to $400,000,000 aggregate principal amount at any one time
outstanding of which $300,000,000 in aggregate principal amount was initially
issued on the Closing Date. Subject to the conditions set forth in the
Indenture, the Issuer may issue up to an additional $100,000,000 aggregate
principal amount of Additional Securities. This Security is one of the [Exchange
Securities][Private Exchange Securities] referred to in the Indenture. The
Securities include the Initial Securities and any Exchange Securities and
Private Exchange Securities issued in exchange for Initial Securities. The
Initial Securities, the Exchange Securities, Private Exchange Securities and the
Private Exchange Securities are treated as a single class of securities under
the Indenture. The Indenture imposes certain limitations on the ability of the
Issuer and its Restricted Subsidiaries to, among other things, incur
Indebtedness and issue Disqualified and Preferred Stock; pay dividends on, and
redeem, capital stock and redeem Indebtedness that is subordinate in right of
payment to the Securities; make certain other Restricted Payments including
Investments; enter into consensual restrictions on the payment of certain
dividends and distributions by Restricted Subsidiaries; enter into or permit
certain transactions with Affiliates; create or incur Liens; and make Asset
Sales. The Indenture also imposes limitations on the ability of the Issuer to
consolidate or merge with or into any other Person or convey, transfer or lease
all or substantially all of the property of the Issuer.
To guarantee the due and punctual payment of the principal and
interest on the Securities and all other amounts payable by the Issuer under the
Indenture and the Securities when and as the same shall be due and payable,
whether at maturity, by acceleration or otherwise, according to the terms of the
Securities and the Indenture, Holdings has unconditionally guaranteed the
Guaranteed Obligations on a senior subordinated basis pursuant to the terms of
the Indenture.
5. Optional Redemption
Except as set forth in the next two paragraphs, the Securities
shall not be redeemable at the option of the Issuer prior to March 1, 2004.
Thereafter, the Securities shall be redeemable at the option of the Issuer, in
whole or in part, on not less than 30 nor more than 60 days' prior notice mailed
by first-class mail to each Holder's registered address, at the following
redemption prices (expressed as percentages of principal amount), plus accrued
and unpaid interest and liquidated damages (if any) to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date), if redeemed during
the 12-month period commencing on March 1 of the years set forth below:
<PAGE>
5
Redemption
Year Price
- ---- ----------
2004 104.875%
2005 103.250%
2006 101.625%
2007 and thereafter 100.000%
In addition, at any time and from time to time prior to March
1, 2002, the Issuer may redeem in the aggregate up to 35% of the original
aggregate principal amount of the Securities (calculated after giving effect to
any issuance of Additional Securities) with the net cash proceeds of one or more
Equity Offerings (i) by the Issuer or (ii) by Holdings to the extent the net
cash proceeds thereof are contributed to the Issuer or used to purchase Capital
Stock (other than Disqualified Stock) of the Issuer from the Issuer, at a
redemption price (expressed as a percentage of principal amount thereof) of
109.75% plus accrued and unpaid interest and liquidated damages, if any, to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date);
provided, however, that at least 65% of the original aggregate principal amount
of the Securities (calculated after giving effect to any issuance of Additional
Securities) must remain outstanding after each such redemption and provided
further that such redemption shall be made within 90 days after the date on
which any such Equity Offering is consummated upon not less than 30 nor more
than 60 days' notice mailed to each holder of Securities being redeemed and
otherwise in accordance with the procedures set forth in the Indenture.
6. Sinking Fund
The Securities are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption will be mailed by first-class mail at
least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at his or her registered address. Securities
in denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued and unpaid interest and liquidated damages, if any, on all Securities
(or portions thereof) to be redeemed on the redemption date is deposited with
the Paying Agent on or before the redemption date and certain other conditions
are satisfied, on and after such date interest ceases to accrue on such
Securities (or such portions thereof) called for redemption.
8. Repurchase of Securities at the Option of Holders upon Change of Control
Upon a Change of Control, any Holder of Securities will have
the right, subject to certain conditions specified in the Indenture, to cause
the Issuer to repurchase all or any part of the Securities of such Holder at a
purchase price equal to 101% of the principal amount of the Securities to be
repurchased plus accrued and unpaid interest and liquidated damages, if any, to
the date of repurchase (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
<PAGE>
6
date that is on or prior to the date of purchase) as provided in, and subject to
the terms of, the Indenture.
9. Subordination
The Securities are subordinated to Senior Indebtedness, as
defined in the Indenture. To the extent provided in the Indenture, Senior
Indebtedness of the Issuer must be paid before the Securities may be paid. The
Issuer and each Guarantor agrees, and each Securityholder by accepting a
Security agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purpose.
10. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $ 1,000 and whole multiples of $ 1,000. A Holder may transfer
or exchange Securities in accordance with the Indenture. Upon any transfer or
exchange, the Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements or transfer documents and to pay any
taxes required by law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange any Securities selected for redemption
(except, in the case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) or to transfer or exchange any Securities for a
period of 15 days prior to a selection of Securities to be redeemed.
11. Persons Deemed Owners
The registered Holder of this Security may be treated as the
owner of it for all purposes.
12. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Issuer at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Issuer and not to the Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, the Issuer at any time may
terminate some of or all its obligations under the Securities and the Indenture
if the Issuer deposits with the Trustee money or U.S. Government Obligations for
the payment of principal and interest on the Securities to redemption or
maturity, as the case may be.
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended without prior notice to any
Securityholder but with the written consent of the Holders of at least a
majority in principal amount of the outstanding Securities and (ii) any default
or noncompliance with any provision may be waived with the written consent of
the Holders of at least a majority in principal amount
<PAGE>
7
of the outstanding Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Holder of Securities, the Issuer and the
Trustee may amend the Indenture or the Securities (i) to cure any ambiguity,
omission, defect or inconsistency; (ii) to comply with Article 5 of the
Indenture; (iii) to provide for uncertificated Securities in addition to or in
place of certificated Securities; (iv) to add Guarantees with respect to the
Securities; (v) to secure the Securities; (vi) to add additional covenants or to
surrender rights and powers conferred on the Issuer; (vii) to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the TIA; (viii) to make any change that does not adversely
affect the rights of any Securityholder; (ix) to make any change in the
subordination provisions of the Indenture that would limit or terminate the
benefits available to any holder of Senior Indebtedness of the Issuer (or any
representative thereof) under such subordination provisions; or (x) to provide
for the issuance of the Exchange Securities, Private Exchange Securities, or
Additional Securities.
15. Defaults and Remedies
If an Event of Default occurs (other than an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Issuer) and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the outstanding Securities may declare the principal of and
accrued but unpaid interest on all the Securities to be due and payable. If an
Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Issuer occurs, the principal of and interest on all the
Securities shall become immediately due and payable without any declaration or
other act on the part of the Trustee or any Holders. Under certain
circumstances, the Holders of a majority in principal amount of the outstanding
Securities may rescind any such acceleration with respect to the Securities and
its consequences.
If an Event of Default occurs and is continuing, the Trustee
shall be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Securities unless (i) such Holder
has previously given the Trustee notice that an Event of Default is continuing,
(ii) Holders of at least 25% in principal amount of the outstanding Securities
have requested the Trustee in writing to pursue the remedy, (iii) such Holders
have offered the Trustee reasonable security or indemnity against any loss,
liability or expense, (iv) the Trustee has not complied with such request within
60 days after the receipt of the request and the offer of security or indemnity
and (v) the Holders of a majority in principal amount of the outstanding
Securities have not given the Trustee a direction inconsistent with such request
within such 60-day period. Subject to certain restrictions, the Holders of a
majority in principal amount of the outstanding Securities are given the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or of exercising any trust or power conferred on the
Trustee. The Trustee, however, may refuse to follow any direction that conflicts
with law or the Indenture or that the Trustee determines is unduly prejudicial
to the rights of any other Holder or that would involve the Trustee in personal
liability. Prior to taking any action under the Indenture, the Trustee shall be
entitled to indemnification
<PAGE>
8
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
16. Trustee Dealings with the Issuer
Subject to certain limitations imposed by the TIA, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Issuer or its Affiliates and may otherwise deal
with the Issuer or its Affiliates with the same rights it would have if it were
not Trustee.
17. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Issuer or any Guarantor shall not have any liability for any obligations of the
Issuer under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.
18. Authentication
This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
19. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
20. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
21. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Issuer has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
The Issuer will furnish to any Holder of Securities upon
written request and without charge to the Holder a copy of the Indenture which
has in it the text of this Security.
<PAGE>
9
<PAGE>
10
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint _______________ agent to transfer this Security on the
books of the Issuer. The agent may substitute another to act for him.
________________________________________________________________________________
Date: __________________ Your Signature: ___________________________________
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
<PAGE>
11
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED SECURITIES
This certificate relates to $________________ principal amount of Securities
held in (check applicable space) __________ book-entry or ______________
definitive form by the undersigned.
The undersigned (check one box below):
/_/ has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Security held by the Depositary a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial
interest in such Global Security (or the portion thereof indicated
above);
/_/ has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act, the undersigned confirms that such Securities
are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) /_/ to the Issuer; or
(2) /_/ pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) /_/ inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933) that
purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that such transfer is
being made in reliance on Rule 144A, in each case pursuant to and
in compliance with Rule 144A under the Securities Act of 1933; or
(4) /_/ outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance
with Rule 904 under the Securities Act of 1933; or
(5) /_/ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that
has furnished to the Trustee a signed letter containing certain
representations and agreements; or
(6) /_/ pursuant to another available exemption from registration provided
by Rule 144 under the Securities Act of 1933.
<PAGE>
12
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any Person other
than the registered holder thereof; provided, however, that if box (4), (5) or
(6) is checked, the Trustee may require, prior to registering any such transfer
of the Securities, such legal opinions, certifications and other information as
the Issuer has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933.
_______________________________
Your Signature
Signature Guarantee:
Date: ___________________ _______________________________
Signature must be guaranteed Signature of Signature
by a participant in a Guarantee
recognized signature guaranty
medallion program or other
signature guarantor acceptable
to the Trustee
________________________________________________________________________________
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Issuer as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Date: ___________________ _______________________________
NOTICE: To be executed by an
executive officer
<PAGE>
13
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $[ ].
The following increases or decreases in this Global Security have been made:
<TABLE>
<S> <C> <C> <C> <C>
Amount of decrease Amount of increase Principal amount of Signature of
in Principal Amount in Principal this Global Security authorized signatory
Date of of this Amount of following such decrease of Trustee or
Exchange Global Security this Global Security or increase Securities Custodian
</TABLE>
<PAGE>
14
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Issuer pursuant to Section 4.06 (Asset Sale) or 4.09 (Change of Control) of the
Indenture, check the box:
Asset Sale /_/ Change of Control /_/
If you want to elect to have only part of this Security
purchased by the Issuer pursuant to Section 4.06 or 4.09 of the Indenture, state
the amount:
$_______________________
Date: _____________________ Your Signature _________________________________
(Sign exactly as your name appears on the other side of the Security)
Signature Guarantee: ___________________________________________________________
Signature must be guaranteed by a participant in a
recognized signature guaranty medallion program or other
signature guarantor acceptable to the Trustee
<PAGE>
EXHIBIT C
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this
"Supplemental Indenture") dated as of
______, among [GUARANTOR] (the "New
Guarantor"), a subsidiary of American Axle &
Manufacturing, Inc. (or its successor), a
Delaware corporation (the "Issuer"),
[EXISTING GUARANTORS]] and [TRUSTEE], a [ ]
banking association, as trustee under the
indenture referred to below (the "Trustee").
W I T N E S S E T H:
WHEREAS the Issuer and [OLD GUARANTOR[S]] (the "Existing
Guarantor[s]") have heretofore executed and delivered to the Trustee an
Indenture (the "Indenture") dated as of March [ ], 1999, providing for the
issuance of an aggregate principal amount of up to $400,000,000 of [ ]% Senior
Subordinated Notes due 2009 (the "Securities");
WHEREAS Section 4.13 of the Indenture provides that under
certain circumstances the Issuer is required to cause the New Guarantor to
execute and deliver to the Trustee a supplemental indenture pursuant to which
the New Guarantor shall unconditionally guarantee all the Issuer's obligations
under the Securities pursuant to a Guarantee on the terms and conditions set
forth herein; and
WHEREAS pursuant to Section 9.01 of the Indenture, the
Trustee, the Issuer and the Existing Guarantor[s] [is/are] authorized to execute
and deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the New Guarantor, the Issuer, the Existing Guarantor[s] and the Trustee
mutually covenant and agree for the equal and ratable benefit of the holders of
the Securities as follows:
1. Agreement to Guarantee. The New Guarantor hereby agrees,
jointly and severally with the Existing Guarantor[s], to unconditionally
guarantee the Issuer's obligations under the Securities on the terms and subject
to the conditions set forth in Article 10 of the Indenture and to be bound by
all other applicable provisions of the Indenture and the Securities.
2. Ratification of Indenture; Supplemental Indentures Part of
Indenture. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every holder of Securities
heretofore or hereafter authenticated and delivered shall be bound hereby.
<PAGE>
16
3. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
4. Trustee Makes No Representation. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental Indenture.
5. Counterparts. The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
6. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed as of the date first above written.
[NEW GUARANTOR],
by ____________________________
Name:
Title:
AMERICAN AXLE & MANUFACTURING, INC.
by ____________________________
Name:
Title:
[EXISTING GUARANTOR[S]],
by ____________________________
Name:
Title:
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee,
by ____________________________
Name:
Title:
<PAGE>
EXHIBIT D
Form of
Transferee Letter of Representation
American Axle & Manufacturing, Inc.
1840 Holbrook Avenue
Detroit, Michigan 48212
Ladies and Gentlemen:
This certificate is delivered to request a transfer of $[___] principal
amount of the [___]% Senior Subordinated Notes due 2009 (the "Securities") of
American Axle & Manufacturing, Inc. (the "Issuer").
Upon transfer, the Securities 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, as amended (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
Securities, and we are acquiring the Securities 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 risks of our investment in the Securities,
and we invest in or purchase securities similar to the Securities 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 Securities 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 Securities to offer, sell or otherwise
transfer such Securities prior to the date that is two years after the later of
the date of original issue and the last date on which the Issuer or any
affiliate of the Issuer was the owner of such Securities (or any predecessor
thereto) (the "Resale Restriction Termination Date") only (a) to the Issuer, (b)
pursuant to a registration statement that has been declared effective under the
Securities Act, (c) in a transaction complying with the requirements of Rule
144A under the Securities Act ("Rule 144A"), to a person we reasonably believe
is a qualified institutional buyer under Rule 144A (a "QIB") that is purchasing
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) pursuant to offers and
sales that occur outside the United
<PAGE>
2
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 purchasing for its own account or
for the account of such an institutional "accredited investor," in each case in
a minimum principal amount of Securities of $250,000, or (f) 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. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Securities is proposed to be made pursuant to clause (e)
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 Issuer and the Trustee, which shall provide, among other things, 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 Securities for investment purposes and not for distribution in violation of
the Securities Act. Each purchaser acknowledges that the Issuer and the Trustee
reserve the right prior to the offer, sale or other transfer prior to the Resale
Restriction Termination Date of the Securities pursuant to clause (d), (e) or
(f) above to require the delivery of an opinion of counsel. certifications or
other information satisfactory to the Issuer and the Trustee.
TRANSFEREE: __________________________,
by: ___________________________________
<PAGE>
EXECUTION COPY
AMERICAN AXLE & MANUFACTURING, INC.
$300,000,000
9 3/4% Senior Subordinated Notes due 2009
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
March 5, 1999
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
MORGAN STANLEY & CO. INCORPORATED
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
American Axle & Manufacturing, Inc. a Delaware corporation
(the "Company"), proposes to issue and sell to Chase Securities Inc. ("CSI"),
Donaldson, Lufkin & Jenrette Securities Corporation and Morgan Stanley & Co.
Incorporated (collectively, the "Initial Purchasers"), upon the terms and
subject to the conditions set forth in a purchase agreement dated March 2, 1999
(the "Purchase Agreement"), $300,000,000 aggregate principal amount of its 9
3/4% Senior Subordinated Notes due 2009 (the "Securities") to be guaranteed on
an unsecured senior subordinated basis by American Axle & Manufacturing
Holdings, Inc., the parent company of the Company ("Holdings"). Capitalized
terms used but not defined herein shall have the meanings given to such terms in
the Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the
Purchase Agreement and in satisfaction of a condition to the obligations of the
Initial Purchasers thereunder, the Company and Holdings agree with the Initial
Purchasers, for the benefit of the holders (including the Initial Purchasers) of
the Securities, the Exchange Securities (as defined herein) and the Private
Exchange Securities (as defined herein) (collectively, the "Holders"), as
follows:
1. Registered Exchange Offer. The Company and Holdings shall
(i) prepare and, not later than 90 days following the date of original issuance
of the Securities (the "Issue Date"), file with the Commission a registration
statement (the "Exchange Offer Registration Statement") on an appropriate form
under the Securities Act with respect to a proposed offer to the Holders of the
Securities (the "Registered Exchange Offer") to issue and deliver to such
Holders, in exchange for the Securities, a like aggregate principal amount of
debt securities of the Company (the "Exchange Securities") that are identical in
all material respects to the Securities, except for the transfer restrictions
relating to the Securities, (ii) use their reasonable best efforts to cause the
Exchange Offer Registration Statement to become effective under the Securities
Act no later than 180 days after the Issue Date and the Registered Exchange
Offer to be consummated no later than 210 days after the Issue Date and (iii)
keep the Exchange Offer Registration Statement effective for not less than 20
business days (or longer, if required by applicable law) after the date on which
notice of the Registered Exchange Offer is mailed to the Holders (such period
being called the "Exchange Offer Registration Period"). The Exchange Securities
will be issued under the Indenture or an indenture (the "Exchange Securities
Indenture") among the Company, Holdings and the Trustee or such other bank or
trust company that is reasonably satisfactory to the Initial Purchasers, as
trustee (the "Exchange Securities Trustee"), such indenture to be identical in
all material respects to the Indenture, except for the transfer restrictions
relating to the Securities (as described above).
<PAGE>
2
Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Registered Exchange Offer, it
being the objective of such Registered Exchange Offer to enable each Holder
electing to exchange Securities for Exchange Securities (assuming that such
Holder (a) is not an affiliate (as defined in Rule 405 under the Securities Act)
of the Company or an Exchanging Dealer (as defined herein) not complying with
the requirements of the next sentence, (b) is not an Initial Purchaser holding
Securities that have, or that are reasonably likely to have, the status of an
unsold allotment in an initial distribution, (c) acquires the Exchange
Securities in the ordinary course of such Holder's business and (d) has no
arrangements or understandings with any person to participate in the
distribution of the Exchange Securities) to trade such Exchange Securities from
and after their receipt without any limitations or restrictions under the
Securities Act and without material restrictions under the securities laws of
the several states of the United States. The Company, Holdings, the Initial
Purchasers and each Exchanging Dealer acknowledge that, pursuant to current
interpretations by the Commission's staff of Section 5 of the Securities Act,
each Holder that is a broker-dealer electing to exchange Securities, acquired
for its own account as a result of market-making activities or other trading
activities, for Exchange Securities (an "Exchanging Dealer"), is required to
deliver a prospectus containing substantially the information set forth in Annex
A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section and in Annex C hereto in
the "Plan of Distribution" section of such prospectus in connection with a sale
of any such Exchange Securities received by such Exchanging Dealer pursuant to
the Registered Exchange Offer.
If, prior to the consummation of the Registered Exchange
Offer, any Holder holds any Securities acquired by it that have, or that are
reasonably likely to be determined to have, the status of an unsold allotment in
an initial distribution, or any Holder is not entitled to participate in the
Registered Exchange Offer, the Company shall, upon the request of any such
Holder, simultaneously with the delivery of the Exchange Securities in the
Registered Exchange Offer, issue and deliver to any such Holder, in exchange for
the Securities held by such Holder (the "Private Exchange"), a like aggregate
principal amount of debt securities of the Company (the "Private Exchange
Securities") that are identical in all material respects to the Exchange
Securities, except for the transfer restrictions relating to such Private
Exchange Securities. The Private Exchange Securities will be issued under the
same indenture as the Exchange Securities, and the Company shall use its
reasonable best efforts to cause the Private Exchange Securities to bear the
same CUSIP number as the Exchange Securities.
In connection with the Registered Exchange Offer, the Company
shall:
(a) mail or cause to be mailed to each Holder a copy of the
prospectus forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and related
documents;
(b) keep the Registered Exchange Offer open for not less than
20 business days (or longer, if required by applicable law) after the
date on which notice of the Registered Exchange Offer is mailed to the
Holders;
(c) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of
New York;
(d) permit Holders to withdraw tendered Securities at any time
prior to the close of business, New York City time, on the last
business day on which the Registered Exchange Offer shall remain open;
and
(e) otherwise comply in all respects with all laws that are
applicable to the Registered Exchange Offer.
As soon as practicable after the close of the Registered
Exchange Offer and any Private Exchange, as the case may be, the Company shall:
<PAGE>
3
(a) accept for exchange all Securities tendered and not
validly withdrawn pursuant to the Registered Exchange Offer and the
Private Exchange;
(b) deliver to the Trustee for cancelation all Securities so
accepted for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as
the case may be, promptly to authenticate and deliver to each Holder,
Exchange Securities or Private Exchange Securities, as the case may be,
equal in principal amount to the Securities of such Holder so accepted
for exchange.
The Company shall use its reasonable 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 used by
all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; provided that (i) in the case where
such prospectus and any amendment or supplement thereto must be delivered by an
Exchanging Dealer, such period shall be the lesser of 90 days and the date on
which all Exchanging Dealers have sold all Exchange Securities held by them and
(ii) the Company shall make such prospectus and any amendment or supplement
thereto available to any broker-dealer for use in connection with any resale of
any Exchange Securities for a period of not less than 90 days after the
consummation of the Registered Exchange Offer.
The Indenture or the Exchange Securities Indenture, as the
case may be, shall provide that the Securities, the Exchange Securities and the
Private Exchange Securities shall vote and consent together on all matters as
one class and that none of the Securities, the Exchange Securities or the
Private Exchange Securities will have the right to vote or consent as a separate
class on any matter.
Interest on each Exchange Security and Private Exchange
Security issued pursuant to the Registered Exchange Offer and in the Private
Exchange will accrue from the last interest payment date on which interest was
paid on the Securities surrendered in exchange therefor or, if no interest has
been paid on the Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer
shall be required to represent to the Company that at the time of the
consummation of the Registered Exchange Offer (i) any Exchange Securities to be
received by such Holder will be acquired in the ordinary course of business,
(ii) such Holder will have no arrangements or understanding with any person to
participate in the distribution of the Securities or the Exchange Securities
within the meaning of the Securities Act and (iii) such Holder is not an
affiliate of the Company or, if it is such an affiliate, such Holder will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable.
Notwithstanding any other provisions hereof, the Company and
Holdings will ensure that (i) any Exchange Offer Registration Statement and any
amendment thereto and any prospectus forming part thereof and any supplement
thereto complies in all material respects with the Securities Act and the rules
and regulations of the Commission thereunder, (ii) any Exchange Offer
Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any prospectus forming part of any Exchange
Offer Registration Statement, and any supplement to such prospectus, does not,
as of the consummation of the Registered Exchange Offer, include 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.
2. Shelf Registration. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff the Company is not
permitted to effect the
<PAGE>
4
Registered Exchange Offer as contemplated by Section 1 hereof, or (ii) any
Securities validly tendered pursuant to the Registered Exchange Offer are not
exchanged for Exchange Securities within 210 days after the Issue Date, or (iii)
any Initial Purchaser so requests with respect to Securities or Private Exchange
Securities not eligible to be exchanged for Exchange Securities in the
Registered Exchange Offer and held by it following the consummation of the
Registered Exchange Offer, or (iv) any applicable law or interpretations do not
permit any Holder to participate in the Registered Exchange Offer, or (v) any
Holder that participates in the Registered Exchange Offer does not receive
freely transferable Exchange Securities in exchange for tendered Securities, or
(vi) the Company so elects, then the following provisions shall apply:
(a) The Company and Holdings shall use their reasonable best
efforts to file as promptly as practicable with the Commission, and
thereafter shall use their reasonable best efforts to cause to be
declared effective, a shelf registration statement on an appropriate
form under the Securities Act relating to the offer and sale of the
Transfer Restricted Securities (as defined below) by the Holders
thereof from time to time in accordance with the methods of
distribution set forth in such registration statement (hereafter, a
"Shelf Registration Statement" and, together with any Exchange Offer
Registration Statement, a "Registration Statement").
(b) The Company and Holdings shall use their reasonable best
efforts to keep the Shelf Registration Statement continuously effective
in order to permit the prospectus forming part thereof to be used by
Holders of Transfer Restricted Securities for a period ending on the
earlier of (i) two years from the Issue Date or such shorter period
that will terminate when all the Transfer Restricted Securities covered
by the Shelf Registration Statement have been sold pursuant thereto and
(ii) the date on which the Securities become eligible for resale
without volume restrictions pursuant to Rule 144 under the Securities
Act (in any such case, such period being called the "Shelf Registration
Period"). The Company and Holdings shall be deemed not to have used
their reasonable best efforts to keep the Shelf Registration Statement
effective during the requisite period if any of them voluntarily take
any action that would result in Holders of Transfer Restricted
Securities covered thereby not being able to offer and sell such
Transfer Restricted Securities during that period, unless (A) such
action is required by applicable law or (B) such action was permitted
by Section 2(c).
(c) Notwithstanding the provisions of Section 2(b) (but subject
to the provisions of Section 3(b)), the Company and Holdings may issue
a notice that the Shelf Registration Statement is unusable pending the
announcement of a material corporate transaction and may issue any
notice suspending use of the Shelf Registration Statement required
under applicable securities laws to be issued.
(d) Notwithstanding any other provisions hereof, the Company
and Holdings will ensure that (i) any Shelf Registration Statement and
any amendment thereto and any prospectus forming part thereof and any
supplement thereto complies in all material respects with the
Securities Act and the rules and regulations of the Commission
thereunder, (ii) any Shelf Registration Statement and any amendment
thereto (in either case, other than with respect to information
included therein in reliance upon or in conformity with written
information furnished to the Company by or on behalf of any Holder
specifically for use therein (the "Holders' Information")) does not,
when it becomes effective,` contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any
prospectus forming part of any Shelf Registration Statement, and any
supplement to such prospectus (in either case, other than with respect
to Holders' Information), does not include 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.
<PAGE>
5
3. Liquidated Damages. (a) The parties hereto agree that the
Holders of Transfer Restricted Securities will suffer damages if the Company and
Holdings fail to fulfill their obligations under Section 1 or Section 2, as
applicable, and that it would not be feasible to ascertain the extent of such
damages. Accordingly, if (i) the applicable Registration Statement is not filed
with the Commission on or prior to 90 days after the Issue Date (or, in the case
of a Shelf Registration Statement required to be filed in response to a change
in law or applicable interpretations of the Commission's staff, if later, within
45 days after publication of the change in law or interpretations, but in no
event before 90 calender days after the Issue Date), (ii) the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
is not declared effective within 180 days after the Issue Date (or, in the case
of a Shelf Registration Statement required to be filed in response to a change
in law or applicable interpretations of the Commission's staff, if later, within
60 days after the publication of the change in law or interpretations, but in no
event before 180 days after the Issue Date), (iii) the Registered Exchange Offer
is not consummated on or prior to 210 days after the Issue Date (other than in
the event the Company files a Shelf Registration Statement), or (iv) the Shelf
Registration Statement is filed and declared effective within the applicable
time period specified in clause (ii) above but shall thereafter cease to be
effective (other than for any period that the Company is not obligated to
maintain the effectiveness thereof, including as set forth in Section 2(c) and
3(b)) without being succeeded within 30 days by an additional Registration
Statement filed and declared effective (each such event referred to in clauses
(i) through (iv), a "Registration Default"), the Company and Holdings will be
jointly and severally obligated to pay liquidated damages to each Holder of
Transfer Restricted Securities, during the period of one or more such
Registration Defaults, with respect to the first 90-day period immediately
following the occurrence of the first Registration Default in an amount equal to
.25% per annum (which rate will be increased by an additional .25% per annum for
each subsequent 90-day period that any liquidated damages continue to accrue;
provided that the rate at which liquidated damages accrue may in no event exceed
1.00% per annum) of the principal amount in respect of the Securities
constituting Transfer Restricted Securities held by such Holder until (i) the
applicable Registration Statement is filed, (ii) the Exchange Offer Registration
Statement is declared effective and the Registered Exchange Offer is
consummated, (iii) the Shelf Registration Statement is declared effective or
(iv) the Shelf Registration Statement again becomes effective, as the case may
be. Following the cure of all Registration Defaults, the accrual of liquidated
damages will cease. As used herein, the term "Transfer Restricted Securities"
means (i) each Security until the date on which such Security has been exchanged
for a freely transferable Exchange Security in the Registered Exchange Offer,
(ii) each Security or Private Exchange Security until the date on which it has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iii) each Security or
Private Exchange Security until the date on which it is distributed to the
public pursuant to Rule 144 under the Securities Act or is saleable pursuant to
Rule 144(k) under the Securities Act. Notwithstanding anything to the contrary
in this Section 3(a) or Section 3(b), the Company and Holdings shall not be
required to pay liquidated damages to a Holder of Transfer Restricted Securities
if such Holder failed to comply with its obligations to make the representations
set forth in the second to last paragraph of Section 1 or failed to provide the
information required to be provided by it, if any, pursuant to Section 4(n).
(b) Notwithstanding the foregoing provisions of Section 3(a),
the Company and Holdings may issue a notice that the Shelf Registration
Statement is unusable pending the announcement of a material corporate
transaction and may issue any notice suspending use of the Shelf Registration
Statement required under applicable securities laws to be issued and, in the
event that the aggregate number of days in any consecutive twelve-month period
for which all such notices are issued and effective exceeds 60 days in the
aggregate, then the Company will be obligated to pay liquidated damages to each
Holder of Transfer Restricted Securities, with respect to the first 90-day
period following such 60 days, in an amount equal to 0.25% per annum (which rate
will be increased by an additional 0.25% per annum for each subsequent 90-day
period that liquidated damages continue to accrue; provided that the rate at
which liquidated damages accrue may in no event exceed 1.00% per annum) of the
principal amount in respect of the Securities constituting Transfer Restricted
Securities. Upon the Company declaring that the Shelf Registration Statement is
usable after the period of time described in the preceding sentence the
<PAGE>
6
accrual of liquidated damages shall cease; provided, however, that if after any
such cessation of the accrual of liquidated damages the Shelf Registration
Statement again ceases to be usable beyond the period permitted above,
liquidated damages will again accrue pursuant to the foregoing provisions.
(c) The Company shall notify the Trustee and the Paying Agent
under the Indenture immediately upon the happening of each and every
Registration Default or any event described in Section 3(b). The Company and
Holdings shall pay the liquidated damages due on the Transfer Restricted
Securities by depositing with the Paying Agent (which may not be the Company for
these purposes), in trust, for the benefit of the Holders thereof, prior to
10:00 a.m., New York City time, on the next interest payment date specified by
the Indenture and the Securities, sums sufficient to pay the liquidated damages
then due. The liquidated damages due shall be payable on each interest payment
date specified by the Indenture and the Securities to the record holder entitled
to receive the interest payment to be made on such date. Each obligation to pay
liquidated damages shall be deemed to accrue from and including the date of the
applicable Registration Default.
(d) The parties hereto agree that the liquidated damages
provided for in this Section 3 constitute a reasonable estimate of and are
intended to constitute the sole damages that will be suffered by Holders of
Transfer Restricted Securities by reason of the failure of (i) the Shelf
Registration Statement or the Exchange Offer Registration Statement to be filed,
(ii) the Shelf Registration Statement to remain effective or (iii) the Exchange
Offer Registration Statement to be declared effective and the Registered
Exchange Offer to be consummated, in each case to the extent required by this
Agreement.
4. Registration Procedures. In connection with any
Registration Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to each Initial Purchaser,
prior to the filing thereof with the Commission, a copy of the
Registration Statement and each amendment thereof and each supplement,
if any, to the prospectus included therein; (ii) include the
information set forth in Annex A hereto on the cover, in Annex B hereto
in the "Exchange Offer Procedures" section and the "Purpose of the
Exchange Offer" section and in Annex C hereto in the "Plan of
Distribution" section of the prospectus forming a part of the Exchange
Offer Registration Statement, and include the information set forth in
Annex D hereto in the Letter of Transmittal delivered pursuant to the
Registered Exchange Offer; and (iii) if requested by any Initial
Purchaser, include the information required by Items 507 or 508 of
Regulation S-K, as applicable, in the prospectus forming a part of the
Exchange Offer Registration Statement.
(b) The Company shall advise each Initial Purchaser, and in the
cases of clauses (ii), (iii), (iv) or (v) below, each Exchanging Dealer
and the Holders (if applicable) and, if requested by any such person,
confirm such advice in writing (which advice pursuant to clauses
(ii)-(v) hereof shall be accompanied by an instruction to suspend the
use of the prospectus until the requisite changes have been made):
(i) when any Registration Statement and any
amendment thereto has been filed with the Commission and when
such Registration Statement or any post-effective amendment
thereto has become effective;
(ii) of any request by the Commission after the
effective date for amendments or supplements to any
Registration Statement or the prospectus included therein or
for additional information;
(iii) of the issuance by the Commission of any stop
order suspending the effectiveness of any Registration
Statement or the initiation of any proceedings for that
purpose;
<PAGE>
7
(iv) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of the Securities, the Exchange Securities or
the Private Exchange Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such
purpose; and
(v) of the happening of any event that requires the
making of any changes in any Registration Statement or the
prospectus included therein in order that the statements
therein are not misleading and do not omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading.
(c) The Company and Holdings will use reasonable best efforts
to obtain the withdrawal at the earliest possible time of any order
suspending the effectiveness of any Registration Statement.
(d) The Company will furnish to each Holder of Transfer
Restricted Securities included within the coverage of any Shelf
Registration Statement, without charge, at least one conformed copy of
such Shelf Registration Statement and any post-effective amendment
thereto, including financial statements and schedules and, if any such
Holder so requests in writing, all exhibits thereto (including those,
if any, incorporated by reference).
(e) The Company will, during the Shelf Registration Period,
promptly deliver to each Holder of Transfer Restricted Securities
included within the coverage of any Shelf Registration Statement,
without charge, as many copies of the prospectus (including each
preliminary prospectus) included in such Shelf Registration Statement
and any amendment or supplement thereto as such Holder may reasonably
request; and the Company consents to the use of such prospectus or any
amendment or supplement thereto by each of the selling Holders of
Transfer Restricted Securities in connection with the offer and sale of
the Transfer Restricted Securities covered by such prospectus or any
amendment or supplement thereto.
(f) The Company will furnish to each Initial Purchaser and each
Exchanging Dealer, and to any other Holder who so requests, without
charge, at least one conformed copy of the Exchange Offer Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules and, if any Initial Purchaser or Exchanging
Dealer or any such Holder so requests in writing, all exhibits thereto
(including those, if any, incorporated by reference).
(g) The Company will, during the Exchange Offer Registration
Period or the Shelf Registration Period, as applicable, promptly
deliver to each Initial Purchaser, each Exchanging Dealer and such
other persons that are required to deliver a prospectus following the
Registered Exchange Offer, without charge, as many copies of the final
prospectus included in the Exchange Offer Registration Statement or the
Shelf Registration Statement and any amendment or supplement thereto as
such Initial Purchaser, Exchanging Dealer or other persons may
reasonably request; and the Company and Holdings consent to the use of
such prospectus or any amendment or supplement thereto by any such
Initial Purchaser, Exchanging Dealer or other persons, as applicable,
as aforesaid.
(h) Prior to the effective date of any Registration Statement,
the Company and Holdings will use their reasonable best efforts to
register or qualify, or cooperate with the Holders of Securities,
Exchange Securities or Private Exchange Securities included therein and
their respective counsel in connection with the registration or
qualification of, such Securities, Exchange Securities or Private
Exchange Securities for offer and sale under the securities or blue sky
laws of such jurisdictions as any such Holder reasonably requests in
writing and do any and all other acts or things reasonably necessary to
enable
<PAGE>
8
the offer and sale in such jurisdictions of the Securities, Exchange
Securities or Private Exchange Securities covered by such Registration
Statement; provided that the Company and Holdings will not be required
to qualify generally to do business in any jurisdiction where they are
not then so qualified or to take any action which would subject them to
general service of process or to taxation in any such jurisdiction
where they are not then so subject.
(i) The Company and Holdings will cooperate with the Holders of
Securities, Exchange Securities or Private Exchange Securities to
facilitate the timely preparation and delivery of certificates
representing Securities, Exchange Securities or Private Exchange
Securities to be sold pursuant to any Registration Statement free of
any restrictive legends and in such denominations and registered in
such names as the Holders thereof may request in writing at least three
business days prior to the closing date of any sales of Securities,
Exchange Securities or Private Exchange Securities pursuant to such
Registration Statement.
(j) If any event contemplated by Section 4(b)(ii) through (v)
occurs during the period for which the Company and Holdings are
required to maintain an effective Registration Statement, the Company
and Holdings will promptly prepare and file with the Commission a
post-effective amendment to the Registration Statement or a supplement
to the related prospectus or file any other required document so that,
as thereafter delivered to purchasers of the Securities, Exchange
Securities or Private Exchange Securities from a Holder, the prospectus
will not include 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.
(k) Not later than the effective date of the applicable
Registration Statement, the Company will provide a CUSIP number for the
Securities, the Exchange Securities and the Private Exchange
Securities, as the case may be, and provide the applicable trustee with
printed certificates for the Securities, the Exchange Securities or the
Private Exchange Securities, as the case may be, in a form eligible for
deposit with The Depository Trust Company.
(l) The Company and Holdings will comply in all material
respects with all applicable rules and regulations of the Commission
and the Company or Holdings will make generally available to its
security holders as soon as practicable after the effective date of the
applicable Registration Statement an earning statement satisfying the
provisions of Section 11(a) of the Securities Act; provided that in no
event shall such earning statement be delivered later than 45 days
after the end of a 12-month period (or 90 days, if such period is a
fiscal year) beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of the applicable
Registration Statement, which statement shall cover such 12-month
period.
(m) The Company and Holdings will cause the Indenture or the
Exchange Securities Indenture, as the case may be, to be qualified
under the Trust Indenture Act as required by applicable law in a timely
manner.
(n) The Company may require each Holder of Transfer Restricted
Securities to be registered pursuant to any Shelf Registration
Statement to furnish to the Company such information concerning the
Holder and the distribution of such Transfer Restricted Securities as
the Company may from time to time reasonably request for inclusion in
such Shelf Registration Statement, and the Company may exclude from
such registration the Transfer Restricted Securities of any Holder that
fails to furnish such information within a reasonable time after
receiving such request.
(o) In the case of a Shelf Registration Statement, each Holder
of Transfer Restricted Securities to be registered pursuant thereto
agrees by acquisition of such
<PAGE>
9
Transfer Restricted Securities that, upon receipt of any notice from
the Company pursuant to Section 2(c), 3(b) or 4(b)(ii) through (v),
such Holder will discontinue disposition of such Transfer Restricted
Securities until such Holder's receipt of copies of the supplemental or
amended prospectus contemplated by Section 4(j) or until advised in
writing (the "Advice") by the Company that the use of the applicable
prospectus may be resumed. If the Company shall give any notice under
Section 2(c), 3(b) or 4(b)(ii) through (v) during the period that the
Company is required to maintain an effective Registration Statement
(the "Effectiveness Period"), such Effectiveness Period shall be
extended by the number of days during such period from and including
the date of the giving of such notice to and including the date when
each seller of Transfer Restricted Securities covered by such
Registration Statement shall have received (x) the copies of the
supplemental or amended prospectus contemplated by Section 4(j) (if an
amended or supplemental prospectus is required) or (y) the Advice (if
no amended or supplemental prospectus is required).
(p) In the case of a Shelf Registration Statement, the Company
and Holdings shall enter into such customary agreements (including, if
requested by the Holders of a majority in aggregate principal amount of
the Exchange Securities, an underwriting agreement in customary form)
and take all such other action, if any, as Holders of a majority in
aggregate principal amount of the Securities, Exchange Securities and
Private Exchange Securities being sold or the managing underwriters (if
any) shall reasonably request in order to facilitate any disposition of
Securities, Exchange Securities or Private Exchange Securities pursuant
to such Shelf Registration Statement.
(q) In the case of a Shelf Registration Statement, the Company
shall (i) make reasonably available for inspection at the location
where they are normally kept and during normal business hours by a
representative of, and Special Counsel (as defined below) acting for,
Holders of a majority in aggregate principal amount of the Securities,
Exchange Securities and Private Exchange Securities being sold and any
underwriter participating in any disposition of Securities, Exchange
Securities or Private Exchange Securities pursuant to such Shelf
Registration Statement, all relevant financial and other records,
pertinent corporate documents and properties of Holdings and its
subsidiaries and (ii) use its reasonable best efforts to have its
officers, directors, employees, accountants and counsel supply all
relevant information reasonably requested by such representative,
Special Counsel or any such underwriter (an "Inspector") in connection
with such Shelf Registration Statement; provided, however, that such
Inspector shall first agree in writing with the Company that any
information received pursuant to this Section 4(q) that is reasonably
and in good faith designated by the Company in writing as confidential
at the time of delivery of such information shall be kept confidential
by such Inspector, unless (i) disclosure of such information is
required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities, (ii) disclosure of such
information is required by law (including any disclosure requirements
pursuant to Federal securities laws in connection with the filing of
such Registration Statement or the use of any prospectus), (iii) such
information becomes generally available to the public other than as a
result of a disclosure or failure to safeguard such information by such
Inspector or (iv) such information becomes available to such Inspector
from a source other than the Company and its subsidiaries and such
source is not known, after due inquiry, by the relevant Holder to be
bound by a confidentiality agreement; provided further, that the
foregoing investigation shall be coordinated on behalf of the Holders
by one representative designated by and on behalf of such Holders and
any such confidential information shall be available from such
representative to such Holders so long as any Holder agrees to be bound
by such confidentiality agreement.
(r) In the case of a Shelf Registration Statement, the Company
shall, if requested by Holders of a majority in aggregate principal
amount of the Securities, Exchange Securities and Private Exchange
Securities being sold, their Special Counsel or the managing
underwriters (if any) in connection with such Shelf Registration
Statement, use
<PAGE>
10
its reasonable best efforts to cause (i) its counsel to deliver an
opinion relating to the Shelf Registration Statement and the
Securities, Exchange Securities or Private Exchange Securities, as
applicable, in customary form and substance, (ii) its officers to
execute and deliver all customary documents and certificates requested
by Holders of a majority in aggregate principal amount of the
Securities, Exchange Securities and Private Exchange Securities being
sold, their Special Counsel or the managing underwriters (if any) and
(iii) its independent public accountants to provide a comfort letter or
letters in customary form and substance, subject to receipt of
appropriate documentation as contemplated, and only if permitted, by
Statement of Auditing Standards No. 72.
5. Registration Expenses. The Company and Holdings will
jointly and severally bear all expenses incurred in connection with the
performance of its obligations under Sections 1, 2, 3 and 4 and, other than in
connection with the Exchange Offer Registration Statement, the Company will
reimburse the Initial Purchasers and the Holders for the reasonable fees and
disbursements of one firm of attorneys (in addition to any local counsel) chosen
by the Holders of a majority in aggregate principal amount of the Securities and
the Private Exchange Securities to be sold pursuant to the Shelf Registration
Statement (the "Special Counsel") acting for the Initial Purchasers or Holders
in connection therewith, which counsel shall be approved by the Company (such
approval to not be unreasonably withheld). Each Initial Purchaser and Holder
shall pay all expenses of its counsel other than as set forth in the preceding
sentence, underwriting discounts and commissions (prior to the reduction thereof
with respect to selling concessions, if any) and transfer taxes, if any,
relating to the sale or disposition of such Initial Purchaser's or Holder's
Securities pursuant to the Shelf Registration Statement.
6. Indemnification. (a) In the event of a Shelf Registration
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Initial Purchaser or Exchanging Dealer, as
applicable, the Company and Holdings shall jointly and severally indemnify and
hold harmless each Holder (including, without limitation, any such Initial
Purchaser or Exchanging Dealer), its affiliates, their respective officers,
directors, employees, representatives and agents, and each person, if any, who
controls such Holder within the meaning of the Securities Act or the Exchange
Act (collectively referred to for purposes of this Section 6 and Section 7 as a
Holder) from and against any loss, claim, damage or liability, joint or several,
or any action in respect thereof (including, without limitation, any loss,
claim, damage, liability or action relating to purchases and sales of
Securities, Exchange Securities or Private Exchange Securities), to which that
Holder may become subject, whether commenced or threatened, under the Securities
Act, the Exchange Act, any other federal or state statutory law or regulation,
at common law or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any such Registration Statement
or any prospectus forming part thereof or in any amendment or supplement thereto
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and shall reimburse each Holder promptly upon demand for any legal
or other expenses reasonably incurred by that Holder in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that the Company and
Holdings shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of, or is based upon, an untrue
statement or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and in conformity with any Holders'
Information; and provided, further, that with respect to any such untrue
statement in or omission from any related preliminary prospectus, the indemnity
agreement contained in this Section 6(a) shall not inure to the benefit of any
Holder from whom the person asserting any such loss, claim, damage, liability or
action received Securities, Exchange Securities or Private Exchange Securities
to the extent that such loss, claim, damage, liability or action of or with
respect to such Holder results from the fact that both (A) a copy of the final
prospectus was not sent or given to such person at or prior to the written
confirmation of the sale of such Securities, Exchange Securities or Private
Exchange Securities to such person and (B) the untrue statement in or omission
from the related
<PAGE>
11
preliminary prospectus was corrected in the final prospectus unless such failure
to deliver the final prospectus was a result of non-compliance by the Company
with Section 4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each Holder
shall indemnify and hold harmless the Company, Holdings and their respective
affiliates, officers, directors, employees, representatives and agents, and each
person, if any, who controls the Company within the meaning of the Securities
Act or the Exchange Act (collectively referred to for purposes of this Section
6(b) and Section 7 as the Company), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with any Holders' Information furnished to
the Company by such Holder, and shall reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that no such Holder
shall be liable for any indemnity claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Securities, Exchange
Securities or Private Exchange Securities pursuant to such Shelf Registration
Statement.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 6 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 6. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than the reasonable costs of investigation; provided, however,
that an indemnified party shall have the right to employ its own counsel in any
such action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any
<PAGE>
12
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees, disbursements and other charges of more than one separate firm
of attorneys (in addition to any local counsel) at any one time for all such
indemnified party or parties. Each indemnified party, as a condition of the
indemnity agreements contained in Sections 6(a) and 6(b), shall use all
reasonable efforts to cooperate with the indemnifying party in the defense of
any such action or claim. No indemnifying party shall be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment for the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of the
indemnified party (which consent shall not be unreasonably withheld), effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
7. Contribution. If the indemnification provided for in
Section 6 is unavailable or insufficient to hold harmless an indemnified party
under Section 6(a) or 6(b) otherwise than as a result of the limitations therein
contained, then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company from the offering and sale of the Securities,
on the one hand, and a Holder with respect to the sale by such Holder of
Securities, Exchange Securities or Private Exchange Securities, on the other, or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and Holdings, on the one hand, and such Holder, on the other, with
respect to the statements or omissions that resulted in such loss, claim, damage
or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company and
Holdings, on the one hand, and a Holder, on the other, with respect to such
offering and such sale shall be deemed to be in the same proportion as the total
net proceeds from the offering of the Securities (before deducting expenses)
received by or on behalf of the Company as set forth in the table on the cover
of the Offering Memorandum, on the one hand, bear to the total proceeds received
by such Holder with respect to its sale of Securities, Exchange Securities or
Private Exchange Securities, on the other. The relative fault 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 the Company and Holdings or information supplied by
the Company and Holdings, on the one hand, or to any Holders' Information
supplied by such Holder, on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The parties hereto agree that it would not be
just and equitable if contributions pursuant to this Section 7 were to be
determined by pro rata allocation or by any other method of allocation that does
not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss, claim,
damage or liability, or action in respect thereof, referred to above in this
Section 7 shall be deemed to include, for purposes of this Section 7, any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending or preparing to defend any such action or claim.
Notwithstanding the provisions of this Section 7, an indemnifying party that is
a Holder of Securities, Exchange Securities or Private Exchange Securities shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Securities, Exchange Securities or Private Exchange
Securities sold by such indemnifying party to any purchaser exceeds the amount
of any damages which such indemnifying party has otherwise paid or become liable
to pay by reason of any 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.
<PAGE>
13
8. Rules 144 and 144A. The Company shall use its reasonable
best efforts to file the reports required to be filed by it under the Securities
Act and the Exchange Act in a timely manner and, if at any time the Company is
not required to file such reports, it will, upon the written request of any
Holder of Transfer Restricted Securities, make publicly available other
information so long as necessary to permit sales of such Holder's securities
pursuant to Rules 144 and 144A. The Company and Holdings covenant that they will
take such further action as any Holder of Transfer Restricted Securities may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Transfer Restricted Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rules 144 and
144A (including, without limitation, the requirements of Rule 144A(d)(4)). Upon
the written request of any Holder of Transfer Restricted Securities, the Company
and Holdings shall deliver to such Holder a written statement as to whether they
have complied with such requirements. Notwithstanding the foregoing, nothing in
this Section 8 shall be deemed to require the Company to register any of its
securities pursuant to the Exchange Act.
9. Underwritten Registrations. If any of the Transfer
Restricted Securities covered by any Shelf Registration Statement are to be sold
in an underwritten offering, the investment banker or investment bankers and
manager or managers that will administer the offering will be selected by the
Holders of a majority in aggregate principal amount of such Transfer Restricted
Securities included in such offering, subject to the consent of the Company
(which shall not be unreasonably withheld or delayed), and such Holders shall be
responsible for all underwriting commissions and discounts in connection
therewith.
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's Transfer
Restricted Securities on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
10. Miscellaneous. (a) 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, unless the
Company so agrees and has obtained the written consent of Holders of a majority
in aggregate principal amount of the Securities, the Exchange Securities and the
Private Exchange Securities, taken as a single class. 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 whose Securities,
Exchange Securities or Private Exchange Securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of a majority in aggregate
principal amount of the Securities, the Exchange Securities and the Private
Exchange Securities being sold by such Holders pursuant to such Registration
Statement.
(b) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telecopier or air courier guaranteeing next-day delivery:
(1) if to a Holder, at the most current address given by
such Holder to the Company in accordance with the provisions of this
Section 10(b), which address initially is, with respect to each Holder,
the address of such Holder maintained by the Registrar under the
Indenture, with a copy in like manner to CSI, Donaldson, Lufkin &
Jenrette Securities Corporation and Morgan Stanley & Co. Incorporated;
(2) if to an Initial Purchaser, initially at its address
set forth in the Purchase Agreement; and
(3) if to the Company or Holdings, initially at the address
of the Company set forth in the Purchase Agreement.
<PAGE>
14
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; one business
day after being delivered to a next-day air courier; five business days after
being deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors And Assigns. This Agreement shall be binding
upon the Company, Holdings and their respective successors and assigns.
(d) Counterparts. This Agreement may be executed in any number
of counterparts (which may be delivered in original form or by telecopier) 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.
(e) Definition of Terms. For purposes of this Agreement, (a)
the term "business day" means any day on which the New York Stock Exchange, Inc.
is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(h) No Inconsistent Agreements. The Company and Holdings
represents, warrants and agrees that (i) it has not entered into, shall not, on
or after the date of this Agreement, enter into any agreement that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof, (ii) it has not previously
entered into any agreement which remains in effect granting any registration
rights with respect to any of its debt securities to any person and (iii) (with
respect to the Company) without limiting the generality of the foregoing,
without the written consent of the Holders of a majority in aggregate principal
amount of the then outstanding Transfer Restricted Securities, it shall not
grant to any person the right to request the Company to register any debt
securities of the Company under the Securities Act unless the rights so granted
are not in conflict or inconsistent with the provisions of this Agreement.
(i) No Piggyback on Registrations. Neither the Company nor any
of its security holders (other than the Holders of Transfer Restricted
Securities in such capacity) shall have the right to include any securities of
the Company in any Shelf Registration or Registered Exchange Offer other than
Transfer Restricted Securities.
(j) Severability. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable 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.
<PAGE>
15
Please confirm that the foregoing correctly sets forth the
agreement among the Company, Holdings and the Initial Purchasers.
Very truly yours,
AMERICAN AXLE & MANUFACTURING, INC.,
By
---------------------------------
Name:
Title:
AMERICAN AXLE & MANUFACTURING
HOLDINGS, INC.,
By
---------------------------------
Name:
Title:
Accepted:
CHASE SECURITIES INC.,
By
-----------------------------
Authorized Signatory
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION,
By
-----------------------------
Authorized Signatory
MORGAN STANLEY & CO. INCORPORATED,
By
-----------------------------
Authorized Signatory
<PAGE>
Each broker-dealer that receives Exchange Securities for its
own account pursuant to the Registered Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange
Securities. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Securities received in
exchange for Securities where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution".
<PAGE>
2
ANNEX B
Each broker-dealer that receives Exchange Securities for its
own account in exchange for Securities, where such Securities were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution".
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its
own account pursuant to the Registered Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange
Securities. This Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of Exchange
Securities received in exchange for Securities where such Securities were
acquired as a result of market-making activities or other trading activities.
The Company has agreed that, for a period of 180 days after the Expiration Date,
it will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until [ ]
199[ ], all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus.
The Company will not receive any proceeds from any sale of
Exchange Securities by broker-dealers. Exchange Securities received by
broker-dealers for their own account pursuant to the Registered Exchange Offer
may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Securities or a combination of such methods of resale,
at market prices prevailing at the time of resale, at prices related to such
prevailing market prices or 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 or the purchasers of any such Exchange Securities. Any
broker-dealer that resells Exchange Securities that were received by it for its
own account pursuant to the Registered Exchange Offer and any broker or dealer
that participates in a distribution of such Exchange Securities may be deemed to
be an "underwriter" within the meaning of the Securities Act and any profit on
any such resale of Exchange Securities and any commission or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
For a period of 180 days after the Expiration Date the Company
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Registered Exchange Offer (including the expenses of one counsel
for the Holders of the Securities) other than commissions or concessions of any
broker-dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
<PAGE>
ANNEX D
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE
10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement among
the Company, Holdings and the Initial Purchasers.
Very truly yours,
AMERICAN AXLE & MANUFACTURING, INC.
By /s/ Gary J. Witosky
-------------------------------
Name:
Title:
AMERICAN AXLE & MANUFACTURING
HOLDINGS, INC.
By /s/ Patrick S. Lancaster
-------------------------------
Name:
Title:
Accepted:
CHASE SECURITIES INC.,
By /s/ Ira Ginsburg
--------------------------
Authorized Signatory
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION,
By /s/ William J.R. Wilson
--------------------------
Authorized Signatory
MORGAN STANLEY & CO.
INCORPORATED,
By /s/ Helen T. Meates
--------------------------
Authorized Signatory
<PAGE>
April 19, 1999
AMERICAN AXLE & MANUFACTURING, INC.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
c/o American Axle & Manufacturing, Inc.
1840 Holbrook Avenue
Detroit, MI 48212
Ladies and Gentlemen:
We have acted as special counsel to American Axle &
Manufacturing, Inc., a Delaware corporation (the "Issuer"), and to
American Axle & Manufacturing Holdings, Inc., a Delaware corporation
(the "Guarantor"), in connection with the Registration Statement on
Form S-4 (the "Registration Statement") filed by the Issuer and the
Guarantor with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended, relating
to the issuance by the Issuer of $300,000,000 aggregate principal
amount of its 9 3/4% Senior Subordinated Notes due 2009 (the
"Exchange Notes") and the issuance by the Guarantor of its guarantee
(the "Guarantee") with respect to the Exchange Notes. The Exchange
Notes and the Guarantee thereof will be issued under an Indenture,
dated as of March 5, 1999 (the "Indenture"), among the Issuer, the
Guarantor and IBJ Whitehall Bank & Trust Company, as Trustee. The
Exchange Notes will be offered by the
<PAGE>
AMERICAN AXLE & MANUFACTURING, INC.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
April 19, 1999
-2-
Issuer in exchange (the "Exchange Offer") for $300,000,000 aggregate
principal amount of its outstanding 9 3/4% Senior Subordinated Notes
due 2009 (the "Notes").
We have examined the Registration Statement and the
Indenture, which has been filed with the Commission as an exhibit to
the Registration Statement. We have also examined the originals,
duplicates or certified or conformed copies of such corporate
records, agreements, instruments and other documents and have made
such other and further investigations as we have deemed relevant and
necessary in connection with the opinions expressed herein. As to
questions of fact material to this opinion, we have relied upon
certificates of public officials and of officers and representatives
of the Issuer and the Guarantor.
In such examination, we have assumed the genuineness
of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as
duplicates or certified or conformed copies, and the authenticity of
the originals of such latter documents.
Based upon the foregoing, and subject to the
qualifications and limitations stated herein, we are of the opinion
that:
1. When the Exchange Notes have been duly executed,
authenticated, issued and delivered in accordance with the provisions of the
Indenture upon the exchange for Notes pursuant to the Exchange Offer, the
Exchange Notes will constitute valid and legally
<PAGE>
AMERICAN AXLE & MANUFACTURING, INC.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
April 19, 1999
-3-
binding obligations of the Issuer, enforceable against the Issuer in accordance
with their terms.
2. When (a) the Exchange Notes have been duly executed,
authenticated, issued and delivered in accordance with the provisions of the
Indenture upon the exchange for Notes pursuant to the Exchange Offer and (b) the
Guarantee has been duly issued, the Guarantee will constitute a valid and
legally binding obligation of the Guarantor, enforceable against the Guarantor
in accordance with its terms.
Our opinions set forth above are subject to the effects of (1)
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, (2)
general equitable principles (whether considered in a proceeding in equity or at
law) and (3) an implied covenant of good faith and fair dealing.
We are members of the Bar of the State of New York and we do not
express any opinion herein concerning any law other than the law of the State of
New York, the federal law of the United States and the Delaware General
Corporation Law.
We hereby consent to the filing of this opinion letter as Exhibit
5.1 to the Registration Statement and to the use of our name under the caption
"Legal Matters" in the Prospectus included in the Registration Statement.
Very truly yours,
/s/ SIMPSON THACHER & BARTLETT
SIMPSON THACHER & BARTLETT
<PAGE>
EXECUTION COPY
================================================================================
AAM MASTER TRUST
POOLING AGREEMENT
Dated as of October 29, 1997,
as amended and restated
as of March 25, 1999
Among
AAM RECEIVABLES CORP.
AMERICAN AXLE & MANUFACTURING, INC.
as Servicer
and
THE CHASE MANHATTAN BANK
as Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
Definitions ..................................................... 2
SECTION 1.01 Definitions ............................................................ 2
SECTION 1.02 Other Definitional Provisions .......................................... 31
ARTICLE II
Conveyance of Receivables;
Representations, Warranties and Covenants .............................. 33
SECTION 2.01 Conveyance of Receivables .............................................. 33
SECTION 2.02 Acceptance by Trustee .................................................. 37
SECTION 2.03 Representations and Warranties of the Company Relating to the Company .. 37
SECTION 2.04 Representations and Warranties of the Company Relating to the
Receivables ............................................................ 42
SECTION 2.05 Adjustment Payment for Ineligible Receivables .......................... 43
SECTION 2.06 Purchase of Investor Certificateholders' Interest in Trust Portfolio ... 45
SECTION 2.07 Affirmative Covenants of the Company ................................... 46
SECTION 2.08 Negative Covenants of the Company ...................................... 51
ARTICLE III
Rights of Holders and
Allocation and Application of Collections .............................. 56
SECTION 3.01 Establishment of Collection Account; Certain Allocations ............... 56
ARTICLE IV
ARTICLE IV IS RESERVED
AND MAY BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO THE SERIES RELATING THERETO ............................ 63
ARTICLE V
The Investor Certificates and
Exchangeable Company Interest .......................................... 63
SECTION 5.01 The Investor Certificates .............................................. 63
SECTION 5.02 Authentication of Investor Certificates ................................ 64
</TABLE>
<PAGE>
TOC Pooling Agreement Contents, p. ii
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 5.03 Registration of Transfer and Exchange of Investor Certificates ......... 65
SECTION 5.04 Mutilated, Destroyed, Lost or Stolen Investor Certificates ............. 68
SECTION 5.05 Persons Deemed Owners .................................................. 68
SECTION 5.06 Appointment of Paying Agent ............................................ 69
SECTION 5.07 Access to List of Investor Certificateholders' Names and Addresses ..... 70
SECTION 5.08 Authenticating Agent ................................................... 71
SECTION 5.09 Tax Treatment .......................................................... 73
SECTION 5.09(A) Administration of the Trust as a FASIT ................................. 73
SECTION 5.09(B) Compliance with the Internal Revenue Code and Treasury Regulations ..... 76
SECTION 5.10 Exchangeable Company Interest .......................................... 77
SECTION 5.11 Book-Entry Certificates ................................................ 82
SECTION 5.12 Notices to Clearing Agency ............................................. 83
SECTION 5.13 Definitive Certificates ................................................ 84
ARTICLE VI
Other Matters Relating to the Company ................................. 84
SECTION 6.01 Liability of the Company .............................................. 84
SECTION 6.02 Limitation on Liability of the Company ................................. 85
ARTICLE VII
Early Amortization Events ........................................... 85
SECTION 7.01 Early Amortization Events .............................................. 85
SECTION 7.02 Additional Rights upon the Occurrence of Certain Events ................ 87
ARTICLE VIII
The Trustee ...................................................... 89
SECTION 8.01 Duties of Trustee ...................................................... 89
SECTION 8.02 Rights of the Trustee .................................................. 92
SECTION 8.03 Trustee Not Liable for Recitals ........................................ 94
SECTION 8.04 Trustee May Own Investor Certificates .................................. 95
SECTION 8.05 Trustee's Fees and Expenses ............................................ 95
SECTION 8.06 Eligibility Requirements for Trustee ................................... 96
SECTION 8.07 Resignation or Removal of Trustee ...................................... 97
SECTION 8.08 Successor Trustee ...................................................... 98
SECTION 8.09 Merger or Consolidation of Trustee ..................................... 98
SECTION 8.10 Appointment of Co-Trustee or Separate
</TABLE>
<PAGE>
TOC Pooling Agreement Contents, p. iii
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Trustee ................................................................ 99
SECTION 8.11 Tax Returns ............................................................ 100
SECTION 8.12 Trustee May Enforce Claims Without Possession of Investor
Certificates ........................................................... 101
SECTION 8.13 Suits for Enforcement .................................................. 101
SECTION 8.14 Rights of Investor Certificateholders to Direct Trustee ................ 102
SECTION 8.15 Representations and Warranties of Trustee .............................. 103
SECTION 8.16 Maintenance of Office or Agency ........................................ 103
SECTION 8.17 Limitation of Liability ............................................... 103
ARTICLE IX
Termination ............................................... 104
SECTION 9.01 Termination of Trust .................................................... 104
SECTION 9.02 Optional Purchase and Final Termination Date of Investor
Certificates of Any Series .............................................. 104
SECTION 9.03 Final Payment with Respect to Any Series ................................ 107
SECTION 9.04 Company's Termination Rights ............................................ 108
ARTICLE X
Miscellaneous Provisions ......................................... 109
SECTION 10.01 Amendment ............................................................... 109
SECTION 10.02 Protection of Right, Title and Interest to Trust ........................ 111
SECTION 10.03 Limitation on Rights of Holders ......................................... 111
SECTION 10.04 Governing Law ........................................................... 113
SECTION 10.05 Notices ................................................................. 113
SECTION 10.06 Severability of Provisions .............................................. 114
SECTION 10.07 Assignment .............................................................. 114
SECTION 10.08 Investor Certificates Nonassessable and Fully Paid ...................... 114
SECTION 10.09 Further Assurances ...................................................... 114
SECTION 10.10 No Waiver; Cumulative Remedies .......................................... 114
SECTION 10.11 Counterparts ............................................................ 115
SECTION 10.12 Third-Party Beneficiaries ............................................... 115
SECTION 10.13 Actions by Investor Certificateholders .................................. 115
SECTION 10.14 Merger and Integration .................................................. 115
SECTION 10.15 Headings ................................................................ 116
SECTION 10.16 Construction of Agreement ............................................... 116
</TABLE>
<PAGE>
TOC Pooling Agreement Contents, p. iv
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 10.17 No Setoff ............................................................... 116
SECTION 10.18 No Bankruptcy Petition .................................................. 116
SECTION 10.19 Limitation of Liability ................................................. 116
SECTION 10.20 Certain Information ..................................................... 118
</TABLE>
EXHIBITS
Exhibit A Form of Lockbox Agreement
Exhibit B Form of Annual Opinion of Counsel
Exhibit C Internal Operating Procedures Memorandum
SCHEDULES
Schedule 1 Receivables
Schedule 2 Identification of Trust Accounts
Schedule 3 Location of Chief Executive Office of the Company
APPENDICES
Appendix A Description of Servicer Site Review Procedures
Appendix B Description of Standby Liquidation System
<PAGE>
POOLING AGREEMENT, dated as of October 29,
1997, as amended and restated as of March 25, 1999,
among AAM RECEIVABLES CORP., a Delaware corporation
(the "Company"); AMERICAN AXLE & MANUFACTURING, INC.,
a Delaware corporation ("AAM", in its capacity as
servicer, the "Servicer"); and THE CHASE MANHATTAN
BANK, a New York banking corporation, not in its
individual capacity, but solely as trustee (in such
capacity, the "Trustee").
W I T N E S S E T H :
WHEREAS, (i) the Company, the Seller and the Servicer entered into a
Receivables Sale Agreement, dated as of October 29, 1997, as amended and
restated as of March 25, 1999 (as amended, supplemented or otherwise modified
from time to time thereafter, the "Receivables Sale Agreement") and (ii) the
Company, the Servicer and the Trustee entered into a Servicing Agreement, dated
as of October 29, 1997, as amended and restated as of March 25, 1999 (as
amended, supplemented or otherwise modified from time to time thereafter, the
"Servicing Agreement");
WHEREAS, the parties hereto entered into the Pooling Agreement, dated
as of October 29, 1997 (the "Existing Pooling Agreement")in order to create a
master trust to which the Company would transfer all its right, title and
interest in, to and under the Receivables and other Trust Assets then or
thereafter owned by the Company, or in which the Company has an interest, and
such master trust shall, from time to time at the direction of the Company,
issue one or more Series of Investor Certificates, representing interests in the
Receivables and such other Trust Assets as specified therein and in the
Supplement related to such Series; and
WHEREAS, the parties hereto wish to amend and restate the Existing
Pooling Agreement in its entirety.
<PAGE>
Pooling Agreement 2
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby expressly acknowledged, the parties
hereto agree that the Existing Pooling Agreement shall be and hereby is amended
and restated in its entirety as follows:
ARTICLE I
Definitions
SECTION 1.01 Whenever used in this Agreement, the following words and
phrases shall have the following meanings:
"AAM" shall mean American Axle & Manufacturing Corp., a Delaware
corporation.
"Accounts" shall have the meaning specified in subsection 2.01(a)(vi)
of this Agreement.
"Adjusted Invested Amount" shall mean, with respect to any Outstanding
Series, the definition assigned to such term in the related Supplement.
"Adjustment Payments" shall mean the collective reference to payments
of Transfer Deposit Amounts and Cash Dilution Payments.
"Affiliate" shall mean, with respect to any specified Person, any other
Person which, directly or indirectly, is in control of, is controlled by, or is
under common control with, such specified Person and any Person who is a
director, officer or general partner of such specified Person. For purposes of
this definition, "control" of a Person means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent" shall mean, with respect to any Series, the Person, if any, so
designated in the related Supplement.
"Aggregate Adjusted Invested Amount" shall mean, with respect to any
date of determination, the sum
<PAGE>
Pooling Agreement 3
of the Adjusted Invested Amounts with respect to all Outstanding Series on such
date of determination.
"Aggregate Allocated Receivables Amount" shall mean, with respect to
any date of determination, the sum of the Allocated Receivables Amounts with
respect to all Outstanding Series on such date of determination.
"Aggregate Daily Collections" shall mean, with respect to any Business
Day, the aggregate amount of all Collections deposited into the Collection
Account on such day.
"Aggregate Invested Amount" shall mean, at any date of determination,
the sum of the Invested Amounts with respect to all Outstanding Series on such
date of determination.
"Aggregate Overconcentration Amount" shall mean, with respect to any
date of determination, the sum of the Overconcentration Amounts of all Eligible
Obligors at the end of the preceding Business Day.
"Aggregate Receivables Amount" shall mean, with respect to any date of
determination, (i) the aggregate Principal Amount of all Eligible Receivables in
the Trust at the end of the Business Day immediately preceding such date minus
(ii) the Aggregate Overconcentration Amount for such date.
"Aggregate Target Receivables Amount" shall mean, with respect to any
date of determination, the sum of the Target Receivables Amounts with respect to
all Outstanding Series on such date of determination.
"Agreement" shall mean the Existing Pooling Agreement, as amended and
restated as of March 25, 1999, and all amendments hereof and supplements hereto,
and including, unless expressly stated otherwise, each Supplement.
"Allocable Charged-Off Amount" shall have, with respect to any Series,
the meaning specified in subsection 3.01(e) and in any Supplement for such
Series.
"Allocable Recoveries Amount" shall have, with respect to any Series,
the meaning specified in subsection 3.01(e) and in any Supplement for such
Series.
<PAGE>
Pooling Agreement 4
"Allocated Receivables Amount" shall have, with respect to any
Outstanding Series, the meaning specified in the related Supplement for such
Outstanding Series.
"Amortization Period" shall have, with respect to any Outstanding
Series, the definition assigned to such term in the related Supplement.
"Applicable Insolvency Laws" shall have the meaning specified in
subsection 7.01(a).
"Authorized Newspaper" shall mean a newspaper with a national
circulation printed in the English language and customarily published on each
Business Day.
"Bankruptcy Code" shall mean the United States Federal Bankruptcy Code,
11 U.S.C. Sections 101-1330, as amended.
"Board" shall mean the Board of Governors of the Federal Reserve System
of the United States of America.
"Book-Entry Certificates" shall mean certificates evidencing a
beneficial interest in the Investor Certificates, ownership and transfers of
which shall be made through book entries by a Clearing Agency as described in
Section 5.11; provided, however, that after the occurrence of a condition
whereupon book-entry registration and transfer are no longer permitted and
Definitive Certificates are issued to the Certificate Book-Entry Holders, such
Investor Certificates shall no longer be "Book-Entry Certificates".
"Business Day" shall mean any day other than (i) a Saturday or a Sunday
or (ii) another day on which commercial banking institutions or trust companies
in the State of New York or in the city where the Corporate Trust Office is
located, are authorized or obligated by law, executive order or governmental
decree to be closed; provided that, when used in connection with the calculation
of Certificate Rates which are determined by reference to LIBOR, "Business Day"
shall mean any Business Day banks are open for dealings in dollar deposits in
the London interbank market.
"Business Day Received" shall mean, except as otherwise set forth in
the applicable Supplement, (i) with respect to funds deposited in the Collection
Account (a) if funds are deposited in the Collection
<PAGE>
Pooling Agreement 5
Account by 1:30 p.m., New York City time, such day of deposit and (b) if funds
are deposited in the Collection Account after 1:30 p.m., New York City time, the
Business Day immediately following such day of deposit and (ii) with respect to
funds deposited in any Lockbox Account (a) if funds are deposited in such
Lockbox Account by the cut-off time established by the related Lockbox Processor
for same-day processing of deposits, such day of deposit and (b) if funds are
deposited in such Lockbox Account after such cut-off time, the Business Day
immediately following such day of deposit.
"Cash Dilution Payment" shall have the meaning specified in subsection
4.05(a) of the Servicing Agreement.
"Certificate Book-Entry Holder" shall mean, with respect to a
Book-Entry Certificate, the Person who is listed on the books of the Clearing
Agency, or on the books of a Person maintaining an account with such Clearing
Agency, as the beneficial owner of such Book-Entry Certificate (directly or as
an indirect participant, in accordance with the rules of such Clearing Agency).
"Certificate Rate" shall mean with respect to any Series and Class of
Investor Certificates, the percentage interest rate (or formula on the basis of
which such interest rate shall be determined) stated in the applicable
Supplement.
"Certificate Register" shall mean the register maintained pursuant to
subsection 5.03(a), providing for the registration of the Investor Certificates
and transfers and exchanges thereof.
"Charged-Off Receivables" shall mean, with respect to any Settlement
Period, all Receivables (or portions thereof) which, in accordance with the
Policies of the Seller, have or should have been written off during such
Settlement Period as uncollectible, including, without limitation, the
Receivables of any Obligor which becomes the subject of any voluntary or
involuntary bankruptcy proceeding.
"Class" shall mean, with respect to any Series, any one of the classes
of Investor Certificates of that Series as specified in the related Supplement.
<PAGE>
Pooling Agreement 6
"Clean-Up Call Repurchase Price" shall have the meaning set forth in
subsection 9.02(a).
"Clearing Agency" shall mean each organization registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934, as amended.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
such Clearing Agency.
"Collection Account" shall have the meaning specified in subsection
3.01(a).
"Collections" shall mean all collections and all amounts received in
respect of the Receivables transferred to the Trust, including Recoveries,
Adjustment Payments, indemnification payments made by the Servicer or the
Company and payments received in respect of Dilution Adjustments, together with
all collections received in respect of the Related Property in the form of cash,
checks, wire transfers or any other form of cash payment, and all proceeds of
Receivables and collections thereof (including, without limitation, collections
constituting an account or general intangible or evidenced by a note,
instrument, letter of credit, security, contract, security agreement, chattel
paper or other evidence of indebtedness or security, whatever is received upon
the sale, exchange, collection or other disposition of, or any indemnity,
warranty or guaranty payable in respect of, the foregoing and all "proceeds" as
defined in Section 9-306 of the UCC as in effect in the State of New York).
"Company" shall mean AAM Receivables Corp., a Delaware corporation.
"Company Collection Subaccount" shall have the meaning specified in
subsection 3.01(a).
"Company Exchange" shall have the meaning specified in subsection
5.10(a).
"Company Repurchase Payment" shall have the meaning specified in
subsection 2.05(b).
"Company Subordinated Obligation" shall mean any payment obligation or
other liability designated as
<PAGE>
Pooling Agreement 7
such in any Pooling and Servicing Agreement, each of which payment obligations
and other liabilities shall (i) be subordinated and subject to the prior payment
in full of all Company Unsubordinated Obligations then due, (ii) be made solely
from funds available to the Company that are not required to be applied to
Company Unsubordinated Obligations then due and (iii) not constitute a general
recourse claim against the Company, but only a claim against the Company to the
extent of funds available to the Company after satisfying all Company
Unsubordinated Obligations then due.
"Company Unsubordinated Obligations" shall mean all payment obligations
and other liabilities of the Company under any Pooling and Servicing Agreement
that are not designated as Company Subordinated Obligations.
"Contractual Obligation" shall mean, as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Corporate Trust Office" shall mean the principal office of the Trustee
at which at any particular time its corporate trust business shall be
administered, which office at the date of the execution of this Agreement is
located at The Chase Manhattan Bank, 450 W. 33rd Street, 14th Floor, New York,
New York 10001 (Attention of: Structured Finance Services Group, AAM Master
Trust).
"Credit Agreement" shall mean the Credit Agreement dated as of October
27, 1997, among American Axle & Manufacturing of Michigan, Inc., the Seller, the
lenders named therein, The Chase Manhattan Bank, as Administrative Agent and
Collateral Agent, and Chase Manhattan Bank Delaware, as Fronting Bank (including
any amendments or modifications thereto or refinancing thereof).
"Credit Enhancer" shall mean, with respect to any Outstanding Series,
that Person, if any, designated as such in the applicable Supplement.
"Cut-Off Date" shall mean the close of business on October 24, 1997.
"Daily Report" shall have the meaning specified in subsection 4.01 of
the Servicing Agreement.
<PAGE>
Pooling Agreement 8
"DCR" shall mean Duff & Phelps Credit Rating Co. or any successor
thereto.
"Defaulted Receivable" shall mean any Eligible Receivable which is
unpaid in whole or in part for more than 120 days after its original due date.
"Definitive Certificates" shall have the meaning specified in Section
5.11.
"Deposit Date" shall have the meaning specified in Section 3.01(d).
"Depository" shall mean, with respect to any Series, the Clearing
Agency designated as the "Depository" in the related Supplement.
"Depository Agreement" shall mean, with respect to any Series, an
agreement among the Company, the Trustee and a Clearing Agency, or a letter of
undertaking to a Clearing Agency by the Company and the Trustee, in each case in
a form reasonably satisfactory to the Trustee and the Company.
"Designated Obligor" shall mean, with respect to any Outstanding
Series, the definition assigned to such term in the related Supplement.
"Dilution Adjustment" shall mean any payments, rebates, discounts,
refunds or adjustments (including without limitation, as a result of the
application of any special or other discounts or any reconciliations) of any
Receivable, the amount owing for any returns (including, without limitation, as
a result of the return of any defective goods) or cancellations and the amount
of any other reduction of any payment under any Receivable, in each case granted
or made by the Seller to the related Obligor; provided, however, a "Dilution
Adjustment" does not include any Charged-Off Receivable.
"Distribution Date" shall mean, except as otherwise set forth in the
applicable Supplement, the 15th day of the month, or if such 15th day is not a
Business Day, the next succeeding Business Day.
"Dollars", "U.S. Dollars" and "$" shall mean dollars in lawful currency
of the United States of America.
<PAGE>
Pooling Agreement 9
"Early Amortization Event" shall have, with respect to any Series, the
meaning specified in Section 7.01 of this Agreement (without taking into account
any Supplements) and in any Supplement for such Series.
"Early Amortization Period" shall have, with respect to any Series, the
definition assigned to such term in Section 7.01 of this Agreement and in any
Supplement for such Series.
"Eligible Institution" shall mean a depositary institution or trust
company (which may include the Trustee and its Affiliates) organized under the
laws of the United States of America or any one of the states thereof or the
District of Columbia; provided, however, that at all times (i) such depositary
institution or trust company is a member of the Federal Deposit Insurance
Corporation, (ii) the certificates of deposit or the unsecured and
uncollateralized debt obligations of such depositary institution or trust
company are rated in one of the two highest long-term or short-term rating
categories by each Rating Agency and (iii) such depositary institution or trust
company has a combined capital and surplus of at least $100,000,000.
"Eligible Investments" shall mean any deposit accounts, book-entry
securities, negotiable instruments or securities represented by instruments in
bearer or registered form which evidence:
(a) direct obligations of, and obligations fully guaranteed as
to timely payment by, the United States of America;
(b) federal funds, demand deposits, time deposits or
certificates of deposit of any depositary institution or trust company
incorporated under the laws of the United States of America or any
state thereof (or any domestic branch of a foreign bank) and subject to
supervision and examination by federal or state banking or depositary
institution authorities; provided, however, that at the time of the
investment or contractual commitment to invest therein the commercial
paper, certificates of deposit or other short-term unsecured and
uncollateralized debt obligations (other than such obligations the
rating of which is based on the credit of a Person other than such
depository institution or trust company) thereof shall have a credit
rating from each of the Rating
<PAGE>
Pooling Agreement 10
Agencies rating such investment in the highest investment category
granted thereby;
(c) commercial paper rated, at the time of the investment or
contractual commitment to invest therein, in the highest rating
category by each Rating Agency rating such commercial paper;
(d) investments in money market funds (including funds for
which the Trustee or any of its Affiliates is investment manager or
adviser) rated in the highest rating category by each Rating Agency
rating such money market fund (provided that, if such Rating Agency is
S&P, such rating shall be AAAm-G);
(e) bankers' acceptances issued by any depository institution
or trust company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that
is a direct obligation of, or fully guaranteed by, the United States of
America or any agency or instrumentality thereof the obligations of
which are backed by the full faith and credit of the United States of
America, in either case entered into with a depository institution or
trust company (acting as principal) described in clause (b) above; or
(g) any other investment that is a Permitted Asset upon
satisfaction of the Rating Agency Condition with respect thereto.
"Eligible Obligor" shall mean, as of any date of determination, each
Obligor in respect of a Receivable that satisfies the following eligibility
criteria:
(a) it is "located" (within the meaning of Section 9-103(3)(d)
of the UCC as in effect in the State of New York) in the United States
or is a "Designated Obligor" (as defined in the applicable Supplement);
(b) it is a Designated Obligor; and
(c) it is not the Seller or an Affiliate of the Seller; and
(d) it is not the subject of any voluntary or involuntary
bankruptcy proceeding;
<PAGE>
Pooling Agreement 11
"Eligible Receivable" shall mean, as of any date of determination, each
Receivable owing by an Eligible Obligor in existence as of such date that
satisfies the following eligibility criteria:
(a) it constitutes either (i) an account within the meaning of
Section 9-106 of the UCC of the state the law of which governs the
perfection of the interest granted in it, (ii) an instrument within the
meaning of Section 9-105 of such UCC, which shall be subject to
compliance with the delivery requirement set forth in subsection
2.01(b), (iii) chattel paper within the meaning of Section 9-105 of
such UCC, which shall be subject to compliance with the delivery
requirement set forth in subsection 2.01(b), or (iv) a general
intangible (including to the extent that such Receivable includes
interest, finance charges, returned check or late charges on sales or
similar charges) within the meaning of Section 9-106 of such UCC;
(b) it is not a Defaulted Receivable;
(c) the goods related to it shall have been shipped or the
services related to it shall have been performed or in the case of a
Material Rebate Receivable, the material or parts shall have been
received by the Seller, or in the case of a Tooling Receivable, the
Seller shall have accrued the amount of such Receivable in accordance
with its historical practices and the rules and guidelines of the
Obligor of such Receivable and in each such case such Receivable shall
have been billed to the related Obligor;
(d) it is denominated and payable only in U.S. Dollars in the
United States;
(e) it arose in the ordinary course of business from the sale
of goods, products or services of the Seller or is a Tooling Receivable
or a Material Rebate Receivable and, in each case, it arose in
accordance with the Policies of the Seller;
(f) it does not contravene any applicable law, rule or
regulation and the Seller is not in violation of any law, rule or
regulation in connection with it, in each case which in any way renders
such Receivable unenforceable or would otherwise impair in any material
respect the collectibility of such Receivable;
<PAGE>
Pooling Agreement 12
(g) it is not a Receivable with an original repayment term in
excess of 90 days;
(h) it is not a Receivable purchased by the Seller from any
Person;
(i) it is not a Receivable for which the Seller has
established an offsetting specific reserve;
(j) it is not a Receivable in respect of which the Seller has
(i) entered into an arrangement with the Obligor pursuant to which
payment of any portion of the purchase price has been extended or
deferred, whether by means of a promissory note or by any other means,
to a date more than 60 days from the due date or (ii) altered the basis
of the aging from the initial due date for payment such that the final
due date extends to a date more than 60 days from its original invoice
date or (iii) otherwise made any modification except in the ordinary
course of business and consistent with the Policies of the Seller;
(k) all required consents, approvals or authorizations
necessary for the creation and enforceability of such Receivable and
the effective assignment and sale thereof by the Seller to the Company
and by the Company to the Trust shall have been obtained with respect
to the Receivable;
(l) the Seller is not in default in any material respect under
the terms of the contract, if any, from which such Receivable arose;
(m) all right, title and interest in it has been validly sold
by the Seller to the Company pursuant to the Receivables Sales
Agreement;
(n) the Company or the Trust will have legal and beneficial
ownership therein free and clear of all Liens other than such Liens
described in clauses (i) and/or (iv) of the definition of Permitted
Liens and such Receivable has been the subject of either a valid
transfer from the Company to the Trust or, alternatively, the grant of
a first priority perfected security interest therein to the Trust free
and clear of all Liens other than such Liens described in clauses (i),
(iii) and/or (iv) of the definition of Permitted Liens;
<PAGE>
Pooling Agreement 13
(o) it represents an enforceable obligation of the related
Obligor to pay the full Principal Amount thereof and it is not subject
to any dispute in whole or in part or to any asserted offset,
counterclaim or defense;
(p) it is at all times the legal, valid and binding obligation
of the Obligor thereon, enforceable against such Obligor in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in
equity or law);
(q) each of the representations and warranties with respect to
such Receivable made in the Receivables Sale Agreement by the Seller is
true and correct in all material respects; and
(r) at the time such Receivable was sold by the Seller to the
Company under the Receivables Sale Agreement, no event described in
subsection 7.01(d) of the Receivables Sale Agreement (without giving
effect to any requirement as to the passage of time) had occurred with
respect to the Seller;
provided that a Receivable which would otherwise not qualify as an Eligible
Receivable because of a failure to comply with clause (j) or (o) above shall
constitute an Eligible Receivable to the extent of the Principal Amount of such
Receivable minus the amount of such Receivable which fails to comply with such
clause (j) or (o).
"Eligible Successor Servicer" shall mean a Person which, at the time of
its appointment as Servicer (i) is legally qualified and has the corporate power
and authority to service the Receivables transferred to the Trust in accordance
with the terms of the Servicing Agreement, (ii) has demonstrated the ability to
service a portfolio of similar receivables in accordance with reasonable
standards of skill and care and (iii) has a combined capital and surplus of at
least $5,000,000.
"Enhancement" shall mean, with respect to any Series (i) the funds on
deposit in or credited to any bank account (or subaccount thereof) of the Trust,
(ii) any surety arrangement, any letter of credit, guaranteed rate agreement,
maturity guaranty facility,
<PAGE>
Pooling Agreement 14
tax protection agreement, interest rate swap, currency swap or other contract,
agreement or arrangement, in each case for the benefit of any Investor
Certificateholders of such Series, as designated in the applicable Supplement
and (iii) the subordination of one Class of Investor Certificates in a Series to
another Class in such Series or the subordination of any Interest to the
Investor Certificates of such Series.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Date" shall have the meaning, with respect to any Series
issued pursuant to an Exchange, specified in subsection 5.10(a).
"Exchange Notice" shall have the meaning, with respect to any Series
issued pursuant to an Exchange, specified in subsection 5.10(a).
"Exchange Register" shall have the meaning specified in subsection
5.10(a).
"Exchangeable Company Interest" shall have the meaning specified in
subsection 3.01(b) and shall be exchangeable as provided in Section 5.10.
"FASIT" shall mean a "financial asset securitization investment trust"
within the meaning of Section 860L(a)(1) of the Internal Revenue Code.
"FASIT Ownership Interest" shall mean, collectively, the Exchangeable
Company Interest and any Subordinated Company Interest which, collectively,
shall be designated as representing the sole "ownership interest" in the Trust
within the meaning of Section 860L(b)(2) of the Internal Revenue Code.
"FASIT Regular Interest" shall mean a FASIT regular interest within the
meaning of Section 860L(b)(1) of the Internal Revenue Code.
"Federal Government Obligor" shall mean the United States Federal
government or any subdivision thereof or any agency, department or
instrumentality thereof.
"Force Majeure Delay" shall mean, with respect to the Servicer, any
cause or event which is beyond the control and not due to the negligence of the
Servicer
<PAGE>
Pooling Agreement 15
which delays, prevents or prohibits the Servicer's delivery of Daily
Reports and/or Monthly Settlement Statements, including, without limitation,
acts of God or the elements and fire, but shall not include strikes or Year 2000
Problems; provided that no such cause or event shall be deemed to be a Force
Majeure Delay unless the Servicer shall have given the Company and the Trustee
written notice thereof as soon as reasonably possible after the beginning of
such delay.
"Ford" shall mean Ford Motor Company, a Delaware corporation, and any
of its Subsidiaries.
"Fractional Undivided Interest" shall mean a fractional undivided
interest, which, with respect to any Investor Certificate, can be expressed as a
percentage of the interest in the Trust Assets represented by the Series or
Class in which it was issued by taking the percentage equivalent of a fraction
the numerator of which is the principal amount of such Investor Certificate and
the denominator of which is the aggregate principal amount of all Investor
Certificates of such Series or Class.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"General Opinion" shall mean, with respect to any action, an Opinion of
Counsel to the effect that (i) such action has been duly authorized by all
necessary corporate action on the part of the Servicer, the Seller or the
Company, as the case may be, and (ii) any agreement executed in connection with
such action constitutes a legal, valid and binding obligation of the Servicer,
the Seller or the Company, as the case may be, enforceable in accordance with
the terms thereof, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereinafter in effect, affecting the enforcement of creditors' rights and except
as such enforceability may be limited by general principles of equity (whether
considered in a proceeding at law or in equity).
"GM" shall mean General Motors Corporation, a Delaware corporation, and
any of its Subsidiaries.
"GM Agreements" shall mean (i) the Component Supply Agreement, as
amended, dated as of February 29,
<PAGE>
Pooling Agreement 16
1994, between the Servicer and General Motors Corporation, (ii) the GMCL
Purchase Order Agreement, as amended, dated as of February 17, 1994, and
effective as of March 1, 1994, between the Servicer and General Motors of Canada
Limited ("GMCL"), (iii) the Amended and Restated Memorandum of Understanding
dated as of September 22, 1997, as amended pursuant to an Extension Agreement
dated as of September 22, 1997 between the Servicer and General Motors
Corporation, (iv) the letter agreement, dated as of February 20, 1996, between
the Servicer and General Motors Corporation and (v) any agreements entered into
between the Servicer and General Motors or GMCL succeeding or replacing the
agreements in clauses (i) and (ii), including "Lifetime Program Contracts".
"Government Obligor" shall mean any Federal Government Obligor or any
State/Local Government Obligor.
"Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Holders" shall mean the collective reference to the Investor
Certificateholders, the holders of Subordinated Company Interests and the
holders of the Exchangeable Company Interest.
"Indebtedness" shall mean, with respect to any Person at any date, (a)
all indebtedness of such Person for borrowed money, (b) any obligation owed for
the deferred purchase price of property or services which purchase price is
evidenced by a note or similar written instrument, (c) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money, (d) that portion of obligations of such Person
under capital leases which is properly classified as a liability on a balance
sheet in conformity with GAAP and (e) all liabilities of the type described in
the foregoing clauses (a) through (d) secured by any Lien on any property owned
by such Person even though such Person has not assumed or otherwise become
liable for the payment thereof.
"Indemnified Person" shall have the meaning specified in Section 10.19.
<PAGE>
Pooling Agreement 17
"Independent Public Accountants" shall mean, with respect to any
Person, any independent certified public accountants of nationally recognized
standing which constitute one of the accounting firms commonly referred to as
the "big six" accounting firms (or any successor thereto); provided that such
firm is independent with respect to such Person within the meaning of Rule
2-01(b) of Regulation S-X under the Securities Act.
"Ineligible Receivable" shall have the meaning specified in subsection
2.05(a).
"Initial Closing Date" shall mean October 29, 1997.
"Initial Invested Amount" shall have, with respect to any Outstanding
Series, the meaning specified in the related Supplement for such Series.
"Insolvency Event" shall mean the occurrence of any one or more of the
Early Amortization Events specified in paragraph (a) of Section 7.01.
"Interest" shall mean any interest in the Trust Assets issued pursuant
to the Agreement or any Supplement.
"Internal Operating Procedures Memorandum" shall mean the internal
operating procedures memorandum prepared by the Trustee as set forth in Exhibit
C hereto.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time, and the rules and regulations promulgated
thereunder from time to time.
"Invested Amount" shall have, with respect to any Outstanding Series,
the meaning specified in the related Supplement for such Series.
"Invested Percentage" shall have, with respect to any Outstanding
Series, the meaning specified in the related Supplement for such Series.
"Investment" shall mean the making by the Company or the Seller, as the
case may be, of any advance, loan, extension of credit or capital contribution
to, the purchase of any stock, bonds, notes, debentures or other securities of
or any assets
<PAGE>
Pooling Agreement 18
constituting a business unit of, or the making by the Company or the Seller, as
the case may be, of any other investment in, any Person.
"Investment Earnings" shall have the meaning specified in subsection
3.01(c).
"Investor Certificateholder" shall mean the holder of record of, or the
bearer of, an Investor Certificate.
"Investor Certificateholders' Interest" shall have the meaning
specified in subsection 3.01(b).
"Investor Certificates" shall mean the certificates executed by the
Company and authenticated by or on behalf of the Trustee, substantially in the
form attached to the applicable Supplement, but shall not include the
Exchangeable Company Interest, any Subordinated Company Interest or any other
Interest held by the Company.
"Issuance Date" shall mean, with respect to any Series, the date of
issuance of such Series, or the date of any increase to the Invested Amount of
such Series, as specified in the related Supplement.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset and
(c) in the case of securities, any purchase option, call or other similar right
of a third party with respect to such securities; provided, however, that if a
lien is imposed under Section 412(n) of the Internal Revenue Code or Section
302(f) of ERISA for a failure to make a required installment or other payment to
a plan to which Section 412(n) of the Internal Revenue Code or Section 302(f) of
ERISA applies, then such lien shall not be treated as a "Lien" from and after
the time (a)(i) any Person who is obligated to make such payment pays to such
plan the amount of such lien determined under Section 412(n)(3) of the Internal
Revenue Code or Section 302(f)(3) of ERISA, as the case may be, and provides to
the Trustee, the Rating Agencies and any Agent a written statement of the amount
of such lien together with written evidence of payment of such amount, or (ii)
such lien expires pursuant to
<PAGE>
Pooling Agreement 19
Section 412(n)(4)(B) of the Internal Revenue Code or Section 302(f)(4)(B) of
ERISA and (b) the Rating Agency Condition shall have been satisfied.
"Lien Creation" shall mean the creation, incurrence, assumption or
suffering to exist by the Company or the Seller, as the case may be, of any Lien
upon the Receivables, Related Property or the proceeds thereof.
"Lockbox" shall mean the post office boxes and accounts listed on
Schedule 2 to the Receivables Sale Agreement to which the Obligors are
instructed to remit payments on the Receivables and/or such other post office
boxes as may be established pursuant to Section 2.03 of the Servicing Agreement.
"Lockbox Account" shall mean the intervening account or accounts used
by a Lockbox Processor for deposit of funds received in a Lockbox prior to their
transfer to the Collection Account.
"Lockbox Agreement" shall mean a lockbox agreement substantially in the
form set forth as Exhibit A, as the same may be amended from time to time in
accordance with the Transaction Documents.
"Lockbox Processor" shall mean the depositary institution or processing
company (which may be the Trustee) that processes payments on the Receivables
sent by the Obligors thereon forwarded to a Lockbox.
"Margin Stock" shall have the meaning given to such term in Regulation
U of the Board.
"Material Adverse Effect" shall mean, when used (i) with respect to the
Seller, a materially adverse effect on the Receivables, taken as a whole, (ii)
with respect to the Seller or the Servicer, (a) a material impairment of the
ability of the Seller or the Servicer, as the case may be, to perform its
obligations under the Transaction Documents, (b) a material impairment of the
validity or enforceability of any of the Transaction Documents against the
Seller or the Servicer, (c) a material impairment of the collectibility of the
Receivables or (d) a material impairment of the interests, rights or remedies of
the Trustee or the Investor Certificateholders under or with respect to the
Transaction Documents or (iii) with respect to the Company, (a) a materially
adverse effect on the business,
<PAGE>
Pooling Agreement 20
operations, property or condition (financial or otherwise) of the Company, (b) a
material impairment of the ability of the Company to perform its obligations
under any Transaction Document to which it is a party, (c) a material impairment
of the validity or enforceability of any of the Transaction Documents against
the Company, (d) a material impairment of the collectibility of the Receivables
or (e) a material impairment of the interests, rights or remedies of the Trustee
or the Investor Certificateholders under or with respect to the Transaction
Documents.
"Material Rebate Receivable" shall mean any Receivable described in
clause (y) of the definition thereof.
"Monthly Servicing Fee" shall have the meaning specified in subsection
2.05(a) of the Servicing Agreement.
"Monthly Settlement Statement" shall have the meaning specified in
Section 4.02 of the Servicing Agreement.
"1940 Act" shall mean the Investment Company Act of 1940, as amended.
"Obligor" shall mean, with respect to any Receivable, the party
obligated to make payments with respect to such Receivable, including any
guarantor thereof.
"Officer's Certificate" shall mean, with respect to any Person, unless
otherwise specified in this Agreement, a certificate signed by the Chairman of
the Board, any Vice Chairman of the Board, the Chief Executive Officer, the
President, the Chief Financial Officer, any Vice President (however denominated)
or the Treasurer of such Person (or an officer holding an office with equivalent
or more senior responsibilities).
"Opinion of Counsel" shall mean a written opinion or opinions of one or
more counsel (who may be internal counsel) to the Company or the Servicer,
designated by the Company or the Servicer, as the case may be, that is
reasonably acceptable to the Trustee.
"Optional Repurchase Percentage" shall have, with respect to any
Series, the meaning specified in the related Supplement for such Series.
<PAGE>
Pooling Agreement 21
"Optional Termination Notice" shall have, with respect to any Series,
the meaning specified in the related Supplement for such Series.
"Outstanding Series" shall mean, at any time, a Series issued pursuant
to an effective Supplement for which the Series Termination Date for such Series
has not occurred.
"Overconcentration Amount" shall mean, at any date with respect to an
Eligible Obligor, the Principal Amount of otherwise Eligible Receivables due
from such Obligor which, expressed as a percentage of the Principal Amount of
all Eligible Receivables in the Trust at such date, exceeds the
Overconcentration Percentage, if any, provided in the related Supplement with
respect to an Outstanding Series;
"Paying Agent" shall mean any paying agent and co-paying agent
appointed pursuant to Section 5.06 and, unless otherwise specified in the
related Supplement of any Outstanding Series and with respect to such Series,
shall initially be The Chase Manhattan Bank, as Trustee.
"Permitted Asset" shall mean:
(i) cash or cash equivalents,
(ii) any Receivable or fixed-rate or floating-rate debt instrument,
other than Receivables from, or debt instruments issued by,
the Company or any Affiliate of the Company,
(iii) foreclosure property that is acquired by the Trust in
connection with the default or imminent default of a
Receivable or other debt instrument held by the Trust (unless
the security interest in such property was created for the
principal purpose of permitting the Trust to invest in such
property),
(iv) any asset -
(x) which is an interest rate or foreign currency
notional principal contract, letter of credit,
insurance, guarantee against payment defaults, or
other similar instrument permitted under the
applicable Treasury Regulations, and
(y) which is reasonably required to guarantee or hedge
against the
<PAGE>
Pooling Agreement 22
Trust's risks associated with being the obligor on
any FASIT Regular Interests issued by the Trust,
(v) contract rights to acquire any Receivables or debt instruments
described in (ii) above or assets described in (iv) above,
(vi) any regular interest in another FASIT, and
(vii) any regular interest in a "real estate mortgage investment
conduit".
"Permitted Liens" shall mean, at any time, for any Person:
(i) Liens created pursuant to this Agreement or the
Receivables Sale Agreement;
(ii) Liens for taxes, assessments or other governmental
charges or levies not yet due or which are being contested in good
faith by appropriate proceedings by such Person and with respect to
which reserves in conformity with GAAP have been provided on the books
of such Person;
(iii) unasserted rights of set-off, counterclaim or other
defenses with respect to such Receivable; and
(iv) any other Liens securing obligations not in excess of
$50,000 in the aggregate at any one time outstanding.
"Person" shall mean any individual, partnership, limited liability
company corporation, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.
"Policies" shall mean, with respect to the Seller, the credit and
collection policies of the Seller, copies of which have been previously
delivered to the Trustee, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the Transaction Documents.
"Pooling and Servicing Agreements" shall have the meaning specified in
subsection 10.01(a).
"Potential Early Amortization Event" shall mean an event which, with
the giving of notice and/or the
<PAGE>
Pooling Agreement 23
lapse of time, would constitute an Early Amortization Event hereunder or under
any Supplement.
"Potential Servicer Default" shall mean an event which, with the giving
of notice and/or the lapse of time, would constitute a Servicer Default
hereunder or under any Supplement.
"Prepayment Request" shall have, with respect to any Series, the
meaning specified in the related Supplement.
"Principal Amount" shall mean, with respect to any Receivable, the
amount due thereunder.
"Principal Terms" shall have the meaning, with respect to any Series
issued pursuant to a Company Exchange, specified in subsection 5.10(c).
"Program Costs" shall have, with respect to any Series, the meaning
specified in the related Supplement for such Series.
"Publication Date" shall have the meaning specified in subsection
7.02(a).
"Rating Agency" shall mean, with respect to each Outstanding Series,
any rating agency or agencies designated as such in the related Supplement;
provided that (i) in the event that no Outstanding Series has been rated, then
for purposes of the definitions of "Eligible Institution" and "Eligible
Investments", "Rating Agency" shall mean S&P; (ii) except as provided in (i), in
the event no Outstanding Series has been rated, any reference to "Rating Agency"
or the "Rating Agencies" shall be deemed to have been deleted herefrom, except
that references to the term "Rating Agency Condition" shall not be deemed
deleted, but shall be modified as set forth under the definition of such term.
"Rating Agency Condition" shall mean, with respect to any action, that
each Rating Agency shall have notified the Company, the Servicer, any Agent and
the Trustee in writing that such action will not result in a reduction or
withdrawal of the rating of any Outstanding Series or any Class of any such
Outstanding Series with respect to which it is a Rating Agency; provided that in
the event that no Outstanding Series has been rated, any reference to a "Rating
Agency Condition" shall be deemed
<PAGE>
Pooling Agreement 24
to be a reference to the prior written consent of the Agent with respect to such
action.
"Receivable" shall mean the indebtedness and payment obligations of any
Person to the Seller (including, without limitation, obligations constituting an
account or general intangible evidenced by a note, instrument, contract,
security agreement, chattel paper or other evidence of indebtedness or security
and whether or not any invoice or other bill has been rendered by the Seller or
any other Person) arising from (x) a sale of merchandise or services by the
Seller (including, without limitation, any right to payment for goods sold or
for services rendered), (y) an obligation of any Person to provide rebates to
the Seller with respect to, or to reimburse the Seller for, a portion of the
costs of materials and parts to be used in the manufacturing of products for
such Person or its affiliates, or (z) an obligation of any Person to pay for
tooling or equipment purchased or built by the Seller for the purpose of
manufacturing products for such Person, in each case including the right to
payment of any interest, sales taxes, finance charges, returned check or late
charges and other obligations of such Person with respect thereto; provided that
any Tooling Receivable that is not generated as part of the GMT 800 program or
any other program providing for periodic payments to the Seller shall not
constitute a "Receivable" until the Production Part Approval Process (PPAP) has
been completed with respect to the tooling giving rise to such Tooling
Receivable; provided further that in no event shall any intercompany or
intracompany obligation owed to the Seller by any of its Subsidiaries, divisions
or other operating units constitute a "Receivable".
"Receivables Purchase Date" shall mean, with respect to any Receivable,
the Business Day on which the Company purchases such Receivable from the Seller
and transfers such Receivable to the Trust.
"Receivables Sale Agreement" shall mean the Receivables Sale Agreement,
dated as of October 29, 1997, as amended and restated as of March 25, 1999,
among the Seller, the Servicer and the Company, as amended, supplemented or
otherwise modified from time to time in accordance with the Transaction
Documents.
"Record Date" shall mean, with respect to any Series, the date
specified as such in the applicable Supplement.
"Recoveries" shall mean all amounts collected (net of out-of-pocket
costs of collection) in respect of Charged-Off Receivables.
"Regulation G" shall mean Regulation G of the Board as from
<PAGE>
Pooling Agreement 25
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Regulation U" shall mean Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation X" shall mean Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Related Property" shall mean, with respect to each Receivable:
(a) all of the Seller's security interest in the goods
(including returned goods), if any, relating to the sale which gave
rise to such Receivable;
(b) all other security interests or Liens, and the Seller's
interest in the property subject thereto, from time to time purporting
to secure payment of such Receivable, whether pursuant to the contract
related to such Receivable or otherwise, together with all financing
statements signed by an Obligor describing any collateral securing such
Receivable; and
(c) all guarantees, insurance, letters of credit and other
agreements or arrangements of whatever character from time to time
supporting or securing payment of such Receivable whether pursuant to
the contract related to such Receivable or otherwise;
including in the case of clauses (b) and (c), without limitation, pursuant to
any obligations evidenced by a note, instrument, contract, security agreement,
chattel paper, or other evidence of indebtedness or security.
"Reported Day" shall have the meaning specified in subsection 4.01(a)
of the Servicing Agreement.
"Repurchase Obligation Date" shall have the meaning specified in
subsection 2.05(a).
"Requirement of Law" for any Person shall mean the certificate of
incorporation and by-laws or other
<PAGE>
Pooling Agreement 26
organizational or governing documents of such Person, and any law, treaty, rule
or regulation, or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"Responsible Officer" shall mean (i) when used with respect to the
Trustee, any officer within the Corporate Trust Office of the Trustee including
any Vice President, any Assistant Vice President, Trust Officer or Assistant
Trust Officer or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
(ii) when used with respect to any other Person, the Chairman of the Board, any
Vice Chairman of the Board, the Chief Executive Officer, the President, the
Chief Financial Officer, any Vice President or the Treasurer of such Person.
"Restricted Payments" shall have the meaning assigned in subsection
2.08(m).
"Revolving Period" shall have, with respect to any Outstanding Series,
the definition assigned to such term in the related Supplement.
"S&P" shall mean Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. or any successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller" shall mean American Axle & Manufacturing, Inc. and its
successors and assigns.
"Seller Note" shall have the meaning specified in Section 8.01 of the
Receivables Sale Agreement.
"Series" shall mean any series of Investor Certificates and any related
Subordinated Company Interest, the terms of which are set forth in a Supplement.
"Series Account" shall mean any deposit, trust, escrow, reserve or
similar account maintained for the benefit of the Investor Certificateholders
and the holders of the related Subordinated Company Interest of any Series or
Class, as specified in any Supplement.
<PAGE>
Pooling Agreement 27
"Series Collection Subaccount" shall have the meaning specified in
subsection 3.01(a).
"Series Collection Sub-subaccount" shall have the meaning specified in
subsection 3.01(a).
"Series Non-Principal Collection Sub-subaccount" shall have the meaning
specified in subsection 3.01(a).
"Series Principal Collection Sub-subaccount" shall have the meaning
specified in subsection 3.01(a).
"Series Termination Date" shall have, with respect to any Outstanding
Series, the meaning specified in the related Supplement for such Series.
"Service Transfer" shall have the meaning specified in Section 6.01 of
the Servicing Agreement.
"Servicer" shall initially mean American Axle & Manufacturing Inc., a
Delaware corporation, and, after any Service Transfer, the Successor Servicer.
"Servicer Default" shall have, with respect to any Series, the meaning
specified in Section 6.01 of the Servicing Agreement and, if applicable, as
supplemented by the related Supplement for such Series.
"Servicer Site Review" shall mean a review performed by the Trustee of
the servicing operations of the Servicer's central site locations, as described
in Appendix A.
"Servicing Agreement" shall have the meaning specified in the recitals
hereto.
"Servicing Fee" shall have the meaning specified in subsection 2.05(a)
of the Servicing Agreement.
"Servicing Fee Percentage" shall mean 1% per annum.
"Settlement Period" shall mean each fiscal month of the Servicer.
"Settlement Report Date" shall mean, except as otherwise set forth in
the applicable Supplement, the
<PAGE>
Pooling Agreement 28
10th day of each calendar month or, if such 10th day is not a Business Day, the
next succeeding Business Day.
"Special Allocation Settlement Report Date" shall have the meaning
specified in subsection 3.01(e).
"Specified Bankruptcy Opinion Provisions" shall mean the factual
assumptions (including those contained in the factual certificate referred to
therein) and the actions to be taken by the Seller or the Company, in each case
as specified in the legal opinion of Simpson Thacher & Bartlett (or other
counsel) relating to certain bankruptcy matters delivered on each Issuance Date.
"Standby Liquidation System" shall mean a system by which the Trustee
will receive and store electronic information regarding Receivables from the
Servicer which may be utilized in the event of a liquidation of the Receivables
to be carried out by the Trustee, as described in Appendix B.
"State/Local Government Obligor" shall mean any state or local
government or any subdivision thereof or any agency, department, or
instrumentality thereof.
"Subordinated Interest Amount" shall have, with respect to any
Outstanding Series, the meaning specified in the related Supplement for such
Outstanding Series.
"Subordinated Company Interest" shall mean any Interest issued to the
Company pursuant to the Supplement for any Series which represents an interest
in the Trust Assets which is subordinated to the Investor Certificates of such
Series.
"Subordinated Interest Register" shall have the meaning specified in
subsection 5.10(d).
"Subsidiary" shall mean, as to any Person, a corporation, partnership
or other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person; provided that the Company shall not constitute a "Subsidiary" of
AAM.
<PAGE>
Pooling Agreement 29
"Successor Servicer" shall have the meaning specified in Section 6.02
of the Servicing Agreement.
"Supplement" shall mean, with respect to any Series, a supplement to
this Agreement complying with the terms of Section 5.10(c), executed in
conjunction with the issuance of any Series.
"Target Receivables Amount" shall have, with respect to any Outstanding
Series, the meaning specified in the related Supplement for such Outstanding
Series.
"Tax Opinion" shall mean, unless otherwise specified in the Supplement
for any Series with respect to such Series or any Class within such Series, with
respect to any action, an Opinion of Counsel (a) to the effect that, for United
States federal income tax purposes, (i) such action will not adversely affect
the characterization as debt of any Investor Certificates of any Outstanding
Series or Class and for which the Trustee has received an Opinion of Counsel
that such Series or Class of Investor Certificates will be characterized as debt
for such purposes, (ii) in the case of a Tax Opinion required under Section
5.10(a) of this Agreement, the Investor Certificates of any new Series that are
not retained by the Company will be characterized as debt and (iii) following
such action, the Trust will not be an association (or publicly traded
partnership) taxable as a corporation and (b) with respect to state taxation
issues regarding the taxation of the Trust, in substantially the form delivered
at the Initial Closing Date; provided, that such opinion shall not be at the
expense of the Trustee.
"Termination Notice" shall have the meaning specified in Section 6.01
of the Servicing Agreement.
"Tooling Receivable" shall mean any Receivable described in clause (z)
of the definition thereof.
"Transactions" shall have the meaning specified in subsection 2.03(b).
"Transaction Documents" shall mean the collective reference to this
Agreement, the Servicing Agreement, each Supplement with respect to any
Outstanding Series, the Receivables Sale Agreement, the Lockbox Agreements, the
Investor Certificates and any other documents delivered pursuant to or in
connection therewith.
<PAGE>
Pooling Agreement 30
"Transfer Agent and Registrar" shall have the meaning specified in
Section 5.03 and shall initially be the Trustee.
"Transfer Deposit Amount" shall have the meaning specified in
subsection 2.05(b).
"Transferred Agreements" shall have the meaning assigned in subsection
2.01(a)(v).
"Trust" shall mean the AAM Master Trust created by this Agreement.
"Trust Assets" shall have the meaning specified in subsection 2.01(a).
"Trust Termination Date" shall have the meaning specified in subsection
9.01(a).
"Trustee" shall mean the institution executing this Agreement as
trustee, or its successor in interest, or any successor trustee appointed as
herein provided.
"Trustee Force Majeure Delay" shall mean any cause or event that is
beyond the control and not due to the gross negligence of the Trustee that
delays, prevents or prohibits the Trustee's performance of its duties under
Article III, including acts of God, floods, fire, explosions of any kind,
snowstorms and other irregular weather conditions, mass transportation
disruptions, any of power failure, telephone failure or computer failure in the
office of the Trustee, including without limitation, failure of the Chemlink or
any similar system or failure of the Fed Wire system operated by the Federal
Reserve Bank of New York and all similar events. The Trustee shall notify the
Company as soon as reasonably possible after the beginning of any such delay.
"UCC" shall mean the Uniform Commercial Code, as amended from time to
time, as in effect in any specified jurisdiction.
"Variable Funding Certificates" or "VFC Certificates" shall have the
meaning specified in Section 5.10.
"Year 2000 Problem" means any significant risk that computer hardware
or software used in the Servicer's businesses or operations will not, in the
case of dates or time periods occurring after December 31, 1999,
<PAGE>
Pooling Agreement 31
function at least as effectively as in the case of dates or time periods
occurring prior to January 1, 2000.
SECTION 1.02. Other Definitional Provisions . (a) All terms defined in
this Agreement, the Servicing Agreement or in any Supplement shall have such
defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in Section
1.01, and accounting terms partly defined in Section 1.01 to the extent not
defined, shall have the respective meanings given to them under GAAP. To the
extent that the definitions of accounting terms herein are inconsistent with the
meanings of such terms under GAAP, the definitions contained herein shall
control.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; and Section, subsection,
Schedule, Exhibit and Appendix references contained in this Agreement are
references to Sections, subsections, Schedules, Exhibits and Appendices in or to
this Agreement unless otherwise specified.
(d) The definitions contained in Section 1.01 are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(e) Where a definition contained in Section 1.01 specifies that such
term shall have the meaning set forth in the related Supplement, the definition
of such term set forth in the related Supplement may be preceded by a prefix
indicating the specific Series or Class to which such definition shall apply.
(f) Where reference is made in this Agreement or any related Supplement
to the principal amount of Receivables, such reference shall, unless explicitly
stated otherwise, be deemed a reference to the Principal Amount (as such term is
defined in Section 1.01) of such Receivables.
<PAGE>
Pooling Agreement 32
(g) Any reference herein or in any other Transaction Document to a
provision of the Bankruptcy Code, the Internal Revenue Code or ERISA shall be
deemed a reference to any successor provision thereto.
(h) To the extent that any provision of this Agreement or any other
Transaction Document requires that a calculation be performed with respect to a
date occurring prior to the effective date of such Transaction Document, such
calculation shall be performed as provided therein as though such Transaction
Document had been effective on and as of such prior date; provided, that the
party required to perform such calculation shall not be responsible for not
performing such calculation as of such prior date.
(i) Any reference herein to a Schedule, Exhibit or Appendix to this
Agreement shall be deemed to be a reference to such Schedule, Exhibit or
Appendix as it may be amended, modified or supplemented from time to time to the
extent that such Schedule, Exhibit or Appendix may be amended, modified or
supplemented (or any term or provision of any Transaction Document may be
amended that would have the effect of amending, modifying or supplementing
information contained in such Schedule, Exhibit or Appendix) in compliance with
the terms of the Transaction Documents.
(j) Any reference herein to any representation, warranty or covenant
"deemed" to have been made is intended to encompass only representations,
warranties or covenants that are expressly stated to be repeated on or as of
dates following the execution and delivery of this Agreement, and no such
reference shall be interpreted as a reference to any implicit, inferred, tacit
or otherwise unexpressed representation, warranty or covenant.
(k) The words "include", "includes" or "including" shall be interpreted
as if followed, in each case, by the phrase "without limitation".
<PAGE>
Pooling Agreement 33
ARTICLE II
Conveyance of Receivables;
Representations, Warranties and Covenants
SECTION 2.01. Conveyance of Receivables. (a) By execution and delivery
of this Agreement, the Company did, as of October 29, 1997, and does as of the
date hereof, hereby, assign, set over and otherwise convey to the Trust for the
benefit of the Holders, without recourse (except as specifically provided
herein), all its present and future right, title and interest in, to and under:
(i) all Receivables, including those existing at the close of
business on the Initial Closing Date and all Receivables thereafter
arising from time to time until but not including the Trust Termination
Date;
(ii) the Related Property;
(iii) all Collections;
(iv) all rights (including rescission, replevin or
reclamation) relating to any Receivable or arising therefrom;
(v) each of the Receivables Sale Agreement including (A) all
rights of the Company to receive monies due and to become due under or
pursuant to such agreement, whether payable as fees, expenses, costs or
otherwise, (B) all rights of the Company to receive proceeds of any
insurance, indemnity, warranty or guaranty with respect to such
agreement, (C) claims of the Company for damages arising out of or for
breach of or default under such agreement, (D) the right of the Company
to amend, waive or terminate such agreement, to perform thereunder and
to compel performance and otherwise exercise all remedies thereunder
and (E) all other rights, remedies, powers, privileges and claims of
the Company under or in connection with such agreement (whether arising
pursuant to such agreement or otherwise available to the Company at law
or in equity), including the rights of the Company to enforce such
agreement and to give or withhold any and all consents, requests,
notices, directions, approvals, extensions or waivers under or in
connection therewith (all of the foregoing set forth in subclauses
(v)(A) through (E), inclusive, the "Transferred Agreements");
<PAGE>
Pooling Agreement 34
(vi) the Collection Account, each Lockbox and each Lockbox
Account (collectively, the "Accounts"), including (A) all funds and
other evidences of payment held therein and all certificates and
instruments, if any, from time to time representing or evidencing any
of such Accounts or any funds and other evidences of payment held
therein, (B) all investments of such funds held in such Accounts and
all certificates and instruments from time to time representing or
evidencing such investments, (C) all notes, certificates of deposit and
other instruments from time to time hereafter delivered or transferred
to, or otherwise possessed by, the Trustee for and on behalf of the
Company in substitution for any of the then existing Accounts and (D)
all interest, dividends, cash, instruments and other property from time
to time received, receivable or otherwise distributed in respect of or
in exchange for any and all of the then existing Accounts; and
(vii) all proceeds of or payments in respect of any and all of
the foregoing clauses (i) through (vi) (including proceeds that
constitute property of the types described in clause (vi) above and
including Collections).
Such property described in the foregoing clauses (i) through (vii), together
with all investments and all monies on deposit in any other bank account or
accounts maintained for the benefit of any Holders and all monies available
under any Enhancement, to the extent paid to the Trust to be provided by the
provider of such Enhancement for any Series for payment to Holders shall
constitute the assets of the Trust (the "Trust Assets").
Subject to Section 5.09, although it is the intent of the parties to
this Agreement that the conveyance of the Company's right, title and interest
in, to and under the Receivables and the other Trust Assets pursuant to this
Agreement shall constitute a purchase and sale and not a loan, in the event that
such conveyance is deemed to be a loan, the Company hereby grants to the Trustee
for the benefit of the Holders a security interest in all of the Company's
present and future right, title and interest in, to and under the Receivables
and the other Trust Assets (it is understood and agreed that the parties intend
that such security interest shall be perfected and first priority upon the
filing of UCC-1 financing statements with the appropriate authorities), and that
this Agreement shall constitute a
<PAGE>
Pooling Agreement 35
security agreement under applicable law in favor of the Trustee, for the benefit
of the Holders.
(b) The assignment, setover and conveyance to the Trust pursuant to
Section 2.01(a) shall be made to the Trustee, on behalf of the Trust, and each
reference in this Agreement to such assignment, setover and conveyance shall be
construed accordingly. In connection with the foregoing assignment, the Company
and the Servicer agree to deliver to the Trustee each Trust Asset evidencing a
Receivable to be included as an Eligible Receivable or any Related Property with
respect thereto (including any original document or instrument necessary to
effect or to perfect such assignment) in which the transfer of an interest is
being perfected under the UCC or otherwise by possession and not by filing a
financing statement or similar document (although a precautionary filing of a
financing statement or similar document is expected to be made in respect of
each such Trust Asset). Without limiting the generality of the foregoing
sentence, the Company and the Servicer agree to deliver or cause to be delivered
to the Trustee an original of (i) any promissory note or other instrument
evidencing a Receivable sold to the Trust and (ii) any chattel paper evidencing
a Receivable sold to the Trust.
Notwithstanding the assignment of the Transferred Agreements set forth
in Section 2.01(a), the Company does not hereby assign or delegate any of its
duties or obligations under the Transferred Agreements to the Trust or the
Trustee and neither the Trust nor the Trustee accepts such duties or
obligations, and the Company shall continue to have the right and the obligation
to purchase Receivables from the Seller thereunder from time to time and to
consummate the other transactions and take any actions contemplated thereby. The
foregoing assignment, set-over and conveyance does not constitute and is not
intended to result in a creation or an assumption by the Trust, the Trustee, any
Investor Certificateholder or the Company, in its capacity as a Holder, of any
obligation of the Servicer, the Company, the Seller or any other Person in
connection with the Receivables or under any agreement or instrument relating
thereto, including, without limitation, any obligation to any Obligor.
In connection with such assignment, the Company agrees to record and
file, or cause to be recorded or filed, at its own expense, any financing
statements (and continuation statements with respect to such financing
<PAGE>
Pooling Agreement 36
statements when applicable) or, where applicable, registrations in the
appropriate records, with respect to the Receivables now existing and hereafter
created and the other Trust Assets, in each case for which a security interest
may be perfected under the relevant UCC, legislation or similar statute by such
filing or registration, as the case may be, in each case meeting the
requirements of applicable law in such manner and in such jurisdictions as are
necessary to perfect and maintain perfection of the assignment of the
Receivables and such other Trust Assets (excluding returned merchandise) to the
Trust, and to deliver a file-stamped copy or certified statement of such
financing statement or registration or other evidence of such filing or
registration to the Trustee on or prior to the date of issuance of any Investor
Certificates, any Subordinated Company Interest or the Exchangeable Company
Interest. The Trustee shall be under no obligation whatsoever to file such
financing statement, or a continuation statement to such financing statement, or
to make any other filing or other registration under the UCC, other relevant
legislation or similar statute in connection with such transfer. The Trustee
shall be entitled to conclusively rely on the filings or registrations made by
or on behalf of the Company without any independent investigation and the
Company's obligation to make such filings as evidence that such filings have
been made.
In connection with such assignment, the Company further agrees, at its
own expense, on or prior to the Initial Closing Date and each Issuance Date (a)
to indicate, or to cause to be indicated, in its computer files containing its
master database of Receivables and to cause the Seller to indicate in its
records containing its master database of Receivables that Receivables have been
conveyed to the Company or the Trust, as the case may be, pursuant to the
Receivables Sale Agreement or this Agreement, respectively, for the benefit of
the Holders and (b) to deliver or transmit or cause to be delivered or
transmitted to the Trustee computer tapes, diskettes or data transmission
containing a true and complete list of all Receivables transferred to the Trust
specifying for each such Receivable, as of the Cut-Off Date, at least (i) the
name of the Obligor and (ii) the aggregate Principal Amount of the Receivables
owing by such Obligor. Such tapes, diskettes or data transmission shall
constitute Schedule 1 to this Agreement and are hereby incorporated into and
made a part of this Agreement whether they are delivered together with or
separate from this Agreement.
<PAGE>
Pooling Agreement 37
SECTION 2.02 Acceptance by Trustee. (a) The Trustee hereby acknowledges
its acceptance on behalf of the Trust of all right, title and interest in, to
and under the property, existing as of October 27, 1997 and thereafter created,
and now existing and hereafter created, assigned to the Trust pursuant to
Section 2.01 and declares that it shall maintain such right, title and interest,
upon the trust herein set forth, for the benefit of all Holders. The Trustee
further acknowledges that, prior to or simultaneous with the execution and
delivery of this Agreement, the Company delivered to the Trustee the computer
tapes containing a list of the Receivables described in the last paragraph of
Section 2.01. The Trustee shall maintain a copy of Schedule 1, as delivered from
time to time, at the Corporate Trust Office.
(b) The Trustee shall have no power to create, assume or incur
indebtedness or other liabilities in the name of the Trust other than as
contemplated in this Agreement.
SECTION 2.03 Representations and Warranties of the Company Relating to
the Company. The Company hereby represents and warrants to the Trustee, in its
individual capacity, and the Trust (for the benefit of the Holders with respect
to each Outstanding Series) as of the Issuance Date of such Series, that:
(a) Organization; Powers. The Company (i) is a "C" corporation duly
organized, validly existing and in good standing under the laws of Delaware,
(ii) has all requisite power and authority to own its property and assets and to
carry on its business as now conducted and as proposed to be conducted, (iii) is
qualified to do business in, and is in good standing in, every jurisdiction
where the nature of its business so requires, except where the failure so to
qualify could not reasonably be expected to result in a Material Adverse Effect
and (iv) has the corporate power and authority to execute, deliver and perform
its obligations under each of the Transaction Documents and each other agreement
or instrument contemplated hereby to which it is or will be a party.
(b) Authorization. The execution, delivery and performance by the
Company of each of the Transaction Documents and the other transactions
contemplated hereby (collectively, the "Transactions") (i) have been duly
authorized by all requisite corporate and, if required,
<PAGE>
Pooling Agreement 38
stockholder action and (ii) will not (A) violate (1) any Requirement of Law or
(2) any provision of any Transaction Document or any other material Contractual
Obligation to which the Company is a party or by which it or any of its property
is or may be bound, (B) be in conflict with, result in a breach of or constitute
(alone or with notice or lapse of time or both) a default under, or give rise to
any right to accelerate or to require the prepayment, repurchase or redemption
of any obligation under, any Transaction Document or any other material
Contractual Obligation or (C) result in the creation or imposition of any Lien
upon or with respect to any property or assets now owned or hereafter acquired
by the Company (other than any Lien created hereunder or contemplated or
permitted hereby).
(c) Enforceability. This Agreement has been duly executed and delivered
by the Company and constitutes, and each other Transaction Document to which the
Company is a party when executed and delivered by the Company will constitute, a
legal, valid and binding obligation of the Company enforceable against it in
accordance with its respective terms, subject (a) as to enforcement of remedies,
to applicable bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting the enforcement of creditors' rights generally, from time
to time in effect and (b) to general principles of equity (whether enforcement
is sought by a proceeding in equity or at law).
(d) Governmental Approvals. No action, consent or approval of,
registration or filing with or any other action by any Governmental Authority is
or will be required in connection with the Transactions, except for (i) the
filing of appropriate UCC financing statements, (ii) such as have been made or
obtained and are in full force and effect and (iii) those that may be required
under the state securities or "blue sky" laws in connection with the offering or
sale of certificates.
(e) Litigation; Compliance with Laws. (i) There are not any actions,
suits or proceedings at law or in equity or by or before any Governmental
Authority now pending or, to the knowledge of the Company, threatened against or
affecting the Company or any business, property or rights of the Company, an
adverse decision in which could reasonably be expected to have a Material
Adverse Effect with respect to the Company.
<PAGE>
Pooling Agreement 39
(ii) The Company is not in default with respect to any judgment, writ,
injunction, decree or order of any Governmental Authority.
(f) Agreements. (i) The Company has no Contractual Obligations other
than (A) the Transaction Documents to which it is a party (including the Seller
Note) and (B) any other agreements or instruments that the Company is not
prohibited from entering into by subsection 2.08(g). The Company is not subject
to any corporate restriction that could reasonably be expected to have a
Material Adverse Effect.
(ii) The Company is not in default in any material respect under any
provision of any Transaction Document or any other material Contractual
Obligation to which it is a party or by which it or any of its properties or
assets are or may be bound.
(g) Federal Reserve Regulations. (i) The Company is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of buying or carrying Margin Stock.
(ii) No part of the proceeds from the issuance of any Investor
Certificates will be used, whether directly or indirectly, and whether
immediately, incidentally or ultimately, for any purpose that entails a
violation of, or otherwise fails to comply with, the provisions of the
Regulations of the Board, including Regulation G, U or X.
(h) Investment Company Act. Neither the Company nor the Trust is an
"investment company" as defined in, or subject to regulation under, the 1940
Act.
(i) No Early Amortization Event. No Early Amortization Event or
Potential Early Amortization Event has occurred and is continuing.
(j) Tax Returns. The Company has filed or caused to be filed all United
States federal, state or other material tax returns required to have been filed
by it and has paid or caused to be paid all taxes due and payable by it and all
assessments received by it to the extent that such failure to file or nonpayment
could reasonably be expected to have a Material Adverse Effect with respect to
the Company.
<PAGE>
Pooling Agreement 40
(k) Location of Records; Chief Executive Office. The offices at which
the Company keeps its records concerning the Receivables either (x) are located
at the addresses set forth for the Seller on Schedule 4 of the Receivables Sale
Agreement or (y) the Company has notified the Trustee of the location thereof in
accordance with the provisions of subsection 2.08(j) of this Agreement. The
chief executive office of the Company is located at the address set forth on
Schedule 3 and is the place where the Company is "located" for the purposes of
Section 9-103(3)(d) of the UCC as in effect in the State of New York. As of the
Initial Closing Date, the state and county where the chief executive office of
the Company is "located" for the purposes of Section 9-103(3)(d) of the UCC as
in effect in the State of New York has not changed in the past four months.
(l) Solvency. No Insolvency Event with respect to the Company has
occurred and the transfer of the Receivables by the Company to the Trust has not
been made in contemplation of the occurrence thereof. Both prior to and after
giving effect to the transactions occurring on each Issuance Date, (i) the fair
value of the assets of the Company at a fair valuation will exceed the debts and
liabilities, subordinated, contingent or otherwise, of the Company; (ii) the
present fair salable value of the property of the Company will be greater than
the amount that will be required to pay the probable liability of the Company on
its debts and other liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured; (iii) the Company will be
able to pay its debts and liabilities, subordinated, contingent or otherwise, as
such debts and liabilities become absolute and matured; and (iv) the Company
will not have unreasonably small capital with which to conduct the business in
which it is engaged as such business is now conducted and is proposed to be
conducted. For all purposes of clauses (i) through (iv) above, the amount of
contingent liabilities at any time shall be computed as the amount that, in the
light of all the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured liability.
The Company does not intend to, nor does it believe that it will, incur debts
beyond its ability to pay such debts as they mature, taking into account the
timing of and amounts of cash to be received by it and the timing of and amounts
of cash to be payable in respect of its Indebtedness.
<PAGE>
Pooling Agreement 41
(m) Ownership; Subsidiaries. All of the issued and outstanding capital
stock of the Company is owned, legally and beneficially, by American Axle &
Manufacturing, Corp. The Company has no Subsidiaries.
(n) Names. The legal name of the Company is as set forth in this
Agreement. The Company has no trade names, fictitious names, assumed names or
"doing business as" names.
(o) Liabilities. Other than (i) the liabilities, commitments or
obligations (whether absolute, accrued, contingent or otherwise) arising under
or in respect of the Transaction Documents, (ii) Program Costs and (iii)
immaterial amounts due and payable in the ordinary course of business of a
special-purpose company, the Company does not have any liabilities, commitments
or obligations (whether absolute, accrued, contingent or otherwise), whether due
or to become due.
(p) Collection Procedures. The Company and the Seller have in place
procedures pursuant to the Transaction Documents which are either necessary or
advisable to ensure the timely collection of Receivables.
(q) Lockbox Agreements; Lockbox Accounts. Except to the extent
otherwise permitted under the terms of this Agreement, (i) each Lockbox
Agreement to which the Company is party is in full force and effect and (ii)
each Lockbox Account set forth in Schedule 2 to the Receivables Sales Agreement
is free and clear of any Lien (other than any right of set-off expressly
provided for in the applicable Lockbox Agreement).
(r) No Material Adverse Effect. Since the incorporation of the Company,
no event has occurred which has had a Material Adverse Effect with respect to
the Company.
(s) FASIT Representations. The Company is not (i) a tax exempt
organization, (ii) a "regulated investment company" (within the meaning of
Section 851(a) of the Internal Revenue Code), (iii) a "real estate investment
trust" (within the meaning of Section 856(a) of the Internal Revenue Code), (iv)
a "real estate mortgage investment conduit" (within the meaning of Section
860(a) of the Internal Revenue Code) or (v) a "cooperative" that is subject to
tax under Part I of Subchapter T of the Internal Revenue Code.
<PAGE>
Pooling Agreement 42
The representations and warranties as of the date made set forth in
this Section 2.03 shall survive the transfer and assignment of the Trust Assets
to the Trust. Upon discovery by a Responsible Officer of the Company or the
Servicer or by a Responsible Officer of the Trustee of a breach of any of the
foregoing representations and warranties with respect to any Outstanding Series
as of the Issuance Date of such Series, the party discovering such breach shall
give prompt written notice to the other parties and to each Agent with respect
to all Outstanding Series. The Trustee's obligations in respect of any breach
are limited as provided in Section 8.02(g).
SECTION 2.04 Representaions and Warranties of the Company Relating to
the Receivables. The Company hereby represents and warrants to the Trustee and
the Trust, for the benefit of the Holders, with respect to each Receivable
transferred to the Trust as of the related Receivables Purchase Date, unless, in
either case, otherwise stated in the applicable Supplement or unless such
representation or warranty expressly relates only to a prior date, that:
(a) Receivables Description. As of the Cut-Off Date, Schedule
1 to this Agreement sets forth a complete listing of all Receivables,
aggregated by Obligor, transferred to the Trust as of the Cut-Off Date
and the information contained therein specified in clauses (i) and (ii)
of the last paragraph of subsection 2.01(b) with respect to each such
Receivable is true and correct (except for any errors or omissions that
do not result in material impairment of the interests, rights or
remedies of the Trustee or the Investor Certificateholders with respect
to any Receivable) as of the Cut-Off Date. As of the Cut-Off Date, the
aggregate amount of Receivables owned by the Company is accurately set
forth in Schedule 1 hereto.
(b) No Liens. Each Receivable existing on the Initial Closing
Date or, in the case of Receivables transferred to the Trust after the
Initial Closing Date, on the date that each such Receivable shall have
been transferred to the Trust, has been conveyed to the Trust free and
clear of any Lien, except for Permitted Liens.
(c) Eligible Receivable. To the Company's knowledge, on the
Initial Closing Date, each Receivable transferred to the Trust that is
included in the
<PAGE>
Pooling Agreement 43
calculation of the initial Aggregate Receivables Amount is an Eligible
Receivable and, in the case of Receivables transferred to the Trust
after the Initial Closing Date, on the date such Receivable shall have
been transferred to the Trust, each such Receivable that is included in
the calculation of the Aggregate Receivables Amount on such date is an
Eligible Receivable. The Receivables are Permitted Assets.
(d) Filings. On or prior to the date that is 10 days after the
Initial Closing Date, all filings and other acts (including but not
limited to all filings and other acts necessary or advisable under the
UCC) shall have been made or performed such that the Trust has a first
priority perfected ownership or security interest in respect of all
Receivables on such date.
The representations and warranties as of the date made set forth in
this Section 2.04 shall survive the transfer and assignment of the Trust Assets
to the Trust. Upon discovery by a Responsible Officer of the Company, the
Servicer or a Responsible Officer of the Trustee of a breach of any of the
representations and warranties (or of any Receivable encompassed by the
representation and warranty in subsection 2.04(c) not being an Eligible
Receivable as of the relevant Receivables Purchase Date) with respect to each
Outstanding Series as of the Issuance Date of such Series, the party discovering
such breach shall give prompt written notice to the other parties and to each
Agent with respect to all Outstanding Series. The Trustee's obligations in
respect of any breach are limited as provided in Section 8.02(g).
SECTION 2.05 Adjustment Payment for Ineleigble Receivables. (a)
Adjustment Payment Obligation. If (i) any representation or warranty under
subsections 2.04(a), (b) or (c) is not true and correct as of the date specified
therein with respect to any Receivable transferred to the Trust, (ii) there is a
breach of any covenant under subsection 2.08(c) with respect to any Receivable,
or (iii) the Trust's interest in any Receivable is not a first priority
perfected ownership or security interest at any time as a result of any action
taken by, or the failure to take action by, the Company (any Receivable as to
which the conditions specified in any of clause (i), (ii), or (iii) of this
subsection 2.05(a) exists is referred to herein as an "Ineligible Receivable")
then, after the earlier (the date on which such earlier event occurs, the
"Repurchase
<PAGE>
Pooling Agreement 44
Obligation Date"), to occur of the discovery by the Company of any such event
that continues unremedied or receipt by the Company of written notice given by
the Trustee or the Servicer of any such event that continues unremedied, the
Company shall make an adjustment payment with respect to such Ineligible
Receivable on the terms and conditions set forth in subsection 2.05(b).
(b) Adjustment Payment Amount. Subject to the last sentence of this
subsection 2.05(b), the Company shall make an adjustment payment with respect to
each Ineligible Receivable as required pursuant to subsection 2.05(a) by
depositing in the Collection Account in immediately available funds on the
Business Day following the related Repurchase Obligation Date an amount equal to
the lesser of (x) the amount by which the Aggregate Target Receivables Amount
exceeds the Aggregate Receivables Amount (after giving effect to the reduction
thereof by the Principal Amount of such Ineligible Receivable) and (y) the
aggregate outstanding Principal Amount of all such Ineligible Receivables (the
"Transfer Deposit Amount"). Upon transfer or deposit of the Transfer Deposit
Amount or the making of any Seller Repurchase Payment (as defined in the
Receivables Sale Agreement), the Trust shall automatically and without further
action be deemed to sell, transfer, assign, set over and otherwise convey to the
Company, without recourse, representation or warranty, all the right, title and
interest of the Trust in and to such Ineligible Receivable (as defined herein
and in the Receivables Sale Agreement), all monies due and unpaid or to become
due with respect thereto and all proceeds thereof; and such repurchased
Ineligible Receivable shall be treated by the Trust as collected in full as of
the date on which it was transferred. The Trustee shall execute such documents
and instruments of transfer or assignment on behalf of the Trust and take such
other actions as shall reasonably be requested in writing by the Company to
effect the conveyance of such Receivables pursuant to this subsection 2.05(b).
Except as otherwise specified in any Supplement, the obligation of the Company
to pay such Transfer Deposit Amount with respect to any Ineligible Receivables
shall constitute the sole remedy respecting the event giving rise to such
obligation available to Investor Certificateholders (or the Trustee on behalf of
Investor Certificateholders). Any payment made by the Company pursuant to this
subsection 2.05(b) is referred to as a "Company Repurchase Payment".
<PAGE>
Pooling Agreement 45
SECTION 2.06 Purchase of Investor Certificateholders' Interst in Trust
Portfolio. (a) In the event of any breach of any of the representations and
warranties set forth in paragraph (a), (b), (c), (d) or (e)(i) of Section 2.03
as of the date made, which breach has a material adverse effect on the interests
of the Holders of an Outstanding Series under or with respect to the Transaction
Documents, then the Trustee, at the written direction of holders evidencing more
than 50% of the Invested Amount of each affected Outstanding Series, shall
notify the Company to purchase such Outstanding Series and the Company shall be
obligated to make such purchase on the next Distribution Date occurring at least
five Business Days after receipt of such notice on the terms and conditions set
forth below; provided, however, that no such purchase shall be required to be
made if, by such Distribution Date, any such material adverse effect caused
thereby shall have been cured.
(b) As required under Section 2.06(a), the Company shall deposit into
the Collection Account for credit to the applicable subaccount of the Collection
Account on the Business Day preceding such Distribution Date an amount equal to
the purchase price (as described in the next succeeding sentence) for the
Investor Certificateholders' Interest for such Outstanding Series on such day.
The purchase price for any such purchase will be equal to (i) the Adjusted
Invested Amount of such Outstanding Series on the date on which the purchase is
made plus (ii) an amount equal to all interest accrued but unpaid on such Series
up to the Distribution Date on which the distribution of such deposit is
scheduled to be made pursuant to Section 9.02 plus (iii) any other amount
required to be paid in connection therewith pursuant to any Supplement.
Notwithstanding anything to the contrary in this Agreement, the entire amount of
the purchase price deposited in the Collection Account shall be distributed to
the related Investor Certificateholders on such Distribution Date pursuant to
Section 9.02. If the Trustee gives notice directing the Company to purchase the
Investor Certificates of an Outstanding Series as provided above, except as
otherwise specified in any Supplement, the obligation of the Company to purchase
such Investor Certificates pursuant to this Section 2.06 shall constitute the
sole remedy respecting an event of the type specified in the first sentence of
this Section 2.06 available to the applicable Investor Certificateholders (or
the Trustee on behalf of such Investor Certificateholders).
<PAGE>
46
Pooling Agreement
SECTION 2.07 AffirmativeCovenants of the Company. The Company
hereby covenants that, until the Trust Termination Date occurs, the Company
shall:
(a) Financial Statements, Reports, etc.
(i) Furnish to the Trustee, each Agent and the Rating
Agencies, within 90 days after the end of each fiscal year,
the balance sheet and related statements of income,
stockholders' equity and cash flows showing the financial
condition of the Company as of the close of such fiscal year
and the results of its operations during such year, all
certified by a Responsible Officer of such Person as fairly
representing the financial condition and results of
operations of the Company in accordance with GAAP
consistently applied;
(ii) Furnish to the Trustee, each Agent and the Rating
Agencies, within 45 days after the end of each of the first
three fiscal quarters of each fiscal year, the Company's
balance sheet and related income statement showing the
financial condition of the Company as of the close of such
fiscal quarter and the results of its operations during such
fiscal quarter and the then elapsed portion of the fiscal
year (and, beginning with the second fiscal year, showing,
on a comparative basis, such information as of and for the
corresponding dates and periods of the preceding fiscal
year), all certified by a Responsible Officer of such Person
as fairly representing the financial condition and results
of operations of the Company in accordance with GAAP
consistently applied, subject to normal year-end audit
adjustments; and
(iii) Furnish to the Trustee and each Agent, promptly,
from time to time, such other information regarding the
operations, business affairs and financial condition of the
Company, or compliance with the terms of any Transaction
Document, in each case as any Agent or the Trustee may
reasonably request.
<PAGE>
47
Pooling Agreement
(b) Annual Opinion. Deliver to the Trustee and the Rating
Agencies an Opinion of Counsel substantially in the form of Exhibit B, by
January 31st of each fiscal year of the Company, the first such delivery
hereunder to occur in January 2000.
(c) Payment of Obligations; Compliance with Obligations.
Pay, discharge or otherwise satisfy at or before maturity or before they
become delinquent, as the case may be, all its obligations of whatever
nature, except where the amount or validity thereof is currently being
contested in good faith by appropriate proceedings and reserves in
conformity with GAAP with respect thereto have been provided on the books
of the Company or where the failure to pay, discharge or otherwise satisfy
such obligation would not have a Material Adverse Effect with respect to
the Company. The Company shall defend the right, title and interest of the
Holders in, to and under the Receivables and the other Trust Assets,
whether now existing or hereafter created, against all claims of third
parties claiming through or under the Company, the Seller or the Servicer.
The Company will duly fulfill all material obligations on its part to be
fulfilled under or in connection with each Receivable and will do nothing
to impair the rights of the Holders in such Receivable.
(d) Inspection of Property; Books and Records; Discussions.
Keep proper books of records and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made
of all dealings and transactions in relation to its business and
activities; and permit representatives of the Trustee upon reasonable
advance notice to visit and inspect any of its properties and examine and
make abstracts from any of its books and records during normal business
hours on any Business Day and as often as may reasonably be requested,
subject to the Company's security and confidentiality requirements, and to
discuss the business, operations, properties and financial and other
condition of the Company with officers and employees of the Company and
with its Independent Public Accountants; provided that the Trustee shall
notify the Company prior to any contact with such Independent Public
Accountants and shall give the Company the opportunity to participate in
such discussions.
<PAGE>
48
Pooling Agreement
(e) Compliance with Law and Policies.
(i) Comply in all material respects with all
Requirements of Law, the provisions of the Transaction
Documents and all other material Contractual Obligations
applicable to the Company; and
(ii) Cause the Seller to perform its respective
obligations in accordance with and to comply in all material
respects with the Policies, as amended from time to time in
accordance with the Transaction Documents, in regard to the
Receivables and the Related Property.
(f) Purchase of Receivables. Purchase Receivables solely in
accordance with the Receivables Sale Agreement or this Agreement.
(g) Delivery of Collections. In the event that the Company
receives Collections directly from Obligors, deliver (which may be by
regular mail) or deposit such Collections into a Lockbox, a Lockbox
Account or the Collection Account within two Business Days after its
receipt thereof.
(h) Notices. Promptly (and, in any event, within five
Business Days after a Responsible Officer of the Company becomes aware of
such event) give written notice to the Trustee, each Rating Agency and
each Agent for any Outstanding Series of:
(i) the occurrence of any Early Amortization Event or
Potential Early Amortization Event; and
(ii) any Lien not permitted by subsection 2.08(c)
on Receivables accounting for 5% or more of the aggregate
Principal Amount of all Receivables in the Trust.
(i) Lockboxes. Maintain, and keep in full force and effect,
each Lockbox Agreement to which the Company is a party, except to the extent
otherwise permitted under the terms of this Agreement and the other
Transaction Documents and (ii) take all reasonable actions necessary to
ensure that each related Lockbox Account shall be free and clear of, and
defend each such Lockbox Account against, any writ,
<PAGE>
49
Pooling Agreement
order, stay, judgment, warrant of attachment or execution or similar
process; provided, however, that the Company may enter into any amendments
or modifications of a Lockbox Agreement that the Company reasonably deems
necessary to conform such Lockbox Agreement to the cash management system
of the Company or the Servicer and that are reasonably acceptable to the
Trustee and each Agent.
(j) Separate Corporate Existence.
(i) Maintain its own deposit account or accounts,
separate from those of any Affiliate, with commercial banking
institutions and ensure that the funds of the Company will not
be diverted to any other Person or for other than corporate
uses of the Company, nor will such funds be commingled with
the funds of the Seller or any Subsidiary or Affiliate of the
Seller;
(ii) To the extent that it shares the same officers
or other employees as any of its stockholders or Affiliates,
the salaries of and the expenses related to providing benefits
to such officers and other employees shall be fairly allocated
among such entities, and each such entity shall bear its fair
share of the salary and benefit costs associated with all such
common officers and employees;
(iii) To the extent that it jointly contracts with
any of its stockholders or Affiliates to do business with
vendors or service providers or to share overhead expenses,
the costs incurred in so doing shall be allocated fairly among
such entities, and each such entity shall bear its fair share
of such costs. To the extent that the Company contracts or
does business with vendors or service providers where the
goods and services provided are partially for the benefit of
any other Person, the costs incurred in so doing shall be
fairly allocated to or among such entities for whose benefit
the goods or services are provided, and each such entity shall
bear its fair share of such costs. All material transactions
between the Company and any of its Affiliates, whether
currently existing or hereafter entered into, shall be
<PAGE>
50
Pooling Agreement
only on an arm's length basis, it being understood and
agreed that the transactions contemplated in the Transaction
Documents meet the requirements of this clause (iii);
(iv) Maintain office space separate from the office
space of the Seller and its Affiliates. To the extent that the
Company and any of its stockholders or Affiliates have offices
in the same location, there shall be a fair and appropriate
allocation of overhead costs among them, and each such entity
shall bear its fair share of such expenses;
(v) Issue separate financial statements prepared not less
frequently than quarterly and prepared in accordance with
GAAP;
(vi) Conduct its affairs strictly in accordance with its
articles of incorporation and observe all necessary,
appropriate and customary corporate formalities, including,
but not limited to, holding all regular and special
stockholders' and directors' meetings appropriate to
authorize all corporate action, keeping separate and
accurate minutes of its meetings, passing all resolutions or
consents necessary to authorize actions taken or to be
taken, and maintaining accurate and separate books, records
and accounts, including, but not limited to, payroll and
intercompany transaction accounts;
(vii) Not assume or guarantee any of the liabilities
of the Seller, the Servicer or any Affiliate thereof; and
(viii) Take, or refrain from taking, as the case may be,
all other actions that are necessary to be taken or not to
be taken in order to (x) ensure that the assumptions and
factual recitations set forth in the Specified Bankruptcy
Opinion Provisions remain true and correct with respect to
the Company and (y) comply with those procedures described
in such provisions which are applicable to the Company.
(k) Preservation of Corporate Existence. (i) Preserve and
maintain its corporate existence, rights, franchises and privileges in the
jurisdiction
<PAGE>
51
Pooling Agreement
of its incorporation and (ii) qualify and remain qualified in good
standing as a foreign corporation in each jurisdiction where such
qualification is required other than any jurisdiction where the failure so
to qualify would not have a Material Adverse Effect with respect to the
Company.
(l) Assessments. Promptly pay and discharge all taxes,
assessments, levies and other governmental charges imposed on it except
such taxes, assessments, levies and other governmental charges that (i)
are being contested in good faith by appropriate proceedings and for which
the Company shall have set aside on its books adequate reserves and (ii)
the failure to pay, satisfy or discharge would not, in any event, result
in a Material Adverse Effect with respect to the Company.
(m) Net Worth. On the Initial Closing Date have a
consolidated common stockholders' equity, and thereafter maintain at all
times a net worth (as defined in accordance with GAAP), of at least
$10,000,000.
(n) Tax Status. The Company will at all times maintain its
status as a taxable United States "C" corporation.
(o) FASIT Election. The Company will make, or cause to be
made, a timely election to treat the Trust as a FASIT for U.S. federal
income tax purposes.
(p) FASIT Ownership Interest. The Company will at all times
be the sole beneficial owner of the FASIT Ownership Interest.
SECTION 2.08 Negative Covenants of the Company. The Company
hereby covenants that, until the Trust Termination Date occurs, it shall not
directly or indirectly:
(a) Accounting of Transfers. Prepare any consolidating
financial statements which shall account for the transactions contemplated
by the Receivables Sale Agreement in any manner other than as a sale of
Receivables by the Seller to the Company; provided, however, that this
subsection shall not apply for any tax or tax accounting purposes.
<PAGE>
52
Pooling Agreement
(b) Limitation on Indebtedness. Create, incur, assume or
suffer to exist any Indebtedness, except (i) Indebtedness evidenced by the
Seller Note; (ii) Indebtedness representing fees, expenses and indemnities
payable pursuant to and in accordance with the Transaction Documents; and
(iii) Indebtedness for services supplied or furnished to the Company in an
amount not to exceed $50,000 at any time outstanding.
(c) Limitation on Transfers of Receivables, etc. At any time
sell, transfer or otherwise dispose of any of the Receivables, Related
Property or the proceeds thereof pursuant to
(i) any Lien Creation except for Permitted Liens set
forth in clause (i) of the definition thereof; or
(ii) any Investment except in respect of or in connection
with (A) the purchase of Receivables and Related Property
from the Seller or its Subsidiaries or (B) an advance or
loan made to the Seller.
(d) Limitation on Guarantee Obligations. Become or remain
liable, directly or contingently, in connection with any Indebtedness or
other liability of any other Person, whether by guarantee, endorsement
(other than endorsements of negotiable instruments for deposit or collection
in the ordinary course of business), agreement to purchase or repurchase,
agreement to supply or advance funds, or otherwise other than in connection
with indemnification obligations of the Company to the limited extent
provided in the Company's certificate of incorporation and by-laws (provided
that any such indemnification obligations shall constitute Company
Subordinated Obligations) and/or under or in connection with any Pooling and
Servicing Agreement.
(e) Limitation on Fundamental Changes. Enter into any
merger, consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution), or make any material
change in its present method of conducting business, or convey, sell, lease,
assign, transfer or otherwise dispose of, all or substantially all of its
property, business or assets other than the assignments and transfers
contemplated hereby.
<PAGE>
53
Pooling Agreement
(f) Business of the Company. Engage at any time in any
business or business activity other than the acquisition of Receivables
pursuant to the Receivables Sale Agreement, the assignments and transfers
hereunder, the other transactions contemplated by the Transaction
Documents or any Pooling and Servicing Agreement, and any activity
incidental to the foregoing and necessary or convenient to accomplish the
foregoing, or enter into or be a party to any agreement or instrument
other than in connection with the foregoing, except those agreements or
instruments permitted under Section 2.08(g).
(g) Agreements. (i) Become a party to any indenture,
mortgage, instrument, contract, agreement, lease or other undertaking,
except the Transaction Documents, leases of office space, equipment or
other facilities for use by the Company in its ordinary course of
business, employment agreements, service agreements, agreements relating
to shared employees and the other Transaction Documents or any Pooling and
Servicing Agreement and agreements necessary to perform its obligations
under the Transaction Documents or any Pooling and Servicing Agreement,
(ii) issue any power of attorney (except to the Trustee or the Servicer or
except for the purpose of permitting any Person to perform any ministerial
functions on behalf of the Company that are not prohibited by or
inconsistent with the terms of the Transaction Documents or any Pooling
and Servicing Agreement), or (iii) amend, supplement, modify or waive any
of the provisions of the Receivables Sale Agreement or any Lockbox
Agreement or request, consent or agree to or suffer to exist or permit any
such amendment, supplement, modification or waiver or exercise any consent
rights granted to it thereunder or under the Receivables Sale Agreement
with respect to the GM Agreements unless such amendment, supplement,
modification or waiver or such exercise of consent rights would not have
an adverse effect on the interests, rights or remedies of the Trustee or
the Investor Certificateholders of any Outstanding Series under or with
respect to the Transaction Documents.
(h) Policies. Make any change or modification (or permit any
change or modification to be made) to the Policies that is materially
adverse to the interests of the Company or its assigns (including the
Trustee and the Investor Certificateholders), except (i) if such changes
or modifications are necessary under any Requirement of Law, (ii) if such
changes or
<PAGE>
54
Pooling Agreement
modifications would not reasonably be likely to have a Material Adverse
Effect with respect to the Company or (iii) if the Rating Agency Condition
is satisfied with respect thereto; provided, however, that if any change
or modification, other than a change or modification permitted pursuant to
clause (i) or (ii) above, would be reasonably likely to have a Material
Adverse Effect on the interests of the Investor Certificateholders of a
Series which is not rated by a Rating Agency, the consent of the
applicable Agent (or if none, as specified in the related Supplement)
shall be required to effect such change or modification.
(i) Receivables Not To Be Evidenced by Promissory Notes.
Subject to the delivery requirement set forth in subsection 2.01(b), take
any action to cause any Receivable not evidenced by an "instrument" (as
defined in the UCC as in effect in any state in which the Company's, or the
Seller's chief executive offices or books and records relating to such
Receivable are located) upon origination to become evidenced by an
instrument, except in connection with its enforcement or collection of a
Defaulted Receivable.
(j) Offices. Move the location of its chief executive office
or of any of the offices where it keeps its records with respect to the
Receivables, or its legal head office to a new location within or outside
the state where such office is now located, without (i) 30 days' prior
written notice to the Trustee and each Rating Agency and (ii) taking all
actions reasonably requested by the Trustee (including but not limited to
all filings and other acts necessary or advisable under the UCC or similar
statute of each relevant jurisdiction) in order to continue the Trust's
first priority perfected ownership or security interest in all Receivables
now owned or hereafter created; provided, however, that the Company shall
not change the location of its chief executive office to a state which is
within the Tenth Circuit unless it delivers an opinion of counsel reasonably
acceptable to the Rating Agencies to the effect that Octagon Gas Systems,
Corp. v. Rimmer, 995 F.2d 948 (10th Cir. 1993) is no longer controlling
precedent in the Tenth Circuit.
(k) Change in Name. Change its name, identity or corporate
structure in any manner that would or is likely (i) to make any financing
statement or continuation statement (or other similar instrument)
<PAGE>
55
Pooling Agreement
relating to this Agreement seriously misleading within the meaning of
Section 9-402(7) of the UCC, or (ii) to impair the perfection of the
Trust's interest in any Receivable under any other similar law, without 30
days' prior written notice to the Trustee and each Rating Agency.
(l) Charter. Amend or make any change or modification to its
certificate of incorporation without first satisfying the Rating Agency
Condition (other than an amendment, change or modification made pursuant to
changes in law of the state of its incorporation or amendments to change the
Company's name (subject to compliance with clause (k) above), registered
agent or address of registered office).
(m) Limitation on Restricted Payments and Payments on Seller
Note. Declare or pay any dividend on, or make any payment on account of, or
set apart assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of, any shares of
any class of capital stock of the Company, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either
directly or indirectly, whether in cash or property or in obligations of the
Company (such declarations, payments, setting apart, purchases, redemptions,
defeasance, retirements, acquisitions and distributions being herein called
"Restricted Payments"), or make, directly or indirectly, payments in any
form in respect of the Seller Note except, in either case, out of funds
available to the Company in accordance with the terms of any Pooling and
Servicing Agreement and only so long as (i) at the date that any such
Restricted Payment or payment in respect of the Seller Note is made, the
Company shall have made all payments in respect of its repurchase
obligations pursuant to this Agreement outstanding at such date and (ii) any
such Restricted Payment is effected in accordance with all corporate and
legal formalities applicable to the Company.
(n) FASIT Restrictions. The Company will not become, and
will not transfer the FASIT Ownership Interest (or any interest therein)
to any Person who is, (i) a tax exempt organization, (ii) a "regulated
investment company" (within the meaning of Section 851(a) of the Internal
Revenue Code), (iii) a "real estate investment trust" (within the meaning
of Section 856(a) of the Internal Revenue Code), (iv) a "real estate
<PAGE>
56
Pooling Agreement
mortgage investment conduit" (within the meaning of Section 860(a) of the
Internal Revenue Code) or (v) a "cooperative" that is subject to tax under
Part I of Subchapter T of the Internal Revenue Code. If the Company sells
or transfers the FASIT Ownership Interest (or any interest therein), it
shall deliver to the Trustee an Officer's Certificate stating that such
sale or transfer is in compliance with this Section 2.08(n).
(o) Transfer of the FASIT Ownership Interest. The Company
will not subdivide or grant any participation or other similar interest in
the FASIT Ownership Interest.
(p) Permitted Assets. The Company will not cause the Trust
to acquire any assets other than Permitted Assets.
ARTICLE III
Rights of Holders and
Allocation and Application of Collections
THE FOLLOWING PORTION OF THIS ARTICLE III
IS APPLICABLE TO ALL SERIES.
SECTION 3.01 Establishment of Collection Account; Certain
Allocations. The Trustee, for the benefit of the Holders, as their interests
appear in this Agreement, shall cause to be established and maintained in the
name of the Trust with an Eligible Institution or with the corporate trust
department of the Trustee or an Eligible Institution or an affiliate of the
Trustee or an Eligible Institution, a segregated trust account (the
"Collection Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Holders. Schedule 2, which
is hereby incorporated into and made a part of this Agreement, identifies the
Collection Account by setting forth the account number of such account, the
account designation of such account and the name of the institution with which
such account has been established. The Collection Account shall be divided
into individual subaccounts for each Outstanding Series (each, respectively, a
"Series Collection Subaccount" and, collectively, the "Series Collection
Subaccounts") and for the Company (the "Company Collection Subaccount"). For
administrative purposes only, the Trustee shall establish or cause to be
established for each Series, so long as such Series is an
<PAGE>
57
Pooling Agreement
Outstanding Series, sub-subaccounts of the Series Collection Subaccounts with
respect to such Series (respectively, the "Series Principal Collection
Sub-subaccount" and "Series Non-Principal Collection Sub-subaccount" and,
collectively, the "Series Collection Sub-subaccounts").
(b) Authority of the Trustee in Respect of the Collection
Account. (i) The Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Collection Account and in all
proceeds thereof. The Collection Account shall be under the sole dominion and
control of the Trustee for the benefit of the Holders. If, at any time, the
Servicer has actual notice or knowledge that any institution holding the
Collection Account has ceased to be an Eligible Institution, the Servicer
shall direct the Trustee to establish within 30 days a substitute account
therefor with an Eligible Institution, transfer any cash and/or any Eligible
Investments to such new account and from the date any such substitute accounts
are established, such account shall be the Collection Account. Neither the
Company, the Servicer, nor any person or entity claiming by, through or under
the Company, or the Servicer, shall have any right, title or interest in,
except to the extent expressly provided under the Transaction Documents, or
any right to withdraw any amount from, the Collection Account. Pursuant to the
authority granted to the Servicer in subsection 2.02(a) of the Servicing
Agreement, the Servicer shall have the power to instruct the Trustee in
writing to make withdrawals from and payments to the Collection Account for
the purposes of carrying out the Servicer's or Trustee's duties hereunder.
(ii) The Servicer agrees to give written direction (which
may be included within any Daily Report) in a timely manner to the Trustee to
apply all Collections with respect to the Receivables and to make all other
applications, allocations and distributions described in Article III and in
the Supplement with respect to each Outstanding Series.
(iii) Each Series of Investor Certificates shall represent
Fractional Undivided Interests as indicated in the Supplement relating to such
Series and the right to receive Collections and other amounts at the times and
in the amounts specified in this Article III (as supplemented by the
Supplement related to such Series) to be deposited in the Collection Account
and any other
<PAGE>
58
Pooling Agreement
accounts maintained for the benefit of the Investor Certificateholders or paid
to the Investor Certificateholders (with respect to each outstanding Series,
the "Investor Certificateholders' Interest"). The Exchangeable Company
Interest shall represent the interest in the Trust not represented by any
Series of Investor Certificates or Subordinated Company Interest then
outstanding, including the right to receive Collections and other amounts at
the times and in the amounts specified in this Article III to be paid to the
Company (the "Exchangeable Company Interest"), and each Subordinated Company
Interest, if any, shall represent the interests granted to such Subordinated
Company Interest pursuant to the related Supplement; provided, however, that
no such Exchangeable Company Interest or Subordinated Company Interest shall
represent any interest in any Trust Account or any other accounts maintained
for the benefit of the Investor Certificateholders, except as specifically
provided in this Article III.
(c) Administration of the Collection Account. At the written
direction of the Servicer, funds on deposit in the Collection Account
available for investment, shall be invested by the Trustee in Eligible
Investments selected by the Company. All such Eligible Investments shall be
held by the Trustee for the benefit of the Investor Certificateholders.
Amounts on deposit in each Series Non-Principal Collection Sub-subaccount
shall, if applicable, be invested in Eligible Investments that will mature, or
that are payable or redeemable upon demand of the holder thereof, so that such
funds will be available on or before the Business Day immediately preceding
the next Distribution Date. None of such Eligible Investments shall be
disposed of prior to the maturity date with respect thereto unless such
disposition is reasonably determined by the Servicer to be necessary to
prevent a loss. All interest and investment earnings (net of losses and
investment expenses) on funds deposited in a Series Non-Principal Collection
Sub-subaccount shall be deposited in such sub-subaccount. Amounts on deposit
in the Series Principal Collection Sub-subaccount and any other
sub-subaccounts as specified in the related Supplement shall be invested in
Eligible Investments that mature, or that are payable or redeemable upon
demand of the holder thereof, so that such funds will be available not later
than the date which is specified in any Supplement. The Trustee, or its
nominee or custodian, shall maintain possession of the negotiable instruments
or securities,
<PAGE>
59
Pooling Agreement
if any, evidencing any Eligible Investments from the time of purchase thereof
until the time of sale or maturity. Any earnings (net of losses and investment
expenses) (the "Investment Earnings") on such invested funds in a Series
Principal Collection Sub-subaccount and any other sub-subaccounts as specified
in the related Supplement will be deposited by the Trustee in the related
Series Non-Principal Collection Sub-subaccount. In the absence of any written
direction from the Company, all Eligible Investments shall be in cash.
(d) Daily Collections. (i) Promptly following its receipt of
Collections in the form of available funds in the Lockbox Account, but in no
event later than the Business Day following such receipt (such later Business
Day, the "Deposit Date"), the Servicer shall transfer, or cause to be
transferred, all Collections on deposit (less the aggregate amount of set-offs
permitted to be retained pursuant to any applicable Lockbox Agreement) in the
form of available funds in the Lockbox Accounts directly to the Collection
Account.
(ii) On the date of receipt of Aggregate Daily Collections,
provided that such Aggregate Daily Collections are received prior to 1:00 p.m.
on a Business Day, and if not, no later than the Business Day following each
Deposit Date, the Trustee shall (in accordance with the written directions
received pursuant to subsection (b)(ii) above) transfer from Aggregate Daily
Collections deposited into the Collection Account pursuant to subsection
(d)(i) above, to the respective Series Collection Subaccount, an amount equal
to the product of (x) the applicable Invested Percentage for such Outstanding
Series and (y) such Aggregate Daily Collections in accordance with the Daily
Report.
(iii) On the date of receipt of Aggregate Daily Collections,
provided that such Aggregate Daily Collections are received prior to 1:00 p.m.
on a Business Day, and if not, no later than the Business Day following each
Deposit Date, the Trustee shall (in accordance with the written directions
received pursuant to subsection (b)(ii) above) allocate funds transferred to
the Series Collection Subaccount for each Outstanding Series pursuant to
subsection (d)(ii) above to the Series Non-Principal Collection Sub-subaccount
and the Series Principal Collection Sub-subaccount of each such Series in
accordance with the Daily Report and the related Supplement for such Series.
<PAGE>
60
Pooling Agreement
(iv) On the date of receipt of Aggregate Daily Collections,
provided that such Aggregate Daily Collections are received prior to 1:00 p.m.
on a Business Day, and if not, no later than the Business Day following each
Deposit Date, except as otherwise provided in a Supplement, the Trustee shall
(in accordance with the written directions received pursuant to subsection
(b)(ii) above) transfer to the Company Collection Subaccount the remaining
funds, if any, on deposit in the Collection Account on such date after giving
effect to transfers to be made pursuant to subsection (d)(ii) above.
(v) In the event that Collections relating to Receivables
with respect to which the Trustee has not received notice that such
Receivables have been sold to the Company are deposited in a Lockbox Account,
the Trustee shall promptly (in accordance with the written directions received
pursuant to subsection (b)(ii) above), and not subject to any conditions,
transfer such Collections to the Seller and such Collections shall not
constitute Aggregate Daily Collections.
(e) Certain Allocations Following an Amortization Period. (i)
If, on any Settlement Report Date, an Amortization Period has occurred and is
continuing with respect to any Outstanding Series and at such Settlement
Report Date, a Revolving Period is still in effect with respect to any other
Outstanding Series (a "Special Allocation Settlement Report Date"), then the
Servicer shall make the following calculations:
(A) the amount (the "Allocable Charged-Off Amount") equal to
the excess, if any, of (I) the aggregate Principal Amount of Charged-Off
Receivables for the related Settlement Period over (II) the aggregate
Principal Amount of Recoveries received during the related Settlement
Period;
(B) the amount (the "Allocable Recoveries Amount") equal to
the excess, if any, of (I) the aggregate Principal Amount of Recoveries
received during the related Settlement Period over (II) the aggregate
Principal Amount of Charged-Off Receivables for the related Settlement
Period; and
(ii) If, on any Special Allocation Settlement Report Date,
either of the Allocable Charged-off Amount or the Allocable Recoveries Amount is
greater than zero for the related Settlement Period, the Trustee shall (in
<PAGE>
61
Pooling Agreement
accordance with written directions received pursuant to subsection (b)(ii)
above) make (A) a pro rata allocation to each Outstanding Series (based on the
Invested Percentage for such Series) of a portion (as determined in clause (iii)
below) of each such positive amount and (B) an allocation to the Exchangeable
Company Interest of the remaining portion of each such positive amount.
(iii) With respect to each portion of the Allocable
Charged-Off Amount and the Allocable Recoveries Amount which is allocated to an
Outstanding Series pursuant to subsection 3.01(e)(ii), the Trustee shall (in
accordance with the written direction of the Servicer) apply each such amount to
such Series in accordance with the related Supplement for such Series.
(f) Allocations for the Exchangeable Company Interest. Until
the occurrence and continuation of an Early Amortization Period, on each
Business Day and, after the occurrence and continuation of an Early Amortization
Period and until the Trust Termination Date, on each Distribution Date, after
making all allocations required pursuant to subsection 3.01(d), the Trustee
shall (in accordance with the written direction of the Servicer) transfer, using
its reasonable efforts to transfer within two hours of receipt of the Aggregate
Daily Collections and the Daily Report and, if the Aggregate Daily Collections
and the Daily Report are received by the Trustee no later than the close of
business, New York City time, making such transfer no later than the close of
business, New York City time, on such Business Day, the amounts on deposit in
the Company Collection Subaccount to the holder of the Exchangeable Company
Interest or to such accounts or such Persons as the holder of the Exchangeable
Company Interest may direct in writing (which direction may consist of standing
instructions provided by the holder of the Exchangeable Company Interest that
shall remain in effect until changed by the holder of the Exchangeable Company
Interest in writing); provided, however, that a transfer for purposes of this
subsection 3.01(f) shall be deemed to have occurred at such time as the Trustee
instructs the Federal Reserve Bank of New York of the outgoing amount; provided
further that a failure of the Trustee to transfer funds by the close of
business, New York City time, shall not be a breach of this subsection 3.01(f)
if a Trustee Force Majeure Delay occurs; in such event the Trustee shall use its
reasonable efforts to transfer funds within a reasonable time.
<PAGE>
62
Pooling Agreement
(g) Setoff. In addition to the provisions of Section 8.05,
(i) if the Company shall fail to make a payment as provided in this Agreement or
any Supplement, the Servicer or the Trustee may set off and apply any amounts
otherwise payable to the Company under any Pooling and Servicing Agreement. The
Company hereby waives demand, notice or declaration of such setoff and
application; provided that notice will promptly be given to the Company of such
setoff and application; provided further that failure to give such notice shall
not affect the validity of such setoff; and (ii) in the event the Servicer shall
fail to make a payment as provided in any Pooling and Servicing Agreement, the
Trustee may set off and apply any amounts otherwise payable to the Servicer in
its capacity as Servicer under the Transaction Documents on account of such
obligation. The Servicer hereby waives demand, notice or declaration of such
setoff and application; provided that notice will promptly be given to the
Servicer of such setoff; provided further that failure to give such notice shall
not affect the validity of such setoff.
(h) Allocation and Application of Funds. The Servicer shall
direct the Trustee in writing (which may be given in the form of the Daily
Reports and the Monthly Settlement Statements) to apply all Collections with
respect to the Receivables as described in this Article III and in the
Supplement with respect to each Outstanding Series. The Servicer shall direct
the Trustee in writing to pay Collections to the holder of the Exchangeable
Company Interest to the extent such Collections are allocated to the
Exchangeable Company Interest under subsection 3.01(f) and as otherwise provided
in Article III. Unless otherwise provided in one or more Supplement, if the
Trustee receives any Daily Report at or before 1:00 p.m., New York City time, on
any Business Day, the Trustee shall make any applications of funds required
thereby on the same Business Day and otherwise on the next succeeding Business
Day.
THE REMAINDER OF ARTICLE III SHALL BE SPECIFIED
IN THE SUPPLEMENT WITH RESPECT TO EACH SERIES.
SUCH REMAINDER SHALL BE APPLICABLE ONLY TO THE
SERIES RELATING TO THE SUPPLEMENT IN WHICH
SUCH REMAINDER APPEARS.
<PAGE>
63
Pooling Agreement
ARTICLE IV
ARTICLE IV IS RESERVED
AND MAY BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO THE SERIES RELATING THERETO.
ARTICLE V
The Investor Certificates and
Exchangeable Company Interest
SECTION 5.01 The Investor Certificates. The Investor
Certificates of each Series and any Class thereof shall be in fully registered
form and shall be substantially in the form of the exhibits with respect
thereto attached to the applicable Supplement; provided that to the extent
provided in the applicable Supplement, the Investor Certificates of any Series
may be uncertificated and all references to the Investor Certificates and
Investor Certificateholders shall, unless otherwise provided herein, include
such uncertificated Investor Certificates and the holders thereof,
respectively. The Investor Certificates (other than uncertificated Investor
Certificates) shall, upon issue, be executed and delivered by the Company to
the Trustee for authentication and redelivery as provided in Section 5.02.
Except as otherwise set forth as to any Series or Class in the related
Supplement, the Investor Certificates shall be issued in minimum denominations
of $1,000,000 and in integral multiples of $100,000 in excess thereof. Unless
otherwise specified in any Supplement for any Series, the Investor
Certificates shall be issued upon initial issuance as a single global
certificate in an original principal amount equal to the Initial Invested
Amount with respect to such Series. The Company is hereby authorized to
execute and deliver each Investor Certificate and any documents related
thereto on behalf of the Trust. Each Investor Certificate, other than
uncertificated Investor Certificates, shall be executed by manual or facsimile
signature on behalf of the Company by a Responsible Officer. Investor
Certificates bearing the manual or facsimile signature of the individual who
was, at the time when such signature was affixed, authorized to sign on behalf
of the Company or the Trustee shall not be rendered invalid, notwithstanding
that such individual has ceased to be so authorized prior to or on the date of
the authentication and delivery of such Investor Certificates or does not hold
such office at the date of such Investor
<PAGE>
64
Pooling Agreement
Certificates. No Investor Certificate (other than an uncertificated Investor
Certificate) shall be entitled to any benefit under this Agreement, or be
valid for any purpose, unless there appears on such Investor Certificate a
certificate of authentication substantially in the form provided for herein
executed by or on behalf of the Trustee by the manual signature of a duly
authorized signatory, and such certificate of authentication upon any Investor
Certificate shall be conclusive evidence, and the only evidence, that such
Investor Certificate has been duly authenticated and delivered hereunder. All
Investor Certificates shall be dated the date of their authentication but
failure to do so shall not render them invalid.
SECTION 5.02 Authentication of Investor Certificates. The
Trustee shall authenticate and deliver the initial Series of Investor
Certificates that is issued upon the written order of the Company in a form
reasonably satisfactory to the Trustee, to the holders of the initial Series
of Investor Certificates, against payment to the Company of the Initial
Invested Amount. The Investor Certificates (other than uncertificated Investor
Certificates) shall be duly authenticated by or on behalf of the Trustee in
authorized denominations equal to (in the aggregate) the Initial Invested
Amount. Upon a Company Exchange as provided in Section 5.10 and the
satisfaction of certain other conditions specified therein, the Trustee shall
authenticate and deliver the Investor Certificates(other than uncertificated
Investor Certificates)of additional Series (with the designation provided in
the applicable Supplement) (or, if provided in any Supplement, the additional
Investor Certificates of an existing Series), upon the written order of the
Company, to the Persons designated in such Supplement. Upon the written order
of the Company, the Investor Certificates(other than uncertificated Investor
Certificates)of any Series shall be duly authenticated by or on behalf of the
Trustee, in authorized denominations equal to (in the aggregate) the Initial
Invested Amount of such Series of Investor Certificates.
With respect to the uncertificated Investor Certificates,
execution, authentication and delivery shall be deemed to occur by notation in
the Certificate Register(as defined in Section 5.03 below) or in a register
maintained by the Trustee in accordance with the applicable Supplement, pursuant
to a written order of the Company. Notwithstanding the foregoing, the Trustee
has no obligation, liability or responsibility for the
<PAGE>
65
Pooling Agreement
sufficiency or adequacy of such execution, authentication or delivery of any
uncertificated Investor Certificates.
SECTION 5.03 Registration of Transfer and Exchange of Investor
Certificates. (a) The Trustee shall cause to be kept at the office or agency
to be maintained by a transfer agent and registrar (which may be the Trustee)
(the "Transfer Agent and Registrar") in accordance with the provisions of
Section 8.16 a register (the "Certificate Register") in which, subject to such
reasonable regulations as the Trustee may prescribe, the Transfer Agent and
Registrar shall provide for the registration of the Investor
Certificates(including, without limitation, any uncertificated Investor
Certificates) and of transfers and exchanges of the Investor Certificates as
herein provided. The Company hereby appoints The Chase Manhattan Bank as
Transfer Agent and Registrar for the purpose of registering the Investor
Certificates and transfers and exchanges of the Investor Certificates as
herein provided. The Chase Manhattan Bank shall be permitted to resign as
Transfer Agent and Registrar upon 30 days' prior written notice to the Company
and the Servicer; provided, however, that such resignation shall not be
effective and The Chase Manhattan Bank shall continue to perform its duties as
Transfer Agent and Registrar until the Trustee has appointed a successor
Transfer Agent and Registrar reasonably acceptable to the Company and such
successor Transfer Agent and Registrar has accepted such appointment. The
provisions of Sections 8.01, 8.02, 8.03, 8.05 and 10.19 shall apply to The
Chase Manhattan Bank (or the Trustee to the extent it is so acting) also in
its role as Transfer Agent or Registrar, as the case may be, for so long as
The Chase Manhattan Bank (or the Trustee to the extent it is so acting) shall
act as Transfer Agent or Registrar, as the case may be.
The Company hereby agrees to provide the Trustee from time to
time sufficient funds, on a timely basis and in accordance with and subject to
Section 8.05, for the payment of any reasonable compensation payable to the
Transfer Agent and Registrar for its services under this Section 5.03 and under
Section 5.10. The Trustee hereby agrees that, upon the receipt of such funds
from the Company, it shall pay the Transfer Agent and Registrar such amounts.
Upon surrender for registration of transfer of any Investor
Certificate at any office or agency of the Transfer Agent and Registrar
maintained for such purpose,
<PAGE>
66
Pooling Agreement
the Company shall execute, and the Trustee shall, upon the written order of
the Company, authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Investor Certificates in authorized
denominations of the same Series representing like aggregate Fractional
Undivided Interests and which bear numbers that are not contemporaneously
outstanding.
At the option of an Investor Certificateholder, Investor
Certificates may be exchanged for other Investor Certificates of the same Series
in authorized denominations of like aggregate Fractional Undivided Interests,
bearing numbers that are not contemporaneously outstanding, upon surrender of
the Investor Certificates to be exchanged at any such office or agency of the
Transfer Agent and Registrar maintained for such purpose. The term "surrender"
as used herein with respect to any uncertificated Investor Certificate shall
mean a written notification delivered to the Trustee by the related
Certificateholder instructing the Trustee that such Certificateholder is
surrendering such uncertificated Investor Certificate.
Whenever any Investor Certificates of any Series are so
surrendered for exchange, the Company shall execute, and the Trustee shall, upon
the written order of the Company, authenticate and (unless the Transfer Agent
and Registrar is different from the Trustee, in which case the Transfer Agent
and Registrar shall) deliver, the Investor Certificates of such Series which the
Investor Certificateholder making the exchange is entitled to receive. Every
Investor Certificate (including any uncertificated Investor Certificate)
presented or surrendered for registration of transfer or exchange shall be
accompanied by a written instrument of transfer, with sufficient instructions,
duly executed by the Investor Certificateholder thereof or his attorney-in-fact
duly authorized in writing delivered to the Trustee (unless the Transfer Agent
and Registrar is different from the Trustee, in which case to the Transfer Agent
and Registrar) and complying with any requirements set forth in the applicable
Supplement.
No service charge shall be made for any registration of
transfer or exchange of Investor Certificates, but the Transfer Agent and
Registrar may require any Investor Certificateholder that is transferring or
exchanging one or more Investor Certificates to pay a sum sufficient to cover
any tax or
<PAGE>
67
Pooling Agreement
governmental charge that may be imposed in connection with any transfer or
exchange of Investor Certificates.
All Investor Certificates surrendered for registration of
transfer and exchange shall be canceled and disposed of in a customary manner
satisfactory to the Trustee. Any uncertificated Investor Certificates shall be
deemed canceled and disposed of by notation in the Certificate Register.
The Company shall execute and deliver Investor Certificates to
the Trustee or the Transfer Agent and Registrar in such amounts and at such
times as are necessary to enable the Trustee and the Transfer Agent and
Registrar to fulfill their respective responsibilities under this Agreement and
the Investor Certificates.
Notwithstanding the foregoing, transfers of uncertificated
Investor Certificates shall be evidenced only by recordation in the Certificate
Register and in accordance with the related Supplement (including, without
limitation, in any register required to be maintained under such Supplement).
(b) The Transfer Agent and Registrar will maintain at its
expense in the Borough of Manhattan, The City of New York and, subject to
subsection 5.03(a), if specified in the related Supplement for any Series, any
other city designated in such Supplement, an office or offices or agency or
agencies where Investor Certificates may be surrendered for registration or
transfer or exchange.
(c) Unless otherwise stated in any related Supplement,
registration of transfer of Investor Certificates containing a legend relating
to restrictions on transfer of such Investor Certificates (which legend shall be
set forth in the Supplement relating to such Investor Certificates (and any such
Investor Certificates which are uncertificated shall be deemed to contain such
legend)) shall be effected only if the conditions set forth in the related
Supplement are complied with.
Investor Certificates issued upon registration or transfer of,
or in exchange for, Investor Certificates bearing the legend referred to above
shall also bear such legend (and any such Investor Certificates which are
uncertificated shall be deemed to bear such legend)) unless the Company, the
Servicer, the Trustee and the
<PAGE>
68
Pooling Agreement
Transfer Agent and Registrar receive an Opinion of Counsel satisfactory to
each of them, to the effect that such legend may be removed.
SECTION 5.04 Mutilated, Destroyed, Lost or Stolen Investor
Certificates. If (a) any mutilated Investor Certificate is surrendered to the
Transfer Agent and Registrar, or the Transfer Agent and Registrar receives
evidence to its satisfaction of the destruction, loss or theft of any Investor
Certificate and (b) there is delivered to the Transfer Agent and Registrar,
the Trustee and the Company such security or indemnity as may be required by
them to save the Trust and each of them harmless, then, in the absence of
actual notice to the Trustee or Transfer Agent and Registrar that such
Investor Certificate has been acquired by a bona fide purchaser, the Company
shall execute and, upon the written request of the Company, the Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Investor Certificate, a new Investor Certificate of
like tenor and aggregate Fractional Undivided Interest and bearing a number
that is not contemporaneously outstanding. In connection with the issuance of
any new Investor Certificate under this Section 5.04, the Trustee or the
Transfer Agent and Registrar may require the payment by the Investor
Certificateholder of a sum sufficient to cover any tax or other governmental
expenses (including the fees and expenses of the Trustee and Transfer Agent
and Registrar) connected therewith. Any duplicate Investor Certificate issued
pursuant to this Section 5.04 shall constitute complete and indefeasible
evidence of ownership in the Trust, as if originally issued, whether or not
the lost, stolen or destroyed Investor Certificate shall be found at any time.
SECTION 5.05 Persons Deemed Owners. At all times prior to due
presentation of an Investor Certificate for registration of transfer, the
Company, the Trustee, the Paying Agent, the Transfer Agent and Registrar, any
Agent and any agent of any of them may treat the Person in whose name any
Investor Certificate is registered as the owner of such Investor Certificate
for the purpose of receiving distributions pursuant to Article IV of the
related Supplement and for all other purposes whatsoever, and neither the
Trustee, the Paying Agent, the Transfer Agent and Registrar nor any agent of
any of them shall be affected by any notice to the contrary, provided that in
the case of an uncertificated certificate the Person listed as the holder of
such
<PAGE>
69
Pooling Agreement
Investor Certificate in the Certificate Register shall be treated as the
registered owner of such Investor Certificate. Notwithstanding the foregoing
provisions of this Section 5.05, in determining whether the Investor
Certificateholders of the requisite Fractional Undivided Interests have given
any request, demand, authorization, direction, notice, consent or waiver
hereunder, Investor Certificates owned by the Company, the Servicer or any
Affiliate thereof, shall be disregarded and deemed not to be outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Investor Certificates which a Responsible Officer of the Trustee
actually knows to be so owned shall be so disregarded. Investor Certificates
so owned by the Company, the Servicer or any Affiliate thereof which have been
pledged in good faith shall not be disregarded and may be regarded as
outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Investor Certificates and that
the pledgee is not the Company, the Servicer or any Affiliate thereof.
SECTION 5.06 Appointment of Paying Agent. The Paying Agent
shall make distributions to Investor Certificateholders from the Collection
Account (and/or any other account or accounts maintained for the benefit of
Investor Certificateholders as specified in the related Supplement for any
Series) pursuant to Articles III and IV. The Trustee may revoke such power and
remove the Paying Agent if the Trustee determines in its sole discretion that
the Paying Agent shall have failed to perform its obligations under this
Agreement in any material respect. Unless otherwise specified in the related
Supplement for any Series and with respect to such Series, the Paying Agent
shall initially be The Chase Manhattan Bank and any co-paying agent chosen by
The Chase Manhattan Bank. Each Paying Agent shall have a combined capital and
surplus of at least $50,000,000. The Paying Agent shall be permitted to resign
upon 30 days' prior written notice to the Trustee. In the event that the Paying
Agent shall so resign, the Trustee shall appoint a successor to act as Paying
Agent (which shall be a depositary institution or trust company) reasonably
acceptable to the Company which appointment shall be effective on the date on
which the Person so appointed gives the Trustee written notice that it accepts
the appointment. Any resignation or removal of the Paying Agent and appointment
of successor Paying Agent pursuant to this Section 5.06 shall not become
effective until
<PAGE>
70
Pooling Agreement
acceptance of appointment by the successor Paying Agent, as provided in this
Section 5.06. The Trustee shall cause such successor Paying Agent or any
additional Paying Agent appointed by the Trustee to execute and deliver to the
Trustee an instrument in which such successor Paying Agent or additional
Paying Agent shall agree with the Trustee that as Paying Agent, such successor
Paying Agent or additional Paying Agent will hold all sums, if any, held by it
for payment to the Investor Certificateholders in trust for the benefit of the
Investor Certificateholders entitled thereto and waive all rights of setoff
the Paying Agent may have against any sum held by it hereunder until such sums
shall be paid to such Investor Certificateholders. The Paying Agent shall
return all unclaimed funds to the Trustee and upon removal of a Paying Agent
such Paying Agent shall also return all funds in its possession to the
Trustee. The provisions of Sections 8.01, 8.02, 8.03, 8.05 and 10.19 shall
apply to The Chase Manhattan Bank (or the Trustee to the extent it is so
acting) also in its role as Paying Agent, for so long as The Chase Manhattan
Bank (or the Trustee to the extent it is so acting) shall act as Paying Agent.
Any reference in this Agreement to the Paying Agent shall include any
co-paying agent unless the context requires otherwise.
The Company hereby agrees to provide the Trustee from time to
time sufficient funds, on a timely basis and in accordance with and subject to
Section 8.05, for the payment of any reasonable compensation payable to the
Paying Agent for its services under this Section 5.06. The Trustee hereby agrees
that, upon the receipt of such funds from the Company, it shall pay the Paying
Agent such amounts.
SECTION 5.07 Access to List of Investor Certificateholders'
Names and Addresses. The Trustee will furnish or cause to be furnished by the
Transfer Agent and Registrar to the Company, the Servicer or the Paying Agent,
within 10 Business Days after receipt by the Trustee of a request therefor
from the Company, the Servicer or the Paying Agent, respectively, in writing,
a list of the names and addresses of the Investor Certificateholders as then
recorded by or on behalf of the Trustee. The reasonable costs and expenses
incurred in connection with the provision of such list shall constitute
Program Costs under the Supplement for the applicable Series. If three or more
Investor Certificateholders of record or any Investor Certificateholder of any
Series or a group of Investor
<PAGE>
71
Pooling Agreement
Certificateholders of record representing Fractional Undivided Interests
aggregating not less than 10% of the Invested Amount of the related
Outstanding Series (the "Applicants") apply in writing to the Trustee, and
such application states that the Applicants desire to communicate with other
Investor Certificateholders of any Series with respect to their rights under
this Agreement or under the Investor Certificates and is accompanied by a copy
of the communication which such Applicants propose to transmit, then the
Trustee, after having been adequately indemnified by such Applicants for its
costs and expenses, shall transmit or shall cause the Transfer Agent and
Registrar to transmit, such communication to the Investor Certificateholders
reasonably promptly after the receipt of such application.
Every Investor Certificateholder, by receiving and holding an
Investor Certificate or acquiring an uncertificated Investor Certificate, agrees
with the Trustee that neither the Trustee, the Transfer Agent and Registrar, nor
any of their respective agents, officers, directors or employees shall be held
accountable by reason of the disclosure or mailing of any such information as to
the names and addresses of the Investor Certificateholders hereunder, regardless
of the sources from which such information was derived.
As soon as practicable following each Record Date, the Trustee
shall provide to the Paying Agent or its designee, a list of Investor
Certificateholders in such form as the Paying Agent may reasonably request.
SECTION 5.08 Authenticating Agent. The Trustee may appoint one
or more authenticating agents with respect to the Investor Certificates which
shall be authorized to act on behalf of the Trustee in authenticating the
Investor Certificates in connection with the issuance, delivery, registration
of transfer, exchange or repayment of the Investor Certificates. Whenever
reference is made in this Agreement to the authentication of Investor
Certificates by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication on behalf of the
Trustee by an authenticating agent and a certificate of authentication
executed on behalf of the Trustee by an authenticating agent.
(b) Any institution succeeding to the corporate trust
business of an authenticating agent shall continue to be an authenticating agent
without the
<PAGE>
72
Pooling Agreement
execution or filing of any paper or any further act on the part of the Trustee
or such authenticating agent.
(c) An authenticating agent may at any time resign by giving
written notice of resignation to the Trustee. Upon the receipt by the Trustee of
any such notice of resignation and upon the giving of any such notice of
termination by the Trustee, the Trustee shall immediately give notice of such
resignation or termination to the Company. Any resignation of an authenticating
agent shall not become effective until acceptance of appointment by the
successor authenticating agent as provided in this Section 5.08. The Trustee may
at any time terminate the agency of an authenticating agent by giving notice of
termination to such authenticating agent. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time an authenticating
agent shall cease to be acceptable to the Trustee, the Trustee promptly may
appoint a successor authenticating agent. Any successor authenticating agent
upon acceptance of its appointment hereunder shall become vested with all the
rights, powers and duties of its predecessor hereunder, with like effect as if
originally named as an authenticating agent. No successor authenticating agent
(other than an Affiliate of the Trustee) shall be appointed unless reasonably
acceptable to the Trustee and the Company.
(d) The Company hereby agrees to provide the Trustee from
time to time sufficient funds, on a timely basis and in accordance with and
subject to Section 8.05, for the payment of any reasonable compensation payable
to each authenticating agent for its services under this Section 5.08. The
Trustee hereby agrees that, upon the receipt of such funds from the Company it
shall pay each authenticating agent such amounts.
(e) The provisions of Sections 8.01, 8.02, 8.03 and 8.05
shall be applicable to any authenticating agent.
(f) Pursuant to an appointment made under this Section 5.08,
the Investor Certificates may have endorsed thereon, in lieu of the Trustee's
certificate of authentication, an alternate certificate of authentication in
substantially the following form:
"This is one of the Investor Certificates described in the
Pooling Agreement among AAM Receivables Corp., American Axle &
Manufacturing,
<PAGE>
73
Pooling Agreement
Inc., as Servicer, and The Chase Manhattan Bank, as Trustee.
----------------
as Authenticating Agent
for the Trustee
By "
--------------------------------------------
Authorized Signatory
SECTION 5.09 Tax Treatment. It is the intent of the Servicer,
the Company, the Investor Certificateholders and the Trustee that for United
States federal, state and local income and franchise tax purposes and for
Michigan single business tax and intangibles tax purposes, the Investor
Certificates will be considered as indebtedness of the Company. The Company,
the Servicer and the Trustee, by entering into this Agreement, each Investor
Certificateholder, by its acceptance of its Investor Certificate, and each
beneficial owner of an Investor Certificate (or any interest therein), by
acquiring a beneficial ownership interest in such Investor Certificate (or
interest) agree to treat the Investor Certificates and the Trust in such
manner for such purposes. The provisions of this Agreement and all related
Transaction Documents shall be construed to further these intentions of the
parties. Each Certificateholder, by acceptance of its Investor Certificate,
and each beneficial owner of an Investor Certificate, by its acquisition of a
beneficial interest in an Investor Certificate, agree to be bound by the
provisions of this Section 5.09 and each Certificateholder agrees that it will
cause any beneficial owner of an Investor Certificate to comply with this
Section 5.09. This Section 5.09 shall survive the termination of this
Agreement and shall be binding on all transferees of any of the foregoing
persons.
SECTION 5.09(A) Administration of the Trust as a FASIT.
(a) The Company, as the sole beneficial owner of the Ownership
Certificate, or, to the extent required under applicable Treasury Regulations or
by other administrative guidance published by the Internal Revenue Service, the
Trustee shall, upon notice from the
<PAGE>
74
Pooling Agreement
Servicer, make a timely election (the "FASIT Election") to treat the Trust as
a FASIT (under Section 860L(a)(1) of the Internal Revenue Code and the
applicable Treasury Regulations, if any, promulgated thereunder) and, if
necessary, under applicable state and/or local law. Unless otherwise required
under applicable Treasury Regulations or by other administrative guidance
published by the Internal Revenue Service, the FASIT Election will be made on
the consolidated United States federal income tax return that includes the
Company for the taxable year in which the Trust is created. In addition, if
required under applicable state and/or local law, the Company (and/or the
Trustee, if required under applicable state or local law) also shall make a
timely FASIT Election at the time and in the manner required under such state
or local law.
(b) Each Investor Certificate issued pursuant to this
Agreement and/or a Supplement to this Agreement is hereby designated as a
separate "regular interest" (within the meaning of Section 860L(b)(1) of the
Internal Revenue Code) in the Trust. The Company Exchangeable Interest and any
outstanding Subordinated Company Interest are, collectively, hereby designated
as representing the sole FASIT Ownership Interest in the Trust. The Company
shall not permit the creation of any other "interests" in the Trust except for
those described above.
(c) The date of this Agreement is hereby designated as the
"startup day" of the FASIT within the meaning of Section 860L(d)(1) of the
Internal Revenue Code.
(d) The Company, as the sole beneficial owner of the FASIT
Ownership Interest, shall pay out of its own funds any taxes imposed on the
Trust (including, without limitation, any taxes imposed under Internal Revenue
Code Section 860I (with respect to gain, if any, recognized upon the transfer of
property to the Trust or the pledge of any property to support the Trust's FASIT
Regular Interests) or Internal Revenue Code Section 860L(e)(1) (with respect of
any "prohibited transactions" (as defined in Section 860L(e)(2) of the Internal
Revenue Code) entered into by, or on behalf of, the Trust) or any tax-related
expenses incurred by, or on behalf of, the Trust.
(e) Within 30 days after the date of this Agreement and within
30 days after the issuance of any
<PAGE>
75
Pooling Agreement
Investor Certificates pursuant to this Agreement and/or any Supplement to this
Agreement, the Company shall prepare or cause to be prepared and filed with
the Internal Revenue Service, an Internal Revenue Service Form 8811,
"Information Return for Real Estate Mortgage Investment Conduits (REMIC) and
Issuers of Collateralized Debt Obligations" for the Trust (or such other forms
or information returns as may be required under the applicable Treasury
Regulations or other administrative guidance published by the Internal Revenue
Service, if any). The Company also shall prepare, execute and file, or cause
to be prepared, executed and filed, any tax returns that the Company or the
Trust are obligated to prepare and file under the Internal Revenue Code or
applicable state or local law. Such tax returns shall be prepared and filed in
accordance with the provisions set forth in Subtitle A, Chapter 1, Subchapter
M, Part V of the Internal Revenue Code (i.e., the FASIT provisions). The
expenses of preparing and filing such tax returns will be tax-related expenses
that shall be borne by the Company, without any right of reimbursement
therefor. The Servicer shall provide on a timely basis to the Company (or its
authorized representatives) any information that is reasonably requested by
such parties in order to enable such parties to perform their obligations
under this Section 5.09(A). Notwithstanding any other provision herein, the
Trustee shall not be responsible for and shall have no liability with respect
to the administration of the FASIT or any Code requirement or reporting
requirements with respect thereto.
(f) The Company shall report all information to the Investor
Certificateholders and the Internal Revenue Service (and any other applicable
state or local taxing authorities) that it is required to report to such parties
under the Internal Revenue Code and/or any applicable state or local law. The
Company also shall notify the Internal Revenue Service of the name, title,
address and telephone number of the Person who will serve as the tax
representative of the Trust.
(g) The Company shall not knowingly take (or cause the Trust
to take) any action or fail to take (or fail to cause to be taken) any action
under this Agreement, that, under the Internal Revenue Code and/or the
applicable Treasury Regulations, if taken or not taken, as the case may be,
would cause the Trust not to be classified as a FASIT for United States federal
income tax purposes. In addition, prior to taking any
<PAGE>
76
Pooling Agreement
action with respect to the Trust, or causing the Trust to take any action,
that is not expressly permitted under the terms of this Agreement, the Company
shall request that a Tax Opinion be delivered to the Company and the Trustee
with respect to taking such action.
(i) The Company, and to the extent that any records are
maintained by the Servicer, the Servicer, shall, for United States federal
income tax purposes, maintain the books and records of the Trust on an accrual
basis. The taxable year of the Trust will be the same as the taxable year of the
Company (or any consolidated group that includes the Company, as the case may
be).
(j) The Company shall not enter into any transaction or
arrangement (or cause or permit the Trust to enter into any transaction or
arrangement) that would result in the Trust receiving a fee or other
compensation for services (other than a fee received as a compensation for a
waiver, amendment or consent under Permitted Assets (other than foreclosure
property) held by the Trust) and the Company shall not permit the Trust to
acquire any assets other than Permitted Assets.
SECTION 5.09(B) Compliance with the Internal Revenue Code and
Treasury Regulations.
(a) If proposed, temporary or final Treasury Regulations are
promulgated, or other applicable administrative guidance is published, the
parties hereto agree (i) to amend this Agreement (and/or the terms of the other
Transaction Documents) to the extent necessary to allow the Trust to continue to
be classified as a FASIT for United States federal income tax purposes (and/or
under applicable state or local law) and (ii) to take any other action necessary
to classify the Trust as a FASIT or to prevent the imposition of any taxes on
the Trust.
(b) The parties to this Agreement hereby agree to take such
further actions, consistent with the terms of this Agreement, as may be required
to effectuate this Section 10.2 and the intent that the Trust be classified as a
FASIT under the Internal Revenue Code and under applicable state and local law.
(c) The Trustee shall not be obligated to take any action
pursuant to Section 5.09(B) except as directed in writing by the Company. The
Trustee may conclusively
<PAGE>
77
Pooling Agreement
rely on any such direction by the Company in performing any obligations under
Section 5.09(B). Notwithstanding any other provision herein or in any
Transaction Document to the contrary, the Trustee may hire an independent
third party to perform any obligation required of it pursuant to Section
5.09(B). In the event that the Trustee is obligated to take any action
pursuant to Section 5.09(B), the cost and expense of taking such actions shall
be reimbursed to the Trustee pursuant to Section 8.05.
Notwithstanding any other provision of this Section 5.09(B),
the Trustee shall not be required to (i) enter into any amendment pursuant to
Section 5.09(B)(a) unless and until the Company, at the Company's expense,
provides the Trustee with an Opinion of Counsel in form and substance acceptable
to the Trustee, stating that such amendment is necessary to allow the Trust to
continue to be classified as a FASIT for United States federal income tax
purposes, or (ii) take any other action pursuant to, or as a result of, Section
5.09(B)(a) or (b), unless and until the Company, at the Company's expense,
provides the Trustee with an Opinion of Counsel in form and substance acceptable
to the Trustee, stating (A) that requiring such action is necessary to allow the
Trust to continue to be classified as a FASIT for United States federal income
tax purposes, (B) that it is necessary for the Trustee to be the party which
takes such action rather than the Company or the Servicer, and (C) the taking of
such action by the Trustee does not conflict with any other provision of this
Agreement or any other Transaction Document.
SECTION 5.10 Exchangeable Company Interest. (a) The Company
may decrease the amount of the Exchangeable Company Interest in exchange for
(i) an increase in the Invested Amount of a Class of Investor Certificates of
an Outstanding Series and an increase in any related Subordinated Company
Interest in connection with an issuance of additional Investor Certificates of
such Outstanding Series or (ii) one or more newly issued Series of Investor
Certificates and any related newly issued Subordinated Company Interest (a
"New Series") (any such exchange, a "Company Exchange"). (A Company Exchange
shall not be necessary in connection with an increase in the Invested Amount
of any Investor Certificates issued in a Series with an Invested Amount that
may increase or decrease from time to time. Such Investor Certificates are
expected to be designated as "Variable Funding Certificates" or "VFC
Certificates".)
<PAGE>
78
Pooling Agreement
The Company may perform a Company Exchange by notifying the Trustee, in
writing at least three days in advance (an "Exchange Notice") of the date upon
which the Company Exchange is to occur (an "Exchange Date"). Any Exchange
Notice shall state the designation of any Series (and/or class, if applicable)
to be issued (or supplemented) on the Exchange Date and, with respect to each
such Series (and/or class, if applicable): (a) its additional or Initial
Invested Amount, as the case may be, if any, which in the aggregate at any
time may not be greater than the current principal amount of the Exchangeable
Company Interest, if any, at such time, (b) its Certificate Rate (or the
method for allocating interest payments or other cash flow to such Series), if
any, and (c) whether such New Series will be a companion Series to an
Outstanding Series (an "Existing Companion Series", together with the New
Series, a "Companion Series"). On the Exchange Date, the Trustee shall (i)
authenticate and deliver any Investor Certificates evidencing an increase in
the Invested Amount of a Class of Investor Certificates or a newly issued
Series and (ii) permit the issuance of any related Subordinated Company
Interest, in each case, only upon delivery by the Company to the Trustee of
the following (together with the delivery by the Company to the Trustee of any
additional agreements, instruments or other documents as are specified in the
related Supplement): (a) a Supplement executed by the Company and specifying
the Principal Terms of such Series (provided that no such Supplement shall be
required for any increase in the Invested Amount of a Class of Investor
Certificates, and any related increase in the related Subordinated Company
Interest, unless it is so required by the related Supplement), (b) a Tax
Opinion addressed to the Trustee and the Trust, (c) a General Opinion
addressed to the Trustee and the Trust, (d) an Officer's Certificate
certifying that all conditions precedent to the authentication and delivery of
such Investor Certificates have been satisfied and upon which Officer's
Certificate the Trustee may conclusively rely, (e) written confirmation from
each Rating Agency that the Company Exchange will not result in the Rating
Agency's reducing or withdrawing its rating on any then Outstanding Series or
any Class of any such Outstanding Series rated by it, (f) written instructions
of an officer of the Company specifying the amount, Series, Investor
Certificates and other Interests to be issued with respect to such Company
Exchange and (g) the applicable Investor Certificates if necessary. Upon
delivery of the items listed in clauses (a) through (g) above, the Trustee
shall cancel the applicable tendered
<PAGE>
79
Pooling Agreement
Investor Certificates and Subordinated Company Interest (and shall note such
transaction in the Subordinated Interest Register), as the case may be, and
issue, as provided above, such Series of Investor Certificates and allow the
issuance of such Subordinated Company Interest (and shall note such
transaction in the Subordinated Interest Register), if applicable, dated the
Exchange Date. The Trustee shall cause to be kept at the office or agency to
be maintained by the Transfer Agent and Registrar in accordance with the
provisions of Section 8.16 a register (the "Exchange Register") in which,
subject to such reasonable regulations as the Trustee may prescribe, the
Transfer Agent and Registrar shall record all Company Exchanges and the amount
of the Exchangeable Company Interest following any such Company Exchange.
There is no limit to the number of Company Exchanges that the Company may
perform under this Agreement. If the Company shall, on any Exchange Date,
retain any Investor Certificates issued on such Exchange Date, it shall, prior
to transferring any such Investor Certificates to another Person, obtain a Tax
Opinion. Additional restrictions relating to a Company Exchange may be set
forth in any Supplement.
(b) Upon any Company Exchange, the Trustee, in accordance
with the written directions of the Company, shall issue to the Company under
Section 5.01, for execution and redelivery to the Trustee for authentication
under Section 5.02, (i) one or more Investor Certificates representing an
increase in the Invested Amount of an Outstanding Series, or (ii) one or more
new Series of Investor Certificates. Any such Investor Certificates shall be
substantially in the form specified in the applicable Supplement and each shall
bear, upon its face, the designation for such Series to which each such
certificate belongs so selected by the Company.
(c) In conjunction with a Company Exchange, the parties
hereto shall, except as otherwise provided in subsection (a) above, execute a
supplement to this Agreement, which shall define, with respect to any additional
Investor Certificates or newly issued Series, as the case may be: (i) its name
or designation, (ii) its additional or initial principal amount, as the case may
be (or method for calculating such amount), (iii) its coupon rate (or formula
for the determination thereof), (iv) the interest payment date or dates and the
date or dates from which interest shall accrue, (v) the method for allocating
Collections to Holders including the
<PAGE>
80
Pooling Agreement
applicable Investor Percentage, (vi) the names of any accounts to be used by
such Series and the terms governing the operation of any such accounts, (vii)
the issue and terms of a letter of credit or other form of Enhancement, if
any, with respect thereto, (viii) the terms on which the certificates of such
Series may be repurchased by the Company or may be remarketed to other
investors, (ix) the Series Termination Date, (x) any deposit account
maintained for the benefit of Holders, (xi) the number of Classes of such
Series, and if more than one Class, the rights and priorities of each such
Class, (xii) the rights of the holder of the Exchangeable Company Interest
that have been transferred to the holders of such Series, (xiii) the
designation of any Series Accounts and the terms governing the operation of
any such Series Accounts, (xiv) provisions acceptable to the Trustee
concerning the payment of the Trustee's fees and expenses and (xv) other
relevant terms (all such terms, the "Principal Terms" of such Series). The
Supplement executed in connection with the Company Exchange shall contain
administrative provisions which are reasonably acceptable to the Trustee.
(d) In order for a New Series to be part of a Companion
Series, the Supplement for the related Existing Companion Series must provide
for or permit the Amortization Period to commence on the Issuance Date for such
New Series, and on or prior to the Issuance Date for the New Series, the
Servicer and the Company shall take all actions, if any, necessary to cause the
Amortization Period for such Existing Companion Series to commence on such
Issuance Date. The proceeds from the issuance of the New Series shall be
deposited by the Company in the applicable Series Principal Collection
Sub-subaccount and the Company shall, on the Issuance Date for such New Series,
deposit into the applicable Series Non-Principal Sub-subaccount the amount of
interest that will accrue on the New Series over a period specified in the
related Supplement for such New Series. On each day on which principal is paid
to the holders of the Existing Companion Series, the Trustee shall distribute to
the Company from the applicable Series Principal Collection Sub-subaccount of
the New Series an amount (up to the amount of available funds in such account)
equal to the amount distributed on such day to the Investor Certificateholders
of any Existing Companion Series; provided that, after giving effect to such
distributions, the Aggregate Receivables Amount shall equal or exceed the sum of
(i) the Target Receivables Amount with respect to such Existing Companion Series
on such day, plus
<PAGE>
81
Pooling Agreement
(ii) the Target Receivables Amount with respect to the New Series on such day,
plus (iii) the Target Receivables Amount with respect to any other Outstanding
Series on such day; provided further that the Trustee may conclusively rely on
the calculations of the Servicer of such amounts.
(e) The Company shall not transfer, assign, exchange or
otherwise dispose of the Exchangeable Company Interest or any Subordinated
Company Interest without (i) the prior satisfaction of the Rating Agency
Condition and (ii) delivery of a Tax Opinion. If the Company shall transfer,
assign, exchange or otherwise dispose of all or any portion of the Exchangeable
Company Interest and the outstanding Subordinated Company Interests, if any, in
accordance with the preceding sentence, the Transfer Agent and Registrar shall
record the transfer, assignment, exchange or other disposition of (i) the
Exchangeable Company Interest in the Exchange Register and (ii) any Subordinated
Company Interest in a register maintained by the Transfer Agent and Registrar at
its office or agency (the "Subordinated Interest Register"). The Exchangeable
Company Interest and all outstanding Subordinated Company Interests (or any
interests therein) may not under any circumstances be transferred, assigned or
disposed of separately. Any Holder who wishes to transfer, assign, exchange or
otherwise dispose of the Exchangeable Company Interest and the Subordinated
Company Interest held by it shall deliver instructions and a written instrument
of transfer, with sufficient instructions, duly executed by the Holder or his
attorney-in-fact duly authorized in writing delivered to the Trustee (unless the
Transfer Agent and Registrar is different from the Trustee, in which case to the
Transfer Agent and Registrar). No service charge shall be made for any
registration of transfer or exchange of the Exchangeable Company Interest and
such Subordinated Company Interests, but the Transfer Agent and Registrar may
require the Holder that is transferring or exchanging the Exchangeable Company
Interest and such Subordinated Company Interests to pay a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer or exchange of all or any portion of the Exchangeable Company Interest
or the Subordinated Company Interest. Notwithstanding any other provision
contained herein or in any Supplement, none of the Trustee, the Registrar, the
Transfer Agent, the Authenticating Agent, or any agent of any of them shall have
any obligation or duty to monitor, determine or inquire as to the compliance
with any restriction or
<PAGE>
82
Pooling Agreement
requirement imposed hereunder or under any Supplement with respect to the
transfer, registration or authentication of any Exchangeable Company Interest
or Subordinated Company Interest (each, an "Uncertificated Interest"), or any
interest therein, other than to require the delivery of the certifications or
opinions of counsel described in this Section 5.10 or contained in any such
Supplement and to comply with the related Exchange Notice to be delivered
pursuant to Section 5.10(a) or the written instructions delivered to the
Trustee pursuant to Section 5.10(e) hereof. At all times, the Company, the
Trustee, the Paying Agent, the Transfer Agent, and the Registrar, any agent of
any of them, may treat the Person in whose name any Uncertificated Interest is
registered in the Exchange Register or the Subordinated Interest Register, as
applicable, as the owner of such Uncertificated Interest for all purposes
whatsoever hereunder or under any Supplement, and none of the Trustee, the
Paying Agent, the Transfer Agent and Registrar and no agent of any of them
shall be affected by any notice to the contrary.
(f) Except as specified in any Supplement for a related
Series, all Investor Certificates of any Series shall be equally and ratably
entitled as provided herein to the benefits hereof without preference, priority
or distinction on account of the actual time or times of authentication and
delivery, all in accordance with the terms and provisions of this Agreement and
the applicable Supplement.
(g) A Holder may not transfer, assign, exchange or otherwise
convey a Subordinated Company Interest unless such Holder delivers a Tax Opinion
addressed to the Trustee and the Trust prior to such transfer, assignment,
exchange or other conveyance.
SECTION 5.11 Book-Entry Certificates. If specified in any
related Supplement, the Investor Certificates, or any portion thereof, upon
original issuance, shall be issued in the form of one or more typewritten
Investor Certificates representing the Book-Entry Certificates, to be
delivered to the depository specified in such Supplement (the "Depository")
which shall be the Clearing Agency, specified by, or on behalf of, the Company
for such Series. The Investor Certificates shall initially be registered on
the Certificate Register in the name of the nominee of such Clearing Agency,
and no Certificate Book-Entry Holder will receive a definitive certificate
representing such
<PAGE>
83
Pooling Agreement
Certificate Book-Entry Holder's interest in the Investor Certificates, except
as provided in Section 5.13. Unless and until definitive, fully registered
Investor Certificates ("Definitive Certificates") have been issued to Investor
Certificateholders pursuant to Section 5.13 or the related Supplement:
(a) the provisions of this Section 5.11 shall be in full
force and effect;
(b) the Company, the Servicer and the Trustee may deal with
each Clearing Agency for all purposes (including the making of
distributions on the Investor Certificates) as the Investor
Certificateholder without respect to whether there has been any actual
authorization of such actions by the Certificate Book-Entry Holders with
respect to such actions;
(c) to the extent that the provisions of this Section 5.11
conflict with any other provisions of this Agreement, the provisions of
this Section 5.11 shall control; and
(d) the rights of Certificate Book-Entry Holders shall be
exercised only through the Clearing Agency and the related Clearing
Agency Participants and shall be limited to those established by law and
agreements between such related Certificate Book-Entry Holders and the
Clearing Agency and/or the Clearing Agency Participants. Pursuant to the
Depository Agreement, the initial Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive and
transmit distributions of principal and interest on the Investor
Certificates to such Clearing Agency Participants.
Notwithstanding the foregoing, no Class or Series of Investor
Certificates may be issued as Book-Entry Certificates (but, instead, shall be
issued as Definitive Certificates) unless at the time of issuance of such Class
or Series, the Company and the Trustee receive an opinion of independent counsel
that the Investor Certificates of such Class or Series will be treated as
indebtedness for United States federal income tax purposes.
SECTION 5.12 Notices to Clearing Agency. Whenever notice or
other communication to the Investor
<PAGE>
84
Pooling Agreement
Certificateholders is required under this Agreement, unless and until
Definitive Certificates shall have been issued to Certificate Book-Entry
Holders pursuant to Section 5.13, the Trustee shall give all such notices and
communications specified herein to be given to the Investor Certificateholders
to the Clearing Agencies.
SECTION 5.13 Definitive Certificates. If (a) (i) the Company
advises the Trustee in writing that any Clearing Agency is no longer willing
or able to properly discharge its responsibilities under the applicable
Depository Agreement, and (ii) the Company is unable to locate a qualified
successor, (b) the Company, at its option, advises the Trustee in writing that
it elects to terminate the book-entry system through the Clearing Agency or
(c) after the occurrence of a Servicer Default or an Early Amortization Event,
Certificate Book-Entry Holders representing Fractional Undivided Interests
aggregating more than 50% of the Invested Amount held by such Certificate
Book-Entry Holders of each affected Series then issued and outstanding advise
the Clearing Agency through the Clearing Agency Participants in writing, and
the Clearing Agency shall so notify the Trustee, that the continuation of a
book-entry system through the Clearing Agency is no longer in the best
interests of the Certificate Book-Entry Holders, the Trustee shall notify the
Clearing Agency, which shall be responsible to notify the Certificate
Book-Entry Holders, of the occurrence of any such event and of the
availability of Definitive Certificates to Certificate Book-Entry Holders
requesting the same. Upon surrender to the Trustee of the Book-Entry
Certificates by the Clearing Agency, accompanied by registration instructions
from the Clearing Agency for registration, the Trustee shall issue the
Definitive Certificates. Neither the Company nor the Trustee shall be liable
for any delay in delivery of such instructions and may conclusively rely on,
and shall be protected in relying on, such instructions.
ARTICLE VI
Other Matters Relating to the Company
SECTION 6.01 Liability of the Company. The Company shall be
liable for all obligations, covenants, representations and warranties of the
Company arising under or related to this Agreement or any Supplement. Except
as provided in the preceding sentence and
<PAGE>
85
Pooling Agreement
otherwise herein, the Company shall be liable only to the extent of the
obligations specifically undertaken by it in its capacity as Company
hereunder.
SECTION 6.02 Limitation on Liability of the Company. Subject
to Sections 6.01 and 10.19, neither the Company nor any of its directors or
officers or employees or agents, in their capacity as transferor of
Receivables and Related Property hereunder, shall be under any liability to
the Trust, the Trustee, the Holders or any other Person for any action taken
or for refraining from the taking of any action pursuant to this Agreement
whether or not such action or inaction arises from express or implied duties
under any Transaction Document; provided, however, that this provision shall
not protect the Company against any liability which would otherwise be imposed
by reason of wilful misconduct, bad faith or negligence in the performance of
any duties or by reason of reckless disregard of any obligations and duties
hereunder. The Company and any director or officer or employee or agent of the
Company may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person (other than, in the case of the
Company, the Company or the Servicer) respecting any matters arising
hereunder.
ARTICLE VII
Early Amortization Events
SECTION 7.01 Early Amortization Events. Unless modified with
respect to any Series of Investor Certificates by any related Supplement, if
any one of the following events (each, an "Early Amortization Event") shall
occur:
(a) (i) a court having jurisdiction in the premises shall
enter a decree or order for relief in respect of the Company in an
involuntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect (the
Bankruptcy Code and all other such applicable laws being collectively,
"Applicable Insolvency Laws"), which decree or order is not stayed or
any other similar relief shall be granted under any applicable federal
or state law now or hereafter in effect and shall not be stayed; (ii)
(A) an involuntary case is commenced against the Company under any
Applicable Insolvency Law now or
<PAGE>
86
Pooling Agreement
hereafter in effect, a decree or order of a court having jurisdiction
in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar
powers over the Company, or over all or a substantial part of the
property of the Company shall have been entered, an interim receiver,
trustee or other custodian of the Company for all or a substantial
part of the property of the Company is involuntarily appointed, a
warrant of attachment, execution or similar process is issued against
any substantial part of the property of the Company, and (B) any event
referred to in clause (ii)(A) above continues for 60 days unless
dismissed, bonded or discharged; (iii) the Company shall at its
request have a decree or an order for relief entered with respect to
it or commence a voluntary case under any Applicable Insolvency Law,
consent to the entry of a decree or an order for relief in an
involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any Applicable Insolvency Law, consent to the
appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property; (iv) the
making by the Company of any general assignment for the benefit of
creditors; or (v) the Board of Directors of the Company adopts any
resolution or otherwise authorizes action to approve any of the
foregoing;
(b) the Trust or the Company shall become an "investment
company" within the meaning of the 1940 Act;
(c) the Trust shall receive a written notice from the
Internal Revenue Service taking the position that the Trust should be
characterized for United States federal income tax purposes as a
"publicly traded partnership" or as an association taxable as a
corporation and counsel to the Company cannot provide an opinion that
such claim is without merit; or
(d) the Trustee shall be appointed Successor Servicer
pursuant to the Servicing Agreement;
then, an "Early Amortization Period" with respect to all Outstanding Series
shall commence without any notice or other action on the part of the Trustee or
any Investor Certificateholder immediately upon the occurrence of such event.
The Servicer shall notify each Rating Agency and the Trustee in writing of the
occurrence of any Early
<PAGE>
87
Pooling Agreement
Amortization Period. Upon the commencement against the Company of a case,
proceeding or other action described in clause (a)(ii) above, the Company
shall cease to purchase Receivables from the Seller and cease to transfer
Receivables to the Trust, until such time, if any, as such case, proceeding or
other action is vacated, discharged, or stayed or bonded pending appeal. If an
Insolvency Event with respect to the Company occurs, the Company shall
immediately cease to transfer Receivables to the Trust (or, if the Company has
previously suspended the transfer of Receivables to the Trust to comply with
the preceding sentence, such suspension shall become a permanent cessation of
the transfer of Receivables to the Trust) and shall promptly give written
notice to the Trustee of such occurrence. Notwithstanding any cessation of the
transfer to the Trust of additional Receivables, Receivables transferred to
the Trust prior to the occurrence of such Insolvency Event and Collections in
respect of such Receivables and interest, whenever created, accrued in respect
of such Receivables, shall continue to be a part of the Trust.
Additional Early Amortization Events and the consequences
thereof may be set forth in each Supplement with respect to the Series relating
thereto.
SECTION 7.02 Additional Rights upon the Occurrence of Certain
Events. (a) Within 15 days of the Trustee's receipt of notice of the
occurrence of an Insolvency Event in accordance with Section 7.01, if the
Aggregate Invested Amount and all accrued and unpaid interest thereon have not
been paid to the Investor Certificateholders, then the Trustee, in accordance
with the written directions of the Servicer shall (i) publish a notice in an
Authorized Newspaper that an Insolvency Event has occurred and that the Trustee
intends to sell, dispose of or otherwise liquidate the Receivables and the other
Trust Assets in a commercially reasonable manner and (ii) send written notice to
the Investor Certificateholders and request instructions from such holders,
which notice shall request each Investor Certificateholder to advise the Trustee
in writing that it elects one of the following options: (A) the Investor
Certificateholder wishes the Trustee to instruct the Servicer not to sell,
dispose of or otherwise liquidate the Receivables and the other Trust Assets, or
(B) the Investor Certificateholder wishes the Trustee to instruct the Servicer
to sell, dispose of or otherwise liquidate the Receivables and the other Trust
Assets and to instruct the Servicer to reconstitute the Trust upon the
<PAGE>
88
Pooling Agreement
same terms and conditions set forth herein, or (C) the Investor
Certificateholder refuses to advise the Trustee as to the specific action the
Trustee shall instruct the Servicer to take. If after 60 days from the day
notice pursuant to clause (i) above is first published (the "Publication
Date"), the Trustee shall not have received written instructions of (x)
holders of Certificates representing undivided interests in the Trust
aggregating in excess of 50% of the related Invested Amount of each Series (or
in the case of a series having more than one Class of Investor Certificates,
each Class of such series) selecting option (A) above and (y) if the owners of
the Exchangeable Company Interest do not include the Company (and following
the delivery of written notice in the form referred to above by the Company to
such owners), the owners thereof representing undivided interests in the Trust
aggregating in excess of 50% of the Company Interest, the Trustee shall
instruct the Servicer to proceed to sell, dispose of, or otherwise liquidate
the Receivables and the other Trust Assets in a commercially reasonable manner
and on commercially reasonable terms, which shall include the solicitation of
competitive bids, and the Servicer shall proceed to consummate the sale,
liquidation or disposition of the Receivables and the other Trust Assets as
provided above with the highest bidder therefor; provided, however, that if
the allocable sale price, less all reasonable fees, expenses and other amounts
due hereunder to the Trustee, its agents and counsel to the Trustee, to be
realized from such sale, liquidation or disposition would be less than the
Aggregate Invested Amount plus accrued and unpaid interest thereon through the
Distribution Date next succeeding the date of such sale, the Trustee must
receive the prior unanimous consent of all the Investor Certificateholders to
such sale, liquidation or disposition. The Company or any of its Affiliates
shall be permitted to bid for the Receivables and the other Trust Assets. In
addition, the Company or any of its Affiliates shall have the right to match
any bid by a third person and be granted the right to purchase the Receivables
and the other Trust Assets at such matched bid price. The Trustee may obtain a
prior determination from any such conservator, receiver or liquidator that the
terms and manner of any proposed sale, disposition or liquidation are
commercially reasonable. The provisions of Sections 7.01 and 7.02 shall be
cumulative and not mutually exclusive. The costs and expenses incurred by the
Trustee in such sale shall be reimbursable to the Trustee as provided in
Section 8.05.
<PAGE>
89
Pooling Agreement
(b) The proceeds from the sale, disposition or liquidation
of the Receivables pursuant to subsection (a) above shall be treated as
Collections on the Receivables and such proceeds shall be released to the
Trustee in an amount equal to the amount of any expenses incurred by the Trustee
acting in its capacity either as Trustee or as liquidating agent under this
Section 7.02 that have not otherwise been reimbursed and the remainder, if any,
will be distributed to holders of each Series after immediately being deposited
in the Collection Account, in accordance with the provisions of Section 3.01(e)
and the related Supplement for such Series. After giving effect to all such
distributions, the remainder, if any, shall be allocated to the Exchangeable
Company Interest and shall be released to the holders of the Exchangeable
Company Interest pro rata based on the amount of the Exchangeable Company
Interest held by each holder thereof as indicated in the Exchange Register.
ARTICLE VIII
The Trustee
SECTION 8.01 Duties of Trustee. (a) The Trustee, prior to the
occurrence of a Servicer Default or Early Amortization Event of which a
Responsible Officer of the Trustee has actual knowledge and after the curing
of all Servicer Defaults and Early Amortization Events which may have
occurred, undertakes to perform such duties and only such duties as are
specifically set forth in the Pooling and Servicing Agreements or any
Supplement and no implied covenants or obligations shall be read into such
Pooling and Servicing Agreements against the Trustee. If a Servicer Default or
Early Amortization Event of which a Responsible Officer of the Trustee has
actual knowledge occurred (which has not been cured or waived), the Trustee
shall exercise the rights and powers vested in it by any Pooling and Servicing
Agreement or any Supplement and shall 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) The Trustee may conclusively rely as to the truth of the
statements and the correctness of the opinions expressed therein upon
resolutions, certificates, statements, opinions, reports, documents, orders or
other instruments furnished to the Trustee; provided that (i) in the case of any
of the above which
<PAGE>
90
Pooling Agreement
are specifically required to be furnished to the Trustee pursuant to any
provision of the Pooling and Servicing Agreements, the Trustee shall, subject
to Section 8.02, examine them to determine whether they appear on their face
to conform to the requirements of this Agreement and (ii) in the case of any
of the above as to which the Trustee is required to perform procedures
pursuant to the Internal Operating Procedures Memorandum, the Trustee shall
perform said procedures in accordance with the Internal Operating Procedures
Memorandum.
(c) Subject to subsection 8.01(a), no provision of this
Agreement or any Supplement shall be construed to relieve the Trustee from
liability for its own negligent action, its own negligent failure to act or its
own wilful misconduct; provided, however, that:
(i) the Trustee shall not be liable for an error of judgment
unless it shall be proved that the Trustee was negligent, or acted in
bad faith, in ascertaining the pertinent facts;
(ii) the Trustee shall not be liable with respect to any
action taken, suffered or omitted to be taken by it in good faith;
(iii) the Trustee shall not be charged with knowledge of any
failure by the Servicer to comply with any of its obligations, unless
a Responsible Officer of the Trustee obtains actual knowledge of such
failure or the Trustee receives written notice of such failure from
the Servicer, any Agent or any Investor Certificateholder;
(iv) the Trustee shall not be charged with knowledge of a
Servicer Default or Early Amortization Event unless a Responsible
Officer of the Trustee obtains actual knowledge of such event or the
Trustee receives written notice of such default or event from the
Servicer, any Agent or any holder of Investor Certificates;
(v) the Trustee shall not be liable for any investment
losses resulting from any investments of funds on deposit in the
Accounts or any subaccounts thereof (provided that such investments
are Eligible Investments); and
(vi) the Trustee shall have no duty to monitor the
performance of the Servicer or the Company, nor
<PAGE>
91
Pooling Agreement
shall it have any liability in connection with malfeasance or
nonfeasance by the Servicer; the Trustee shall have no liability in
connection with compliance of the Servicer or the Company with
contractual, statutory or regulatory requirements related to the
Receivables; and the Trustee shall have no duty to perform, except as
otherwise required pursuant to the Internal Operating Procedures
Memorandum, any recalculation or verification of any calculation with
respect to data provided to the Trustee by the Servicer.
(d) The Trustee shall not be required to expend or risk its
own funds or otherwise incur any liability in the performance of any of its
duties under any Pooling and Servicing Agreement or any Supplement or in the
exercise of any of its rights or powers, if there is reasonable ground for
believing that the repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it, and none of the provisions
contained in any Pooling and Servicing Agreement shall in any event require the
Trustee to perform, or be responsible for the manner of performance of, any
obligations of the Servicer under such Agreement except during such time, if
any, as the Trustee shall be the successor to, and be vested with the rights,
duties, powers and privileges of, the Servicer in accordance with the terms of
such Agreement.
(e) The Trustee shall not be required to advance its own
funds in the performance of any of its duties under any Pooling and Servicing
Agreement or any Supplement or the exercise of any of its rights or powers.
(f) Except as expressly provided in any Pooling and
Servicing Agreement, the Trustee shall have no power to vary the corpus of the
Trust.
(g) Provided that the Servicer and the Company shall have
provided to the Trustee promptly upon request all books, records and other
information reasonably requested by the Trustee and shall have provided the
Trustee with all necessary access to the properties, books and records of the
Servicer and the Company which the Trustee may reasonably require, then within
120 days following the Initial Closing Date, the Trustee shall have (i)
completed the Servicer Site Review and (ii) established the Standby Liquidation
System, and
<PAGE>
92
Pooling Agreement
shall have notified the Servicer, each Rating Agency and each Investor
Certificateholder of such events.
(h) The Trustee shall prepare and deliver to the Company and
the Servicer, within 90 days of the Initial Closing Date, the Internal Operating
Procedures Memorandum. From and after such date, the Trustee shall take such
actions as are set forth in the Internal Operating Procedures Memorandum unless
prevented from doing so through no fault of the Trustee.
SECTION 8.02 Rights of the Trustee. Except as otherwise
provided in Section 8.01 and in the Internal Operating Procedures Memorandum:
(a) The Trustee may conclusively rely on and shall be
protected in acting on, or in refraining from acting in accord with, any
resolution, Officers Certificate, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, appraisal, bond, note or other paper or
document believed by it to be genuine and to have been signed or
presented to it pursuant to any Pooling and Servicing Agreement by the
proper party or parties.
(b) The Trustee may consult with counsel and any Opinion of
Counsel and any advice of such counsel shall be full and complete
authorization and protection in respect of any action taken or suffered
or omitted by it hereunder in good faith and in accordance with such
Opinion of Counsel.
(c) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by any Pooling and Servicing
Agreement, or to institute, conduct or defend any litigation hereunder
or in relation hereto, at the request, order or direction of any of the
Holders, pursuant to the provisions of any Pooling and Servicing
Agreement, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby; provided, however,
that nothing contained herein shall relieve the Trustee of the
obligations, upon the occurrence of a Servicer Default or Early
Amortization Event (which has not been cured), to exercise such of the
rights and powers vested in it by any Pooling and Servicing Agreement,
and to use the same degree of care and
<PAGE>
93
Pooling Agreement
skill in their exercise as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs.
The right of the Trustee to perform any discretionary act enumerated
in this Agreement shall not be construed as a duty, and the Trustee
shall not be answerable for other than its gross negligence or wilful
misconduct in the performance of any such act.
(d) The Trustee shall not be personally liable for any
action taken, suffered or omitted by it in good faith and believed by it
to be authorized or within the discretion or rights or powers conferred
upon it by any Pooling and Servicing Agreement; provided that the
Trustee shall be liable for its gross negligence or wilful misconduct.
(e) The Trustee shall not be bound to make any investigation
into the facts of matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent,
direction, order, approval, bond, note or other paper or document,
unless requested in writing so to do by the holders of Investor
Certificates evidencing Fractional Undivided Interests aggregating more
than 50% of the Invested Amount of any Series which could be materially
and adversely affected if the Trustee does not perform such acts;
provided, however, that such holders of Investor Certificates shall
indemnify and reimburse the Trustee for any liability or expense
resulting from any such investigation requested by them to the extent
the Trustee is not otherwise reimbursed hereunder; provided further that
the Trustee shall be entitled to make such further inquiry or
investigation into such facts or matters as it may reasonably see fit,
and if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books and records of
the Company, personally or by agent or attorney, at the sole cost and
expense of the Company.
(f) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through affiliates, agents or attorneys or a custodian or nominee, and
the Trustee shall not be responsible for any misconduct or gross
negligence on the part of, or for the supervision of, any such
affiliate, agent, attorney,
<PAGE>
94
Pooling Agreement
custodian or nominee appointed with due care by it hereunder.
(g) The Trustee shall not be required to make any initial or
periodic examination of any documents or records related to the
Receivables or the Accounts for the purpose of establishing the presence
or absence of defects, the compliance by the Company with its
representations and warranties or for any other purpose.
(h) In the event that the Trustee is also acting as Paying
Agent or Transfer Agent and Registrar hereunder, the rights and
protections afforded to the Trustee pursuant to this Article VIII shall
also be afforded to such Paying Agent or Transfer Agent and Registrar.
SECTION 8.03 Trustee Not Liable for Recitals. The Trustee
assumes no responsibility for the correctness of the recitals contained herein
and in the Investor Certificates (other than the certificate of authentication
on the Investor Certificates). Except as set forth in Section 8.15, the
Trustee makes no representations as to the validity or sufficiency of any
Pooling and Servicing Agreement, of the Investor Certificates (other than the
certificate of authentication on the Investor Certificates), of the
Exchangeable Company Interest, of any Interest, of any Subordinated Company
Interest, of any Receivable or related document or interest. The Trustee shall
not be accountable for the use or application by the Company of any of the
Investor Certificates, any Subordinated Company Interest or the Exchangeable
Company Interest or of the proceeds of such Investor Certificates, such
Subordinated Company Interest or the Exchangeable Company Interest or for the
use or application of any funds paid to the Company in respect of the
Receivables or deposited in or withdrawn from the Accounts or other accounts
hereafter established to effectuate the transactions contemplated herein and
in accordance with the terms of any Pooling and Servicing Agreement.
The Trustee shall not be accountable for the use or
application by the Servicer of any of the Investor Certificates or any Interest
or of the proceeds of such Investor Certificates or any Interest, or for the use
or application of any funds paid to the Servicer in respect of the Receivables
or deposited in or withdrawn from the Accounts or any Lockbox by or at the
direction of the
<PAGE>
95
Pooling Agreement
Servicer or Lockbox Processor. The Trustee shall at no time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Receivable.
SECTION 8.04 Trustee May Own Investor Certificates. The
Trustee in its individual or any other capacity (a) may become the owner or
pledgee of Investor Certificates with the same rights as it would have if it
were not the Trustee and (b) may transact any banking and trust business with
the Company, the Servicer or the Seller as it would were it not the Trustee.
SECTION 8.05 Trustee's Fees and Expenses. (a) The Servicer
covenants and agrees to pay, but only from funds available to it as the
Servicing Fee paid under the Servicing Agreement, to the Trustee annually in
advance on the Initial Closing Date and on or about each one-year anniversary
thereof, and the Trustee shall be entitled to receive, such reasonable
compensation as is agreed upon in writing between the Trustee and the Servicer
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by it
in the execution of the trust hereby created and in the exercise and
performance of any of the powers and duties hereunder of the Trustee.
(b) The Trustee shall be entitled to reimbursement upon its
request for all reasonable expenses (including, without limitation, expenses
incurred in connection with notices, requests for documentation or other
communications to Holders), disbursements, losses, liabilities, damages and
advances incurred or made by the Trustee in accordance with any of the
provisions of any Pooling and Servicing Agreement or by reason of its status as
Trustee under any Pooling and Servicing Agreement (including the reasonable fees
and expenses of its agents, any co-trustee and counsel) except any such expense,
disbursement, loss, liability, damage or advance as may arise from its gross
negligence or bad faith. To the extent the fees and expenses of the Trustee are
not paid on a current basis, the Trustee shall be entitled to be paid such items
from amounts that would be distributable to the Company under Article III of
this Agreement and, to the extent still unpaid in full, the Company will pay or
reimburse the Trustee upon its request for such items. Notwithstanding anything
contained in this Agreement to the contrary, the Trustee shall not be entitled
to reimbursement for any costs or expenses incurred in connection with the
review,
<PAGE>
96
Pooling Agreement
negotiation, preparation, execution and delivery of any of the Transaction
Documents or in connection with the issuance of any Investor Certificates on
the Initial Closing Date except for such costs and expenses as have been
agreed to in writing between the Trustee and Company. If the Trustee is
appointed Successor Servicer in accordance with the Servicing Agreement, the
provisions of this Section 8.05 shall not apply to expenses, disbursements,
losses, liabilities, damages and advances made or incurred by the Trustee in
its capacity as Successor Servicer, which items shall be paid, first, out of
the Servicing Fee, second, from amounts which would be distributable to the
Company under Article III of this Agreement, third, from amounts distributable
to the Company pursuant to Section 9.04 and fourth, to the extent still unpaid
in full, the Company will pay or reimburse the Trustee upon its request for
such items. The provisions of this Section 8.05 shall apply to the reasonable
expenses, disbursements and advances made or incurred by the Trustee, or any
other Person, in its capacity as liquidating agent, to the extent not
otherwise paid. In the event the Trustee acts as Successor Servicer, it shall
be entitled to all the rights and benefits of the Servicer (including, without
limitation, the Servicing Fee, under the Transaction Documents). The covenants
to pay the expenses, disbursements, losses, liabilities, damages and advances
provided for in this Section shall survive the termination of any Pooling and
Servicing Agreement and shall be binding on the Company, the Servicer and any
Successor Servicer. The Company's and the Servicer's covenants and agreements
contained in this Section 8.05 shall survive the termination of this
Agreement.
SECTION 8.06 Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a corporation organized and doing business
under the laws of the United States of America or any state thereof authorized
under such laws to exercise corporate trust powers, having (or having a
holding company parent with) a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by federal or state
authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising
or examining authority, then, for the purpose of this Section 8.06, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Trustee shall cease
<PAGE>
97
Pooling Agreement
to be eligible in accordance with the provisions of this Section 8.06, the
Trustee shall resign immediately in the manner and with the effect specified
in Section 8.07.
SECTION 8.07 Resignation or Removal of Trustee. (a) Subject to
paragraph (c) below, the Trustee may at any time resign and be discharged from
the trust hereby created by giving written notice thereof to the Company, the
Servicer and the Rating Agencies. Upon receiving such notice of resignation,
the Company shall promptly appoint a successor trustee by written instrument,
in duplicate, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee. If no successor trustee shall
have been so appointed and have accepted such appointment within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a successor
trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.06 hereof and shall fail to resign
after written request therefor by the Company, or if at any time the Trustee
shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or
if a receiver of the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Company may remove the Trustee and promptly appoint a successor trustee by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee.
(c) Any resignation or removal of the Trustee and
appointment of successor trustee pursuant to any of the provisions of this
Section 8.07 shall not become effective until acceptance of appointment by the
successor trustee as provided in Section 8.08.
(d) The obligations of the Company described in Section 8.05
hereof and the obligations of the Servicer described in Section 8.05 hereof and
Section 5.01 of the Servicing Agreement shall survive the removal or resignation
of the Trustee as provided in this Agreement.
<PAGE>
98
Pooling Agreement
(e) No Trustee under this Agreement shall be personally
liable for any action or omission of any successor trustee.
SECTION 8.08 Successor Trustee. (a) Any successor trustee
appointed as provided in Section 8.07 shall execute, acknowledge and deliver
to the Company and to its predecessor Trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with like
effect as if originally named as Trustee herein. The predecessor Trustee shall
deliver to the successor trustee all documents or copies thereof, at the
expense of the Servicer, and statements held by it hereunder; and the Company
and the predecessor Trustee shall execute and deliver such instruments and do
such other things as may reasonably be required for fully and certainly
vesting and confirming in the successor trustee all such rights, power, duties
and obligations. The Servicer shall immediately give notice, but in no event
less than 10 days prior to any such resignation or removal, to each Rating
Agency upon the appointment of a successor trustee.
(b) No successor trustee shall accept appointment as
provided in this Section 8.08 unless at the time of such acceptance such
successor trustee shall be eligible under the provisions of Section 8.06.
(c) Upon acceptance of appointment by a successor trustee as
provided in this Section 8.08, such successor trustee shall mail notice of such
succession hereunder to all Holders at their addresses as shown in the
Certificate Register, the Exchange Register or the Subordinated Interest
Register, as applicable.
SECTION 8.09 Merger or Consolidation of Trustee. Any Person
into which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding
to the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be eligible under the
provisions of Section 8.06, without the execution or filing of any paper or
any further act on the part of any of the parties hereto, anything herein to
<PAGE>
99
Pooling Agreement
the contrary notwithstanding. The Trustee shall promptly give notice (except
to the extent prohibited under any Requirement of Law or Contractual
Obligation), but in no event less than 10 days prior to any such merger or
consolidation, to the Company, the Servicer and the Rating Agencies upon any
such merger or consolidation of the Trustee. Information as to such merger or
consolidation that is made publicly available by the Trustee in at least one
Authorized Newspaper shall be deemed to satisfy the notice requirement of this
Section 8.09.
SECTION 8.10 Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions of any Pooling and Servicing
Agreement, at any time, for the purpose of meeting any legal requirements of
any jurisdiction in which any part of the Trust may at the time be located,
the Trustee shall have the power and may execute and deliver all instruments
to appoint one or more persons to act as a co-trustee or co-trustees, or
separate trustee or separate trustees, of all or any part of the Trust, and to
vest in such Person or Persons, in such capacity and for the benefit of the
Holders, such title to the Trust, or any part thereof, and, subject to the
other provisions of this Section 8.10, such powers, duties, obligations,
rights and trusts as the Trustee may consider necessary. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility
as a successor trustee under Section 8.06 and no notice to Holders of the
appointment of any co-trustee or separate trustee shall be required under
Section 8.08. The Trustee shall promptly notify each Rating Agency of the
appointment of any co-trustee.
(b) Every separate trustee and co-trustee shall, to the
extent permitted by law, be appointed and act subject to the following
provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any statute of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform
such
<PAGE>
100
Pooling Agreement
act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of the Trustee;
(ii) no trustee hereunder shall be personally liable by
reason of any act or omission of any other trustee hereunder; and
(iii) the Trustee may at any time accept the resignation of
or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the
Trustee shall be deemed to have been given to each of the then separate trustees
and co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VIII. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of any Pooling and Servicing Agreement, specifically including every provision
of any Pooling and Servicing Agreement relating to the conduct of, affecting the
liability of, or affording protection to, the Trustee. Every such instrument
shall be filed with the Trustee and a copy thereof given to the Servicer and the
Company.
(d) Any separate trustee or co-trustee may at any time
constitute the Trustee, its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect to any Pooling and Servicing Agreement on its behalf and in its name. If
any separate trustee or co-trustee shall die, become incapable of acting, resign
or be removed, all of its estates, properties, rights, remedies and trusts shall
vest in and be exercised by the Trustee, to the extent permitted by law, without
the appointment of a new or successor trustee.
SECTION 8.11 Tax Returns. In the event the Trust shall be
required to file United States federal, state, local or foreign income tax
returns, the Company shall prepare and file or shall cause to be prepared and
<PAGE>
101
Pooling Agreement
filed any such tax returns required to be filed by the Trust and shall remit
such tax returns to the Trustee for signature at least five Business Days
before such tax returns are due to be filed (including extensions). The
Company shall also prepare or shall cause to be prepared all United States
federal tax information in connection with this Agreement required by law to
be distributed to Holders and shall deliver such information to the Trustee at
least five Business Days prior to the date it is required by law to be
distributed to the Holders. The Trustee, upon request, will furnish the
Company with all such information known to the Trustee as may be reasonably
determined by the Company to be required in connection with the preparation of
all United States federal, state, local or foreign income tax returns of the
Trust, and shall, upon the Company's written request, execute such tax
returns. In no event shall the Trustee in its individual capacity be liable
for any liabilities, costs or expenses of the Trust, the Holders, the Company,
or the Servicer arising under any United States federal, state, local or
foreign income tax law or regulation, including, without limitation, excise
taxes or any other tax imposed by a Governmental Authority on or measured by
income (or any interest or penalty with respect thereto or arising from any
failure to comply therewith). The Trustee shall not be required to determine
whether any filing of tax returns is required.
SECTION 8.12 Trustee May Enforce Claims Without Possession of
Investor Certificates. All rights of action and claims under any Pooling and
Servicing Agreement or the Investor Certificates may be prosecuted and
enforced by the Trustee without the possession of any of the Investor
Certificates or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee. Any recovery of judgment shall, after provision for the payment of
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of the Investor
Certificateholders in respect of which such judgment has been obtained.
SECTION 8.13 Suits for Enforcement. If a Servicer Default
shall occur and be continuing, the Trustee may, as provided in Section 6.01 of
the Servicing Agreement, proceed to protect and enforce its rights and the
rights of the Holders under this Agreement or any other Transaction Document
by suit, action or proceeding (including any suit, action or proceeding on
behalf of
<PAGE>
102
Pooling Agreement
the Holders against any third party) in equity or at law or otherwise, whether
for the specific performance of any covenant or agreement contained in this
Agreement or any other Transaction Document or in aid of the execution of any
power granted in this Agreement or any other Transaction Document or for the
enforcement of any other legal, equitable or other remedy as the Trustee,
being advised by counsel, shall deem most effectual to protect and enforce any
of the rights of the Trustee or the Holders. In furtherance of and without
limiting the generality of subsection 8.01(d), the Trustee shall have the
right to obtain, before initiating any such action, such reasonable indemnity
from the Investor Certificateholders as the Trustee may require against the
costs, expenses and liabilities that may be incurred therein or thereby.
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 Investor
Certificates, the Subordinated Company Interests or the Exchangeable Company
Interest or the rights of any holder thereof, or authorize the Trustee to vote
in respect of the claim of any Holder in any such proceeding.
SECTION 8.14 Rights of Investor Certificateholders to Direct
Trustee. Investor Certificateholders evidencing more than 50% of the Invested
Amount of any Series affected by the conduct of any proceeding or the exercise
of any right conferred on the Trustee shall 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; provided,
however, that nothing in any Pooling and Servicing Agreement shall impair the
right of the Trustee to take any action deemed proper by the Trustee and which
is not inconsistent with such direction of the Investor Certificateholders;
provided further in furtherance and without limiting the generality of
subsection 8.01(d), the Trustee shall have the right to obtain, before acting
in accordance with any such direction of the Investor Certificateholders, such
reasonable indemnity from the Investor Certificateholders as the Trustee may
require against the costs, expenses and liabilities that may be incurred in so
acting.
<PAGE>
103
Pooling Agreement
SECTION 8.15 Representations and Warranties of Trustee. The
Trustee represents and warrants that:
(a) the Trustee is a banking corporation organized, existing
and in good standing under the laws of the State of New York and is duly
authorized to exercise trust powers under applicable law;
(b) the Trustee has the power and authority to enter into
this Agreement and any Supplement, and has taken all necessary action to
authorize the execution, delivery and performance by it of this
Agreement and any Supplement;
(c) each Pooling and Servicing Agreement and each of the
Transaction Documents executed by it have been duly executed and
delivered by the Trustee and, in the case of all such Transaction
Documents, are legal, valid and binding obligations of the Trustee,
enforceable in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect affecting the enforcement of creditors' rights generally and
except as such enforceability may be limited by general principles of
equity (whether considered in a suit at law or in equity); and
(d) the Trustee satisfies the eligibility requirements of
Section 8.06.
SECTION 8.16 Maintenance of Office or Agency. The Trustee will
maintain at its expense in the Borough of Manhattan, The City of New York, an
office or offices or agency or agencies where notices and demands to or upon
the Trustee in respect of the Investor Certificates or any other Interests and
the Pooling and Servicing Agreements may be served. The Trustee will give
prompt written notice to the Company, the Servicer and the Holders of any
change in the location of the Certificate Register, the Exchange Register, the
Subordinated Interest Register or any such office or agency.
SECTION 8.17 Limitation of Liability. The Investor
Certificates are executed by the Trustee, not in its individual capacity but
solely as Trustee of the Trust, in the exercise of the powers and authority
conferred and vested in it by the Trust Agreement. Each of the undertaking and
agreements made on the part of the Trustee in the Investor Certificates is
made and intended
<PAGE>
104
Pooling Agreement
not as a personal undertaking or agreement by the Trustee but is made and
intended for the purpose of binding only the Trust.
ARTICLE IX
Termination
SECTION 9.01 Termination of Trust. (a) The Trust and the
respective obligations and responsibilities of the Company, the Servicer and
the Trustee created hereby (other than the obligation of the Trustee to make
payments to Holders as hereafter set forth) shall terminate, except with
respect to any such obligations or responsibilities expressly stated to
survive such termination, on the earliest of (i) the last day of the October
2009 Settlement Period, (ii) at the option of the Company, at any time when
the Aggregate Invested Amount is zero, (iii) following the occurrence of any
of the Early Amortization Events specified in Section 7.01 of this Agreement,
at any time when the Aggregate Invested Amount is zero and (iv) upon
completion of distribution of the amounts referred to in subsection 7.02(b)
(the "Trust Termination Date").
(b) If on the Distribution Date in the month immediately
preceding the month in which the Trust Termination Date occurs (after giving
effect to all transfers, withdrawals, deposits and drawings to occur on such
date and the payment of principal on any Series of Investor Certificates to be
made on the related Distribution Date pursuant to Article III) the Invested
Amount of any Series would be greater than zero (as certified in writing by the
Servicer), the Trustee, in accordance with the written direction of the
Servicer, shall make reasonable efforts to sell within 30 days of such
Distribution Date all of the Receivables and other Trust Assets. The proceeds of
such sale shall be treated as Collections on the Receivables and shall be
allocated in accordance with Article III. During such 30-day period, the
Servicer shall continue to collect Collections on the Receivables and allocate
Collections in accordance with the provisions of Article III. The reasonable
costs and expenses incurred by the Trustee in such sale shall be reimbursable to
the Trustee as provided in Section 8.05.
SECTION 9.02 Optional Purchase and Final Termination Date of
Investor Certificates of Any Series.
<PAGE>
105
Pooling Agreement
(a) On any Distribution Date during the Amortization Period with respect to any
Series on which the Invested Amount (or such other amount as may be set forth in
the related Supplement) of such Series is reduced to an amount equal to or less
than the Optional Repurchase Percentage of the Initial Invested Amount (or such
other amount as may be set forth in the related Supplement) for such Series as
of the day preceding the beginning of such Amortization Period, the Company
shall have the option to repurchase the entire Investor Certificateholders'
Interest of such Series, at a purchase price equal to (i) the outstanding
Invested Amount of the Investor Certificates of such Series plus (ii) accrued
and unpaid interest through such Distribution Date (after giving effect to any
payment of principal and monthly interest on such date of purchase) plus (iii)
all other amounts payable to all Investor Certificateholders of such Series
under the related Supplement (such purchase price, the "Clean-Up Call Repurchase
Price"). The amount of the Clean-Up Call Repurchase Price will be deposited into
the Collection Account for credit to the Series Collection Subaccount for such
Series on such Distribution Date in immediately available funds and will be
passed through in full to the applicable Investor Certificateholders. Following
any such repurchase, such Investor Certificateholders' Interest in the
Receivables and the other Trust Assets shall terminate and such interest therein
will be allocated to the Exchangeable Company Interest and such Investor
Certificateholders will have no further rights with respect thereto. In the
event that the Company fails for any reason to deposit the Clean-Up Call
Repurchase Price for such Receivables, the Investor Certificateholders' Interest
in the Receivables and the other Trust Assets will continue and monthly payments
will continue to be made to the Investor Certificateholders.
(b) The amount deposited pursuant to subsection 9.02(a)
shall be paid to the Investor Certificateholders of the related Series pursuant
to Article III on the Distribution Date following the date of such deposit. All
Investor Certificates of a Series which are purchased by the Company pursuant to
subsection 9.02(a) shall be delivered by the Company upon such purchase to, and
be canceled by (in accordance with the written directions of the Company), the
Transfer Agent and Registrar and be disposed of in a manner satisfactory to the
Trustee and the Company.
<PAGE>
106
Pooling Agreement
(c) All principal or interest with respect to any Series of
Investor Certificates shall be due and payable no later than the Series
Termination Date with respect to such Series. Unless otherwise provided in a
Supplement, in the event that the Invested Amount of any Series of Investor
Certificates is greater than zero on its Series Termination Date (after giving
effect to all transfers, withdrawals, deposits and drawings to occur on such
date and the payment of principal to be made on such Series on such date), the
Trustee will sell or cause to be sold, in accordance with the directions of
Investor Certificateholders representing more than 50% of the Invested Amount of
such Series (upon which the Trustee may conclusively rely) and pay the proceeds
to all Investor Certificateholders of such Series pro rata (except that unless
expressly provided to the contrary in the related Supplement, no payment shall
be made to Investor Certificateholders of any Class of any Series that is by its
terms subordinated to any other Class until such senior Class of Investor
Certificates have been paid in full) in final payment of all principal of and
accrued interest on such Series of Investor Certificates, an amount of
Receivables or interests in Receivables up to the Invested Amount of such Series
at the close of business on such date; provided, however, in furtherance and
without limiting the generality of subsection 8.01(d), the Trustee shall have
the right to obtain, before acting in accordance with any such direction of the
Investor Certificateholders, such reasonable indemnity from the Investor
Certificateholders as the Trustee may require against the costs, expenses and
liabilities that may be incurred in so acting. Absent such direction from
Investor Certificateholders representing more than 50% of the Invested Amount of
such Series or absent such reasonable indemnity as the Trustee may require in
connection with such direction, the Trustee shall continue to hold the Trust
Assets in respect of such Series in accordance with the terms of the Pooling and
Servicing Agreements until the Trust Termination Date (or until Investor
Certificateholders representing more than 50% of the Invested Amount of such
Series shall otherwise direct the Trustee); provided that the terms of this
Agreement, the related Supplement and the Servicing Agreement shall be deemed to
remain in full force and effect, except that no additional Receivables shall be
allocated with respect to such Series. The reasonable costs and expenses
incurred by the Trustee in such sale shall be reimbursable to the Trustee as
provided in Section 8.05. Any proceeds of such sale in excess of such principal
and interest paid shall be paid
<PAGE>
107
Pooling Agreement
to the holder of the Exchangeable Company Interest, unless and to the extent
otherwise specified in any applicable Supplement. Upon such Series Termination
Date with respect to the applicable Series, final payment of all amounts
allocable to any Investor Certificates of such Series shall be made in the
manner provided in this Section 9.02.
SECTION 9.03 Final Payment with Respect to Any Series. (a)
Written notice of any termination, specifying the Distribution Date upon which
the Investor Certificateholders of any Series may surrender their Investor
Certificates for payment of the final distribution with respect to such series
and cancellation, shall be given (subject to at least 30 days' prior written
notice from the Servicer to the Trustee containing all information required
for the Trustee's notice or such shorter period as is acceptable to the
Trustee) by the Trustee to Investor Certificateholders of such Series mailed
not later than the fifth day of the month of such final distribution
specifying (i) the Distribution Date upon which final payment of the Investor
Certificates will be made upon presentation and surrender of Investor
Certificates at the office or offices therein designated, (ii) the amount of
any such final payment and (iii) that the Record Date otherwise applicable to
such Distribution Date is not applicable, payments being made only upon
presentation and surrender of the Investor Certificates at the office or
offices therein specified. The Servicer's notice to the Trustee in accordance
with the preceding sentence shall be accompanied by an Officer's Certificate
setting forth the information specified in Section 4.04 of the Servicing
Agreement covering the period during the then current calendar year through
the date of such notice. The Trustee shall give such notice to the Transfer
Agent and Registrar and the Paying Agent at the time such notice is given to
such Investor Certificateholders.
(b) Notwithstanding the termination of the Trust pursuant to
subsection 9.01(a) or the occurrence of the Series Termination Date with respect
to any Series pursuant to Section 9.02, all funds then on deposit in the
Collection Account (but only to the extent necessary to pay all outstanding and
unpaid amounts to Holders) shall continue to be held in trust for the benefit of
the Holders and the Paying Agent or the Trustee shall pay such funds to the
Investor Certificateholders upon surrender of their Investor Certificates in
accordance with the terms hereof. Any Investor Certificate not
<PAGE>
108
Pooling Agreement
surrendered on the date specified in subsection 9.03(a)(i) shall cease to
accrue any interest provided for such Investor Certificate from and after such
date. In the event that all of the Investor Certificateholders shall not
surrender their Investor Certificates for cancellation within six months after
the date specified in the above-mentioned written notice, the Trustee shall
give a second written notice to the remaining Investor Certificateholders of
such Series to surrender their Investor Certificates for cancellation and
receive the final distribution with respect thereto. If within one year after
the second notice all the Investor Certificates of such Series shall not have
been surrendered for cancellation, the Trustee may take appropriate steps, or
may appoint an agent to take appropriate steps, to contact the remaining
Investor Certificateholders of such Series concerning surrender of their
Investor Certificates, and the cost thereof shall be paid out of the funds in
the Collection Account held for the benefit of such Investor
Certificateholders. The Trustee and the Paying Agent shall pay to the Company
upon request any monies held by them for the payment of principal or interest
that remains unclaimed for two years and neither the Trustee nor the Paying
Agent shall be liable to any Investor Certificateholder for such payment to
the Company upon its request. After payment to the Company, Holders entitled
to the money must look to the Company for payment as general creditors unless
an applicable abandoned property law designates another Person.
(c) All Investor Certificates surrendered for payment of the
final distribution with respect to such Investor Certificates and cancellation
shall be canceled by the Transfer Agent and Registrar and be disposed of in a
customary manner satisfactory to the Trustee.
SECTION 9.04 Company's Termination Rights. Upon the
termination of the Trust pursuant to Section 9.01 and payment to the Trustee
(in its capacity as such and/or in its capacity as Successor Servicer) of all
amounts owed to it under any Pooling and Servicing Agreement, the Trustee
shall assign and convey to the Company (without recourse, representation or
warranty) in exchange for the Exchangeable Company Interest all right, title
and interest of the Trust in the Trust Assets, whether then existing or
thereafter created, and all proceeds thereof except for amounts held by the
Trustee pursuant to subsection 9.03(b). The Trustee shall execute and deliver
such instruments of transfer and
<PAGE>
109
Pooling Agreement
assignment, in each case without recourse, representation or warranty, as
shall be reasonably requested by the Company to vest in the Company all right,
title and interest which the Trust had in the Trust Assets.
ARTICLE X
Miscellaneous Provisions
SECTION 10.01 Amendment (a) This Agreement, the Servicing
Agreement and each Supplement in respect of an Outstanding Series
(collectively, the "Pooling and Servicing Agreements") may be amended in
writing from time to time by the Servicer, the Company and the Trustee,
without the consent of any Holder, to comply with Section 5.09(b) of this
Agreement, to cure any ambiguity, to correct or supplement any provisions
herein or therein which may be inconsistent with any other provisions herein
or therein or to add any other provisions hereof to change in any manner or
eliminate any of the provisions with respect to matters or questions raised
under any Pooling and Servicing Agreement which shall not be inconsistent with
the provisions of any Pooling and Servicing Agreement; provided, however, that
such action shall not, as evidenced by an Officer's Certificate delivered to
the Trustee upon which the Trustee may conclusively rely, have a material
adverse effect on the interests of the Investor Certificateholders of any
Series which is an Outstanding Series immediately prior to and after giving
effect to such actions (but, to the extent that the determination of whether
such action would have such a material adverse effect requires a conclusion as
to a question of law, an Opinion of Counsel shall be delivered to the Trustee
in addition to such Officer's Certificate); provided further any amendment
that is entered into to provide additional Enhancement for any Outstanding
Series shall be deemed to have no such material adverse effect. The Trustee
may, but shall not be obligated to, enter into any such amendment pursuant to
this paragraph or paragraph (b) below which affects the Trustee's rights,
duties or immunities under any Pooling and Servicing Agreement or otherwise.
(b) Any Pooling and Servicing Agreement and, to the extent
provided in any Pooling and Servicing Agreement, any other agreement relating to
the Receivables may also be amended (other than in the circumstances referred to
in the preceding paragraph (a))
<PAGE>
110
Pooling Agreement
in writing from time to time by the Servicer, the Company and the Trustee with
the consent of Investor Certificateholders evidencing more than 50% of the
Invested Amount of any Series adversely affected in any material respect by
the amendment (or, if any such Series shall have more than one Class of
Investor Certificates adversely affected in any material respect by the
amendment, more than 50% of the Invested Amount of each such Class) for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of such Pooling and Servicing Agreement or such other
agreement or of modifying in any manner the rights of holders of any Series
then issued and outstanding; provided, however, that no such amendment shall
(i) reduce in any manner the amount of, or delay the timing of, distributions
which are required to be made on any Investor Certificate of such Series
without the consent of such Investor Certificateholder of such Series; (ii)
change the definition of or the manner of calculating the interest or fees of
any Investor Certificateholder of such Series without the consent of such
Investor Certificateholder; or (iii) reduce the aforesaid percentage of the
Invested Amount of any adversely affected Series or Class the holders of which
are required to consent to any such amendment without the consent of all
Investor Certificateholders of each Series adversely affected in any material
respect.
(c) Notwithstanding anything in this Section 10.01 to the
contrary, the Supplement with respect to any Series may be amended on the terms
and with the procedures provided in such Supplement.
(d) Promptly after the execution of any such amendment or
consent, the Trustee shall furnish written notification of the substance of such
amendment to each Investor Certificateholder of each Outstanding Series (or with
respect to an amendment of a Supplement, to each Investor Certificateholder of
the applicable Series), and the Servicer shall furnish written notification of
the substance of such amendment to each Rating Agency. No such amendment
(including without limitation, the amendment of any Supplement notwithstanding
anything to the contrary contained in any Supplement) shall be effective until
the Rating Agency Condition has been satisfied.
(e) It shall not be necessary for the consent of Investor
Certificateholders under this Section 10.01 to approve the particular form of
any proposed amendment,
<PAGE>
111
Pooling Agreement
but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Investor Certificateholders shall be
subject to such reasonable requirements as the Trustee may prescribe.
(f) In executing or accepting any amendment pursuant to this
Section 10.01, the Trustee shall, upon request, be entitled to receive and rely
upon (i) an Opinion of Counsel stating that such amendment is authorized
pursuant to a specific provision of a Pooling and Servicing Agreement and
complies with such provision, (ii) a certificate from a Responsible Officer of
the Company stating that such (A) amendment shall not adversely affect the
interests of the holders of any outstanding Investor Certificates in any
material respect except for holders of the Series whose consent to such
amendment has been obtained in accordance with clause (b) of this Section 10.01
and (B) all conditions precedent to the execution and delivery of such amendment
shall have been satisfied in full and (iii) a Tax Opinion.
SECTION 10.02 Protection of Right, Title and Interest to
Trust. The Company shall cause all financing statements and continuation
statements and any other necessary documents covering the Holders' and the
Trustee's right, title and interest to the Trust and the Trust Assets to be
promptly recorded, registered and filed, and at all times to be kept recorded,
registered and filed, all in such manner and in such places as may be required
by law fully to preserve and protect the right, title and interest of the
Trustee hereunder to all property comprising the Trust. The Company shall
deliver to the Trustee copies of, or filing receipts for, any document
recorded, registered or filed as provided above, as soon as available
following such recording, registration or filing. In the event that the
Company fails to file such financing or continuation statements and the
Trustee has received an opinion of counsel, at the expense of the Company,
that such filing is necessary to preserve and to protect the Trustee's right,
title and interest in any Trust Asset then the Trustee shall have the right to
cause to be filed the same on behalf of the Company and the Trustee shall be
reimbursed and indemnified by the Company for making such filing.
SECTION 10.03 Limitation on Rights of Holders. (a) The death
or incapacity of any Holder shall not operate to terminate this Agreement or
the Trust, nor
<PAGE>
112
Pooling Agreement
shall such death or incapacity entitle such Holders' legal representatives or
heirs to claim an accounting or to take any action or commence any proceeding
in any court for a partition or winding up of the Trust, nor otherwise affect
the rights, obligations and liabilities of the parties hereto or any of them.
(b) Except with respect to the Investor Certificateholders
as expressly provided in any Pooling and Servicing Agreement, no Holder shall
have any right to vote or in any manner otherwise control the operation and
management of the Trust, or the obligations of the parties hereto. Nor shall any
Holder be under any liability to any third person by reason of any action taken
by the parties to this Agreement pursuant to any provision hereof.
(c) No Holder shall have any right by virtue of any
provisions of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee written request to institute
such action, suit or proceeding in its own name as Trustee hereunder and shall
have offered to the Trustee such reasonable indemnity as it may require against
the costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee, for 60 days after its receipt of such notice, request and offer of
indemnity, shall have neglected or refused to initiate any such action, suit or
proceeding; it being understood and intended, and being expressly covenanted by
each Holder with every other Holder and the Trustee, that no one or more Holder
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of the Pooling and Servicing Agreements to affect,
disturb or prejudice the rights of any other of the Interests, or to obtain or
seek to obtain priority over or preference to any other such Holder, or to
enforce any right under this Agreement, except in the manner herein provided and
for the equal, ratable and common benefit of all Holders. For the protection and
enforcement of the provisions of this Section 10.03, each and every Holder and
the Trustee shall be entitled to such relief as can be given either at law or in
equity.
(d) By their acceptance of Interests pursuant to this
Agreement and the applicable Supplement, the Holders agree to the provisions of
this Section 10.03.
<PAGE>
113
Pooling Agreement
SECTION 10.04 Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 10.05 Notices. All notices, requests and demands to
or upon the respective parties hereto to be effective shall be in writing
(including by telecopy), and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or
three days after being deposited in the mail, postage prepaid, or, in the case
of telecopy notice, when received, addressed as follows in the case of the
Company, the Servicer and the Trustee, or to such other address as may be
hereafter notified by the respective parties hereto:
The Company:
AAM Receivables Corp.
1840 Holbrook Avenue; Suite 2A
Detroit, MI 48212
Attention of: Mark Umlauf
Telecopy: (313) 873-5472
with a copy to the Servicer
The Servicer:
American Axle & Manufacturing, Inc.
1840 Holbrook Avenue
Detroit, MI 48212
Attention of: Gary Witosky
Telecopy: (313) 974-2229
The Trustee:
The Chase Manhattan Bank
450 West 33rd Street, 14th Floor
New York, New York 10001
Attention of: Structured Finance Services,
AAM Master Trust
Telecopy: (212) 946-3916
Any notice required or permitted to be mailed to a Holder shall be given by
first-class mail, postage prepaid, at the address of such Holder as shown in the
Certificate Register, the Exchange Register or the Subordinated Interest
Register, as the case may be. Any notice so mailed within the time prescribed in
any Pooling and
<PAGE>
114
Pooling Agreement
Servicing Agreement shall be conclusively presumed to have been duly given,
whether or not the Holder receives such notice.
SECTION 10.06 Severability of Provisions. If any one or more
of the covenants, agreements, provisions or terms of any Pooling and Servicing
Agreement shall for any reason whatsoever be held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of such Pooling and
Servicing Agreement and shall in no way affect the validity or enforceability
of the other provisions of any Pooling and Servicing Agreement or of the
Investor Certificates or rights of the Holders.
SECTION 10.07 Assignement. Notwithstanding anything to the
contrary contained herein, except as provided in Section 5.03 of the Servicing
Agreement, no Pooling and Servicing Agreement may be assigned by the Company
or the Servicer without the prior written consent of the Trustee acting on
behalf of the holders of 66-2/3% of the Invested Amount of each Outstanding
Series and without the Rating Agency Condition having been satisfied with
respect to such assignment.
SECTION 10.08 Investor Certificates Nonassessable and Fully
Paid. It is the intention of the parties to each Pooling and Servicing
Agreement that the Investor Certificateholders shall not be personally liable
for obligations of the Trust, that the interests in the Trust represented by
the Investor Certificates shall be nonassessable for any losses or expenses of
the Trust or for any reason whatsoever and that Investor Certificates upon
authentication thereof by the Trustee pursuant to Section 5.02 are and shall
be deemed fully paid.
SECTION 10.09 Further Assurances. The Company and the Servicer
agree to do and perform, from time to time, any and all acts and to execute
any and all further instruments required or reasonably requested by the
Trustee more fully to effect the purposes of each Pooling and Servicing
Agreement, including, without limitation, the execution of any financing
statements or continuation statements relating to the Receivables for filing
under the provisions of the UCC of any applicable jurisdiction.
SECTION 10.10 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the
<PAGE>
115
Pooling Agreement
part of the Trustee or the Investor Certificateholders, any right, remedy,
power or privilege, hereunder, shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of
any other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exhaustive of any rights,
remedies, powers and privileges provided by law.
SECTION 10.11 Counterparts. This Agreement may be executed
in two or more counterparts (and by different parties on separate
counterparts), each of which shall be an original, but all of which together
shall constitute one and the same instrument.
SECTION 10.12 Third-Party Beneficiaries. This Agreement will
inure to the benefit of and be binding upon the parties hereto, the Holders
and their respective successors and permitted assigns. Except as otherwise
provided in this Section 10.12, no other Person will have any right or
obligation hereunder.
SECTION 10.13 Actions by Investor Certificateholders. (a)
Wherever in any Pooling and Servicing Agreement a provision is made that an
action may be taken or a notice, demand or instruction given by Investor
Certificateholders, such action, notice or instruction may be taken or given
by any Investor Certificateholders of any Series, unless such provision
requires a specific percentage of Investor Certificateholders of a certain
Series or all Series.
(b) Any request, demand, authorization, direction, notice,
consent, waiver or other act by an Investor Certificateholder shall bind such
Investor Certificateholder and every subsequent holder of such Investor
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done or omitted to be done by
the Trustee, the Company, or the Servicer in reliance thereon, whether or not
notation of such action is made upon such Investor Certificate.
SECTION 10.14 Merger and Integration. Except as specifically
stated otherwise herein, this Agreement and the Servicing Agreement set forth
the entire understanding of the parties relating to the subject matter hereof,
and all prior understandings, written or oral, are superseded by this
Agreement and the Servicing
<PAGE>
116
Pooling Agreement
Agreement. This Agreement and the Servicing Agreement may not be modified,
amended, waived, or supplemented except as provided herein.
SECTION 10.15 Headings. The headings herein are for purposes
of reference only and shall not otherwise affect the meaning or interpretation
of any provision hereof.
SECTION 10.16 Construction of Agreement. (a) The Company
hereby grants to the Trustee, for the benefit of the Holders, a security
interest in all of the Company's right, title and interest in, to and under the
Receivables and the other Trust Assets now existing and hereafter created, all
monies due or to become due and all amounts received with respect thereto and
all "proceeds" thereof (including Recoveries), to secure all of the Company's
and the Servicer's obligations hereunder, including, without limitation, the
Company's obligation to sell or transfer Receivables hereafter created to the
Trust.
(b) This Agreement shall constitute a security agreement
under applicable law.
SECTION 10.17 No Setoff. Except as expressly provided in this
Agreement or any other Transaction Document, the Trustee agrees that it shall
have no right of setoff or banker's lien against, and no right to otherwise
deduct from, any funds held in the Collection Account for any amount owed to it
by the Company, the Servicer or any Holder.
SECTION 10.18 No Bankruptcy Petition. Each of the Trustee and
the Servicer hereby covenants and agrees that, prior to the date which is one
year and one day after the date of the end of the Amortization Period with
respect to all Outstanding Series, it will not institute against, or join any
other Person in instituting against, the Company any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any federal or state bankruptcy or similar law.
SECTION 10.19 Limitation of Liability. It is expressly
understood and agreed by the parties hereto that (a) each Pooling and
Servicing Agreement is executed and delivered by the Trustee, not individually
or personally but solely as Trustee of the Trust, in the exercise of the
powers and authority conferred and vested
<PAGE>
117
Pooling Agreement
in it, (b) except with respect to Section 8.15 hereof the representations,
undertakings and agreements herein made on the part of the Trust are made and
intended not as personal representations, undertakings and agreements by the
Trustee, but are made and intended for the purpose of binding only the Trust,
(c) nothing herein contained shall be construed as creating any liability on
the Trustee, individually or personally, to perform any covenant either
expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties who are signatories to this Agreement and by
any Person claiming by, through or under such parties; provided, however, the
Trustee shall be liable in its individual capacity for its own wilful
misconduct or gross negligence and for any tax assessed against the Trustee
based on or measured by any fees, commission or compensation received by it
for acting as Trustee and (d) under no circumstances shall the Trustee be
personally liable for the payment of any indebtedness or expenses of the Trust
or be liable for the breach or failure of any obligation, representation,
warranty or covenant made or undertaken by the Trust under any Pooling and
Servicing Agreement; provided further that the foregoing clauses (a) through
(d) shall survive the resignation or removal of the Trustee.
The Company hereby agrees to indemnify and hold harmless the
Trustee and the Trust (for the benefit of the Holders) (each, an "Indemnified
Person") from and against (i) any state or local income, franchise or single
business tax that is imposed on or assessed against the Trust (rather than the
Company), and (ii) any loss, liability, expense, damage or injury suffered or
sustained by reason of any acts, omissions or alleged acts or omissions arising
out of, or relating to, activities of the Company pursuant to any Pooling and
Servicing Agreement to which it is a party, including but not limited to any
judgment, award, settlement, reasonable attorneys' fees and other reasonable
costs or expenses incurred in connection with the defense of any actual or
threatened action, proceeding or claim, except to the extent such loss,
liability, expense, damage or injury resulted from the gross negligence, bad
faith or wilful misconduct of an Indemnified Person or resulted from the
performance of any Receivable, market fluctuations or other market or investment
risk not attributable to acts or omissions or alleged acts or omissions of the
Company provided, however, that any payments to be made by the Company pursuant
to this subsection shall be Company Subordinated Obligations.
<PAGE>
118
Pooling Agreement
SECTION 10.20 Certain Information. The Servicer and the
Company shall promptly provide to the Trustee such information in computer
tape, hard copy or other form regarding the Receivables as the Trustee may
reasonably determine to be necessary to perform its obligations hereunder and
under the Servicing Agreement.
<PAGE>
Pooling Agreement
IN WITNESS WHEREOF, the Company, the Servicer and the Trustee
have caused this Pooling Agreement to be duly executed by their respective
officers as of the day and year first above written.
AAM RECEIVABLES CORP.,
by
-----------------------------------------
Name:
Title:
AMERICAN AXLE &
MANUFACTURING, INC.,
as Servicer,
by
-----------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
not in its individual
capacity but solely as
Trustee,
by
-----------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A to the
POOLING AGREEMENT
[FORM OF LOCKBOX AGREEMENT]
, 1999
[Name and address of Lockbox Bank]
Attention:
Ladies and Gentlemen:
AAM Receivables Corp., a Delaware corporation (the "Company"),
has agreed to purchase certain receivables (the "Receivables") from American
Axle & Manufacturing, Inc. ("AAMI, in its capacity as seller, the "Seller", and
in its capacity as servicer pursuant to the Transaction Documents, the
"Servicer") pursuant to the Receivables Sale Agreement, dated as of October 29,
1997, as amended and restated as of March 25, 1999 (as amended, supplemented or
otherwise modified from time to time, the "Receivables Sale Agreement"), between
AAMI and the Company. The Company has in turn assigned the Receivables to a
master trust (the "Master Trust") pursuant to a Pooling Agreement, dated as of
October 29, 1997, as amended and restated as of March 25, 1999 (as amended,
supplemented or otherwise modified from time to time, the "Pooling Agreement"),
among the Company, the Servicer and The Chase Manhattan Bank, a New York banking
corporation, as trustee (the "Trustee"). The Receivables are serviced pursuant
to the terms of a Servicing Agreement, dated as of October 29, 1997, as amended
and restated as of March 25, 1999 (as the same may be amended, supplemented or
otherwise modified from time to time, the "Servicing Agreement"; and,
collectively with the Pooling Agreement, the "Pooling and Servicing Agreements")
among the Company, the Servicer and the Trustee. Capitalized terms used herein
but not defined herein shall have the meanings assigned to such terms in the
Pooling Agreement.
Pursuant to the terms of the Pooling and Servicing Agreements
and except as otherwise provided therein, (i) the Servicer has agreed to
instruct all Obligors under the Receivables to make all payments in respect of
such Receivables to a blocked deposit account (each, a "Lockbox Account")
designated by the Servicer to such Obligor and (ii) the Company has agreed to
grant a security interest in its right, title and interest in each Lockbox
Account and all funds and other evidences of
<PAGE>
2
Pooling Agreement
payment held therein to the Trustee. Furthermore, the Company, the Servicer
and the Trustee have agreed, pursuant to the Pooling and Servicing Agreements,
to enter into an agreement with each bank maintaining a Lockbox Account and
hereby request that [name of Lockbox Bank] (the "Lockbox Bank") act as, and
the Lockbox Bank hereby agrees to act as, a lockbox deposit bank for the
Company with respect to the Lockbox Account. This Letter Agreement defines
certain rights and obligations with respect to the appointment of the Lockbox
Bank.
Accordingly, the Company, the Servicer, the Trustee and the
Lockbox Bank agree as follows:
Reference is made to the Lockbox Account (Account No. ),
including box number thereunder (collectively, the "Specified Account"),
maintained with you by the Servicer. The Servicer hereby transfers the Specified
Account to the Company and hereafter the Specified Account shall be in the name
of the Company and maintained by the Lockbox Bank for the benefit of the Company
and the Trustee, as set forth herein. All funds and other evidences of payment
received by the Lockbox Bank in its capacity as Lockbox Bank shall be deposited
in the Specified Account. Such payments shall not be commingled with other
funds. All funds and other evidences of payment at any time on deposit in the
Specified Account shall be held by the Lockbox Bank for application strictly in
accordance with the terms of this Letter Agreement. The Lockbox Bank agrees to
give the Trustee, the Company and the Servicer prompt notice if the Specified
Account shall become subject to any writ, judgment, warrant of attachment,
execution or similar process.
The Trustee shall have sole and exclusive dominion over and
control of the Specified Account and all Collections and other property from
time to time deposited therein, and shall have the sole right of withdrawal from
the Specified Account. Each of the Company and the Servicer acknowledges and
agrees that it shall not have any dominion over or control of the Specified
Account or any Collections or other property from time to time deposited therein
including any right to withdraw or utilize any funds or other evidences of
payment on deposit in the Specified Account, other than the right to authorize
transfers to the Collection Account as set forth herein and pursuant to the
terms of the Pooling and Servicing Agreements. The Lockbox Bank shall
automatically, by 1:00 p.m., New York City time, at
<PAGE>
3
Pooling Agreement
least as often as once each day that is a business day for the Lockbox Bank
and for the Trustee, transfer, by means of the Automated Clearing House
System, all available funds on deposit in the Specified Account, including all
funds transferred from Obligors on or before the end of the preceding day,
along with, subject to the next succeeding sentence, all remittance
advisements and payment invoices on deposit therein, to the Collection
Account. The Lockbox Bank acknowledges that, until it receives instructions
from the Trustee to the contrary, the Lockbox Bank shall return to the
Company, upon the Company's reasonable request therefor, any remittance
advisements and payment invoices deposited into the Specified Account.
Deposited checks with respect to the Specified Account
returned to the Lockbox Bank for any reason will be charged against the
Specified Account. Nothing contained in the previous sentence shall be construed
to prejudice other rights of the Lockbox Bank, which rights include the right of
recourse against the Company for any overdrafts in the Specified Account.
The Trustee is authorized to receive mail delivered to the
Lockbox Bank with respect to the Specified Account and the Company has filed a
form of standing delivery order with the United States Postal Service
authorizing the Trustee to receive mail delivered to the Lockbox Bank with
respect to the Specified Account.
The Lockbox Bank shall also furnish the Trustee with
statements, in the form and manner typical for the Lockbox Bank, of amounts of
deposits in, and amounts transferred to the Collection Account from, the
Specified Account pursuant to any reasonable request of the Trustee but in any
event not less frequently than monthly and such other information relating to
the Specified Account at such times as shall be reasonably requested by the
Trustee.
For purposes of this Letter Agreement, any officer of the
Trustee shall be authorized to act, and to give instructions and notice, on
behalf of the Trustee hereunder.
The fees for the services of the Lockbox Bank shall be
mutually agreed upon between the Company and the Lockbox Bank and paid by the
Company. Neither the Trustee nor any investor in the Master Trust shall have
<PAGE>
4
Pooling Agreement
any responsibility or liability for the payment of any such fee.
The Lockbox Bank may perform any of its duties hereunder by or
through its officers, employees or agents and shall be entitled to rely upon the
advice of counsel as to its duties. The Lockbox Bank shall not be liable to the
Trustee, the Servicer or the Company for any action taken or omitted to be taken
by it in good faith, nor shall the Lockbox Bank be responsible to the Trustee,
the Servicer or the Company for the consequences of any oversight or error of
judgment or be answerable to the Trustee for the same, unless such action,
omission, oversight or error of judgment shall happen through the Lockbox Bank's
negligence or willful misconduct.
The Lockbox Bank hereby represents and warrants that (a) it is
a banking corporation duly organized, validly existing and in good standing
under the laws of [ ] and has full corporate power and authority under such laws
to execute, deliver and perform its obligations under this Agreement and (b) the
execution, delivery and performance of this Agreement by the Lockbox Bank have
been duly and effectively authorized by all necessary corporate action and this
Agreement has been duly executed and delivered by the Lockbox Bank and
constitutes a valid and binding obligation of the Lockbox Bank enforceable in
accordance with its terms.
The Lockbox Bank may resign at any time as Lockbox Bank
hereunder by delivery to the Trustee and the Company of written notice of
resignation not less than 30 days prior to the effective date of such
resignation. The Company may, with the written consent of the Trustee, and, if
the Company shall refuse any demand by the Trustee to do so in the event (i) an
Early Amortization Period shall have occurred and be continuing or (ii) there
has been a failure by the Lockbox Bank to perform any of its material
obligations hereunder and such failure could adversely affect the Trustee's
interest in any Receivable or the Trustee's rights, or ability to exercise any
remedies, under this Letter Agreement or the Pooling and Servicing Agreements,
the Trustee may close the Specified Account at any time by delivery of notice to
the Lockbox Bank and the Company at the addresses appearing below. This Letter
Agreement shall terminate upon receipt of such notice of closing, or delivery of
such notice of resignation, except that the Lockbox Bank shall immediately
transfer to the Collection Account, or any other account designated by the
Trustee all available
<PAGE>
5
Pooling Agreement
funds or, subject to the Company's reasonable request to retain such items,
any remittance advisements or payment invoices, if any, then on deposit in, or
otherwise to the credit of, the Specified Account and deliver any available
funds or such remittance advisements or payment invoices relating to the
Receivables received by the Lockbox Bank after such notice directly to the
Collection Account or any other account designated by the Trustee.
All notices and communications hereunder shall be in writing
(except where telephonic instructions or notices are authorized herein) and
shall be deemed to have been received and shall be effective on the day on which
delivered (including delivery by telex):
(i) in the case of the Trustee, to it at:
The Chase Manhattan Bank
450 West 33rd Street, 14th Floor
New York, NY 10011
Attention: Structured Finance Services,
AAM Master Trust
Telecopy No.: (212) 946-3916
(ii) in the case of the Lockbox Bank, to it at:
Attention:
Telecopy No.:
(iii) in the case of the Company, to it at:
AAM Receivables Corp.
1840 Holbrook Avenue, Suite 2A
Detroit, MI 48212
Attention: Mark Umlauf
Telecopy No.: (313) 873-5472
<PAGE>
6
Pooling Agreement
(iv) in the case of the Servicer, to it at:
American Axle & Manufacturing, Inc.
1840 Holbrook Avenue
Detroit, MI 48212
Attention: Gary Witosky
Telecopy No.: (313) 974-2229
The Lockbox Bank shall not assign or transfer any of its
rights or obligations hereunder (other than to the Trustee) without the prior
written consent of the Trustee. This Letter Agreement may be amended only by a
written instrument executed by the Company, the Servicer, the Trustee and the
Lockbox Bank, acting by their representative officers thereunto duly authorized.
Except with respect to the amount of its fees payable hereunder, the Lockbox
Bank hereby unconditionally and irrevocably waives (so long as the Pooling and
Servicing Agreements are in effect) any rights of setoff or banker's lien
against, or to otherwise deduct from, any funds or other evidences of payment
held in any Specified Account for any indebtedness or other claim owed by the
Company or the Servicer to the Lockbox Bank.
THIS LETTER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF THE SECURITY INTEREST OR REMEDIES HEREUNDER IN RESPECT
OF ANY RECEIVABLE MAY BE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN NEW
YORK.
This Letter Agreement (i) shall inure to the benefit of, and
be binding upon, the Company, the Servicer, the Trustee, the Lockbox Bank and
their respective successors and assigns and (ii) may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. Delivery of an executed
counterpart of a signature page to this Letter Agreement by facsimile
transmission shall be effective as delivery of a manually executed counterpart
of this Letter Agreement.
<PAGE>
Pooling Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Letter
Agreement to be executed by their duly authorized officers as of the date first
above written.
Very truly yours,
AAM RECEIVABLES CORP.,
by
-----------------------------
Title:
AMERICAN AXLE & MANUFACTURING,
INC., as Servicer,
by
-----------------------------
Title:
Agreed to and accepted:
[NAME OF LOCKBOX BANK],
as Lockbox Bank
by
--------------------------
Title:
THE CHASE MANHATTAN BANK,
as Trustee
by
--------------------------
Title:
<PAGE>
Exhibit B to the
Pooling Agreement
FORM OF ANNUAL OPINION OF COUNSEL
PROVISIONS TO BE INCLUDED
IN ANNUAL OPINION OF COUNSEL DELIVERED PURSUANT TO
SECTION 2.07(b) OF THE POOLING AGREEMENT ON JANUARY 31,
OF EACH YEAR COMMENCING WITH JANUARY , 2000
The opinion set forth below, which is to be delivered pursuant
to Section 2.07(b) of the Pooling Agreement, dated as of October 29, 1997, as
amended and restated as of March 25, 1999, among AAM Receivables Corp., American
Axle & Manufacturing, Inc. ("AAMI"), as Servicer, and The Chase Manhattan Bank,
as Trustee, may be subject to certain qualifications, assumptions, limitations
and exceptions taken or made in the opinions of counsel delivered on the Initial
Issuance Date with respect to similar matters. In addition, the opinion may
contain the following qualification as applicable:
With your permission, we have based our opinions set forth in paragraphs
1, 2 and 3 below as they relate to the laws of [states in which the
opiner does not have an office] (each a "UCC State") solely upon our
review of the relevant provisions of Sections 9-102, 9-103, 9-105,
9-106, 9-302, 9-304, 9-306, 9-401, 9-402 and 9-403 [and such additional
Sections as the opiner may determine] of the Uniform Commercial Code as
enacted in each UCC State as set forth in [the CCH Secured Transactions
Guide or a similar compilation]. We have assumed such provisions are
presently in effect and have not been modified in any respect by any
other statute, regulation or court decision with respect to the laws of
each such UCC State or otherwise. We call to your attention that we are
not licensed to practice in any of the UCC States nor do we profess any
expertise with respect to the laws thereof.
1. With respect to the transfer by AAMI, as Seller (the
"Seller") to AAM Receivables Corp. of all of the Seller's right, title and
interest in, to and under the Receivables, Related Property, Collections and all
rights (including rescission, replevin or reclamation) relating to any
Receivable originated by the Seller or arising therefrom (collectively, the
"Seller Property") pursuant to the terms of the Receivables Sale Agreement,
dated as of October 29, 1997, as amended and restated as of March 25, 1999 (as
amended, supplemented or otherwise modified thereafter, the "Receivables Sale
Agreement"), between AAM Receivables Corp. and the Seller, no filing or other
action, other than such filing or action
<PAGE>
2
Pooling Agreement
described in the [opinions of counsel delivered on the Initial Issuance Date]
[or the opinions delivered on January 31 of the prior year pursuant to Section
2.07(b) of the Pooling Agreement] with respect to similar matters, is
necessary from the date of such opinions through 90 days into the following
calendar year to continue the perfected and priority status of the interest of
AAM Receivables Corp. in such Seller Property.
2. With respect to the transfer by AAM Receivables Corp. to
the Trust of all of AAM Receivables Corp.'s right, title and interest in, to and
under the Receivables and the other Trust Assets (as defined in the Pooling
Agreement) (collectively, the "Trust Property") pursuant to the terms of the
Pooling Agreement, no filing or other action, other than such filing or action
described in the [opinions of counsel delivered on the initial Issuance Date]
[or the opinions delivered on January 31 of the prior year pursuant to Section
2.07(b) of the Pooling Agreement] with respect to similar matters is necessary
from the date of such opinions through 90 days into the following calendar year
to continue the perfected and priority status of the interest of the Trust in
such Trust Property.
3. Set forth on Schedule __ to this opinion is a list of all
UCC Financing Statements which have been filed by the Seller relating to the
Seller Property and by AAM Receivables Corp. relating to the Trust Property and
the earliest and latest date under the applicable UCC on which continuation
statements may be filed for each such financing statement.(1)
- --------
(1) In the event that the earliest date for filing any continuation statement
occurs prior to January 30 of the following year, such opinion shall also
be delivered to the Seller, AAM Receivables Corp. and the Servicer with a
notice stating that such continuation statements shall be filed on such
earliest date.
<PAGE>
Schedule 1 to the
POOLING AGREEMENT
Receivables
American Axle & Manufacturing, Inc. aged trial balance as of
October 24, 1997, on computer diskette.
<PAGE>
SCHEDULE 2 to the
POOLING AGREEMENT
Identification of Trust Accounts
The following accounts have been established by and at the
Chase Manhattan Bank.
Name Number
Collection Account 507-831454
Company Collection Subaccount 507-830555
<PAGE>
SCHEDULE 3 to the
POOLING AGREEMENT
Chief Executive Office
AAM Receivables Corp.
1840 Holbrook Avenue, Suite 2A
Detroit, Michigan 48212
<PAGE>
EXHIBIT 10.16(a)
EXECUTION COPY
================================================================================
AAM MASTER TRUST
SERIES 1999-A SUPPLEMENT
TO
POOLING AGREEMENT
Among
AAM RECEIVABLES CORP.
AMERICAN AXLE & MANUFACTURING, INC.
as Servicer
and
THE CHASE MANHATTAN BANK
as Trustee
Dated as of March 25, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
-----
ARTICLE I
Definitions
SECTION 1.01 Definitions..................................................1
ARTICLE II
Designation of VFC Certificates; Purchase and
Sale of the VFC Certificates
SECTION 2.01 Designation ................................................16
SECTION 2.02 The VFC Certificates and Series 1999-A
Subordinated Interest ....................................16
SECTION 2.03 Purchases of Interests in the VFC
Certificates and the Series 1999-A
Subordinated Interest ....................................17
SECTION 2.04 Delivery ...................................................17
SECTION 2.05 Procedure for Initial Issuance and for
Increasing the Series 1999-A Invested
Amount ...................................................18
SECTION 2.06 Procedure for Decreasing the Series
1999-A Invested Amount; Optional
Termination ..............................................19
SECTION 2.07 Reductions of the Commitments...............................20
SECTION 2.08 Interest; Commitment Fee....................................21
SECTION 2.09 Indemnification by the Company and
the Servicer .............................................22
ARTICLE III
Article III of the Agreement
SECTION 3A.02. Establishment of Trust Accounts.............................23
SECTION 3A.03. Daily Allocations...........................................24
SECTION 3A.04. Determination of Interest...................................26
SECTION 3A.05. Determination of Series 1999-A Monthly
Principal ................................................28
SECTION 3A.06. Applications ...............................................29
ARTICLE IV
Distributions and Reports
SECTION 4A.01. Distributions...............................................31
i
<PAGE>
SECTION 4A.02. Daily Reports...............................................31
SECTION 4A.03. Statements and Notices......................................32
ARTICLE V
Additional Early Amortization Events
SECTION 5.01 Additional Early Amortization Events........................33
ARTICLE VI
Servicing Fee
SECTION 6.01 Servicing Compensation.....................................36
ARTICLE VII
Change in Circumstances
SECTION 7.01 Illegality ................................................36
SECTION 7.02 Requirements of Law........................................37
SECTION 7.03 Taxes .....................................................39
SECTION 7.04 Indemnity .................................................41
SECTION 7.05 Assignment of Commitments Under Certain
Circumstances; Duty to Mitigate ...........................42
SECTION 7.06 Limitation ................................................43
ARTICLE VIII
Covenants, Representations and Warranties
SECTION 8.01 Representations and Warranties of the
Company and the Servicer...................................43
SECTION 8.02 Covenants of the Company and the Servicer..................43
SECTION 8.03 Covenants of the Servicer..................................44
SECTION 8.04 Covenant of the Company....................................45
SECTION 8.05 Obligations Unaffected.....................................45
SECTION 8.06 Representations and Warranties of
the Initial Purchasers and any
Acquiring Purchasers......................................46
ARTICLE IX
Conditions Precedent
SECTION 9.01 Conditions Precedent to Effectiveness
of Supplement ...........................................46
ARTICLE X
The Agent
ii
<PAGE>
SECTION 10.01 Appointment ...............................................50
SECTION 10.02 Delegation of Duties.......................................50
SECTION 10.03 Exculpatory Provisions.....................................50
SECTION 10.04 Reliance by Agent..........................................51
SECTION 10.05 Notice of Servicer Default or Early
Amortization Event or Potential
Early Amortization Event ................................51
SECTION 10.06 Non-Reliance on Agent and Other
Purchasers ..............................................52
SECTION 10.07 Indemnification............................................52
SECTION 10.08 Agent in Its Individual Capacity...........................53
SECTION 10.09 Successor Agent............................................53
ARTICLE XI
Miscellaneous
SECTION 11.01 Ratification of Agreement..................................53
SECTION 11.02 Governing Law..............................................53
SECTION 11.03 Further Assurances.........................................53
SECTION 11.04 Payments...................................................54
SECTION 11.05 Costs and Expenses.........................................54
SECTION 11.06 No Waiver; Cumulative Remedies.............................54
SECTION 11.07 Amendments.................................................54
SECTION 11.08 Severability...............................................56
SECTION 11.09 Notices....................................................56
SECTION 11.10 Successors and Assigns.....................................56
SECTION 11.11 Counterparts...............................................60
SECTION 11.12 Adjustments; Setoff........................................61
SECTION 11.13 Limitation of Payments by Company..........................61
SECTION 11.14 No Bankruptcy Petition.....................................62
ARTICLE XII
Final Distributions
SECTION 12.01 Certain Distributions......................................62
iii
<PAGE>
Series 1999-A Supplement
------------------------
SERIES 1999-A SUPPLEMENT dated as of March 25,
1999 (this "Supplement"), among AAM RECEIVABLES
CORP., a Delaware corporation (the "Company"),
AMERICAN AXLE & MANUFACTURING, INC., a Delaware
corporation, as servicer (the "Servicer"), the
financial institutions parties hereto on the date
hereof (the "Initial Purchasers") and the financial
institutions from time to time parties hereto as
purchasers pursuant to Section 11.10, THE CHASE
MANHATTAN BANK, a New York banking corporation, as
agent (the "Agent") for the Purchasers (as
hereinafter defined) in its individual capacity and
not as Trustee and THE CHASE MANHATTAN BANK, in its
capacity as trustee (the "Trustee") under the
Agreement.
W I T N E S S E T H :
WHEREAS, the Company, the Servicer and the Trustee have
entered into the Pooling Agreement, dated as of October 29, 1997, as amended and
restated as of the date hereof (as amended, supplemented or otherwise modified
from time to time, the "Agreement");
WHEREAS, the Agreement provides, among other things, that the
Company, the Servicer and the Trustee may at any time and from time to time
enter into supplements to the Agreement for the purpose of authorizing the
issuance on behalf of the Trust by the Company for execution and redelivery to
the Trustee for authentication of one or more Series of Investor Certificates;
and
WHEREAS, the Company, the Servicer, and the Trustee wish to
supplement the Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, and other good and valuable consideration,
the receipt and sufficiency of which are hereby expressly acknowledged, the
parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. (a) The following words and phrases shall have
the following meanings with respect to Series 1999-A and the definitions of such
terms are applicable to
1
<PAGE>
the singular as well as the plural form of such terms and to the masculine as
well as the feminine and neuter genders of such terms:
"ABR" shall mean, for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the
Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. If for any reason, the Agent shall have
determined (which determination shall be conclusive absent manifest error) that
it is unable to ascertain the Federal Funds Effective Rate for any reason,
including the failure of the Federal Reserve Bank of New York to publish rates
or the inability of the Agent to obtain quotations in accordance with the terms
thereof, the ABR shall be determined without regard to clause (b) of the
immediately preceding sentence until the circumstances giving rise to such
inability no longer exist. Any change in the ABR due to a change in the Prime
Rate or the Federal Funds Effective Rate shall be effective on the effective
date of such change in the Prime Rate or the Federal Funds Effective Rate,
respectively. The term "Prime Rate" shall mean the rate of interest per annum
publicly announced from time to time by the Agent as its prime rate in effect at
its principal office in New York City; each change in the Prime Rate shall be
effective on the date such change is publicly announced as being effective. The
term "Federal Funds Effective Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the average of
the quotations for the day for such transactions received by the Agent from
three Federal funds brokers of recognized standing selected by it.
"Accrual Period" shall mean, with respect to Series 1999-A,
the period from and including a Distribution Date to but excluding the next
succeeding Distribution Date; provided further that in the case of the initial
Accrual Period, it shall mean the period from and including the Issuance Date to
but excluding the next succeeding Distribution Date.
"Accrued Expense Adjustment" shall mean, for any Business Day
in any Accrual Period, the amount, if any, which may be less than zero, equal to
the difference between (a) the entire amount of (i) the Commitment Fee, if any,
due and payable on the next succeeding Distribution Date, (ii) the Series 1999-A
Monthly Interest to be distributed on the next succeeding Distribution Date,
(iii) the Series 1999-A Monthly Servicing Fee, (iv) the aggregate amount of all
previously accrued, unpaid and unallocated Series 1999-A Monthly Interest for
prior Distribution Dates, (v) the aggregate amount of all accrued, unpaid and
unallocated Additional Interest and (vi) all accrued Program Costs, in each case
for such Accrual Period determined as of such day, and (b) the aggregate of the
amounts transferred to the
2
<PAGE>
Series 1999-A Non-Principal Collection Sub-subaccount on or before such day in
respect of such Accrual Period pursuant to subsection 3A.03(a)(i), before giving
effect to any transfer made in respect of the Accrued Expense Adjustment on such
day pursuant to the proviso contained in such subsection.
"Accrued Expense Amount" shall mean, for each Business Day
during an Accrual Period, the sum of (a) for Eurodollar Tranches, in the case of
each of the first ten Business Days in the Accrual Period, one-tenth of the
Series 1999-A Monthly Interest determined as of such Business Day, (b) in the
case of each of the first ten Business Days in the Accrual Period, one-tenth of
the Commitment Fee payable to the VFC Certificate holders on the next succeeding
Distribution Date, (c) in the case of each of the first ten Business Days in the
Accrual Period, one-tenth of the Series 1999-A Monthly Servicing Fee (in the
case of each of the foregoing clauses (a) through (c), up to the amount thereof
due and payable on such next succeeding Distribution Date, but subject to
Accrued Expense Adjustments as provided in subsection 3A.03(a)(i)), (d) the
aggregate amount of all previously accrued, unpaid and unallocated Series 1999-A
Monthly Interest for prior Distribution Dates, (e) the aggregate amount of all
accrued, unpaid and unallocated Additional Interest and (f) all Program Costs
that have accrued since the preceding Business Day.
"Acquiring Purchaser" shall have the meaning assigned in
subsection 11.10(b).
"Additional Interest" shall have the meaning assigned in
subsection 3A.04(b).
"Agent" shall have the meaning specified in the recitals
hereto.
"Aggregate Commitment Amount" shall mean, with respect to any
Business Day, the aggregate amount of the Commitments of all Purchasers on such
date, as reduced from time to time pursuant to Section 2.07.
"Aggregate Receivables Amount" shall mean with respect to any
date of determination, the aggregate Principal Amount of all Eligible
Receivables in the Trust at the end of the Business day immediately preceding
such date; provided that notwithstanding anything to the contrary contained
herein, during any GMT/PPAP Rejection Period, no Tooling Receivables relating to
the GMT 800 Program shall be included in the calculation of the Aggregate
Receivables Amount.
"Applicable Margin" shall mean at any date of determination,
1.25% per annum.
"Article VII Costs" shall mean any amounts due pursuant to
Article VII.
3
<PAGE>
"Available Commitment" shall mean, with respect to any
Business Day, the (i) Aggregate Commitment Amount on such Business Day minus
(ii) the Series 1999-A Invested Amount.
"Available Pricing Amount" shall mean, on any Business Day,
the sum of (i) the Unallocated Balance plus (ii) the Increase, if any, on such
date.
"Benefitted Purchaser" shall have the meaning assigned in
Section 11.12.
"Carrying Cost Reserve Ratio" shall mean, as of any Settlement
Report Date and continuing until (but not including) the next Settlement Report
Date, an amount (expressed as a percentage) equal to (a) the product of (i) 2.0
times Days Sales Outstanding as of such day and (ii) 1.50 times the Certificate
Rate in effect as of such day divided by (b) 365.
"Certificate Rate" shall mean on any date of determination,
the average (weighted based on the respective outstanding amounts of each
Eurodollar Tranche) of One-Month LIBOR then in effect plus, in each case, the
Applicable Margin.
"Change in Control" shall mean the occurrence of any event the
result of which causes the Company not to be a direct or indirect, wholly owned
Subsidiary of American Axle & Manufacturing, Inc.
"Claim" shall have the meaning specified in subsection
2.09(a).
"Code" shall mean the Internal Revenue Code (as defined in the
Pooling Agreement).
"Commitment" shall mean, as to any Purchaser, its obligation
to maintain and, subject to certain conditions, increase, its Series 1999-A
Purchaser Invested Amount, in an aggregate amount not to exceed at any one time
outstanding the amount set forth opposite such Purchaser's name on Schedule 1
under the caption "Commitment", as such amount may be reduced from time to time
as provided herein; collectively, as to all Purchasers, the "Commitments".
"Commitment Fee" shall have the meaning assigned in subsection
2.08(b).
"Commitment Percentage" shall mean, as to any Purchaser and as
of any date, the percentage equivalent of a fraction, the numerator of which is
such Purchaser's Commitment as set forth on Schedule 1 and the denominator of
which is the Aggregate Commitment Amount as of such date.
"Commitment Period" shall mean the period commencing on the
Issuance Date and terminating on the date that the Series 1999-A Amortization
Period commences.
4
<PAGE>
"Commitment Reduction" shall have the meaning assigned in
subsection 2.07(a).
"Commitment Termination Date" shall mean the earlier of (a)
the Scheduled Revolving Termination Date and (b) the date on which the
Commitments are terminated in whole pursuant to Section 2.07.
"Commitment Transfer Supplement" shall have the meaning
assigned in subsection 11.10(c).
"Company Indemnified Person" shall have the meaning assigned
in subsection 2.09(a).
"Credit Agreement" shall mean the Credit Agreement dated as of
October 27, 1997, among American Axle & Manufacturing of Michigan, Inc., the
Seller, the lenders named therein, The Chase Manhattan Bank, as Administrative
Agent and Collateral Agent, and Chase Manhattan Bank Delaware, as Fronting Bank
(including any amendments or modifications thereto or refinancing thereof).
"Daily Interest Adjustment" shall mean, for any Business Day
in any Accrual Period, the amount, if any, which may be less than zero, equal to
the difference between (i) the sum of (A) the Series 1999-A Monthly Interest
determined as of such day, (B) the aggregate amount of all previously accrued,
unpaid and unallocated Series 1999-A Monthly Interest for prior Distribution
Dates and (C) the aggregate amount of all accrued, unpaid and unallocated
Additional Interest and (ii) the amount on deposit in the Series 1999-A Accrued
Interest Sub-subaccount on such day after making any deposit thereto pursuant to
subsection 3A.03(c), before giving effect to any transfer made in respect of the
Daily Interest Adjustment on such day pursuant to the proviso to such
subsection.
"Daily Interest Deposit" shall mean, for any Business Day, an
amount equal to (i) the amount of accrued and unpaid Daily Interest Expense in
respect of such day plus (ii) the aggregate amount of all previously accrued,
unpaid and unallocated Series 1999-A Monthly Interest for prior Distribution
Dates plus (iii) the aggregate amount of all accrued, unpaid and unallocated
Additional Interest.
"Daily Interest Expense" for any day in any Accrual Period,
shall mean the product of (i) the Series 1999-A Invested Amount (calculated
without regard to clauses (d) and (e) of the definition of Series 1999-A
Purchaser Invested Amount) allocable to Eurodollar Tranches on such day divided
by 360 and (ii) One-Month LIBOR plus the Applicable Margin on such day in effect
with respect thereto; provided, however, that for the purposes of calculating
Series 1999-A Monthly Interest, the "Daily Interest Expense" for any day
following the date of determination shall be based on the Series 1999-A Invested
Amount and the Certificate Rate as of or in effect on such date of
determination; provided
5
<PAGE>
further that for any such day during the continuation of an Early Amortization
Period, the "Daily Interest Expense" for such day shall be equal to the greater
of (i) the sum of the amounts calculated pursuant to clauses (A) and (B) above
and (ii) the product of (x) the Series 1999-A Invested Amount on such day
divided by 365 and (y) the Certificate Rate in effect on such day plus 2.00% per
annum.
"Daily Report" shall mean a report prepared by the Servicer on
each Business Day for the period specified therein, in substantially the form of
Exhibit D.
"Days Sales Outstanding" shall mean, as of any Settlement
Report Date and continuing until the next Settlement Report Date, the number of
days equal to the product of (a) 91 and (b) the amount obtained by dividing (i)
the Aggregate Receivables Amount as at the last day of the Settlement Period
immediately preceding such earlier Settlement Report Date, by (ii) the aggregate
Principal Amount of Receivables originated by the Seller (whether or not billed)
for the three Settlement Periods immediately preceding such earlier Settlement
Report Date, computed solely with respect to Receivables of Designated Obligors.
"Decrease" shall have the meaning assigned in Section 2.06.
"Designated Obligor" shall mean GM, Ford and any other Obligor
designated by the Servicer and approved by the Majority Purchasers and the
Rating Agency, provided that if such other Obligor is of a credit quality
comparable to GM, then such approval shall not be unreasonably withheld.
"Dilution Horizon" shall mean (i) for the period from the
Issuance Date until the Settlement Report Date occurring in July 1999 75 days as
representing the time period it takes the Seller to recognize a Dilution
Adjustment, and (ii) for each six-month period (beginning and ending on a
Settlement Report Date) to occur after such initial period, the number of days
(expressed as a dollar weighted average based upon the Dilution Adjustments for
such period), as determined by the Servicer in accordance with procedures
utilized to calculate the dilution horizon in clause (i) above; provided, that
in no event shall the Dilution Horizon be less than 30 days.
"Dilution Horizon Factor" shall mean (i) for the period from
the Issuance Date until the Settlement Report Date occurring in July 1999, 2.50
months, and (ii) for each six-month period (beginning and ending on a Settlement
Report Date) to occur after such initial period, a fraction, the numerator of
which is the Dilution Horizon for such period and the denominator of which is
30.
"Dilution Period" shall mean, as of any Settlement Report Date
and continuing until (but not including) the next
6
<PAGE>
Settlement Report Date, the quotient of (i) the product of (A) the aggregate
Principal Amount of Receivables that were initially billed by the Seller during
the Settlement Period preceding such earlier Settlement Report Date and (B) the
Dilution Horizon Factor and (ii) the aggregate Principal Amount of all Eligible
Receivables billed to Designated Obligors in the Trust as of the last day of the
Settlement Period preceding such earlier Settlement Report Date, computed solely
with respect to Receivables of Designated Obligors.
"Dilution Ratio" shall mean, as of the last day of each
Settlement Period, an amount (expressed as a percentage) equal to the aggregate
amount of (i) Dilution Adjustments made during such Settlement Period and (ii)
the amount of Receivables due from GM and Ford which have aged more than 150
days from their original due date divided by the aggregate Principal Amount of
Receivables that were initially billed by the Seller during such Settlement
Period, computed solely with respect to Receivables of Designated Obligors.
"Dilution Reserve Ratio" shall mean, as of any Settlement
Report Date and continuing until (but not including) the next Settlement Report
Date, an amount (expressed as a percentage) that is calculated as follows:
DRR = [(c * d) + e] * f
Where:
DRR = Dilution Reserve Ratio;
c = 2.00;
d = the average of the Dilution Ratio that occurred during the
period of twelve consecutive Settlement Periods ending
immediately prior to such earlier Settlement Report Date;
e = The product of (i) the twelve-month sample standard
deviation of the Dilution Ratio as of the end of each of the
twelve consecutive Settlement Periods immediately preceding
such earlier Settlement Report Date and (ii) 1.96.
f = the highest Dilution Period that occurred during the last
three Settlement Periods occurring prior to such earlier
Settlement Report Date.
"Distribution Date" shall mean, the 15th day of the month, or
if such 15th day is not a Business Day, the next succeeding Business Day, and in
the case any Eurodollar Period ends on another day, it shall also mean the last
day of such Eurodollar Period.
7
<PAGE>
"Early Amortization Event" shall have the meanings assigned in
Section 5.01 of this Supplement and Section 7.01 of the Agreement.
"Early Amortization Period" shall have the meaning assigned in
Section 5.01 of this Supplement and Section 7.01 of the Agreement.
"Effective Date" shall have the meaning assigned in Section
9.01.
"Eurodollar Lending Office" means, as to the Trustee or any
successor thereto, its office, branch or affiliate as it may designate as its
Eurodollar Lending Office by notice to the Purchasers and the Agent.
"Eurodollar Period" shall mean, with respect to any Eurodollar
Tranche:
(a) initially, the period commencing on the Issuance Date,
Increase Date or conversion date, as the case may be, with respect to
such Eurodollar Tranche and ending one month thereafter; and
(b) thereafter, each period commencing on the last day of the
immediately preceding Eurodollar Period applicable to such Eurodollar
Tranche and ending one month thereafter;
provided that, all of the foregoing provisions relating to Eurodollar Periods
are subject to the following:
(1) if any Eurodollar Period would otherwise end on a day that
is not a Business Day, such Eurodollar Period shall be extended to the
next succeeding Business Day unless the result of such extension would
be to carry such Eurodollar Period into another calendar month in which
event such Eurodollar Period shall end on the immediately preceding
Business Day;
(2) any Eurodollar Period that would otherwise extend beyond
the Scheduled Revolving Termination Date shall end on the Scheduled
Revolving Termination Date; and
(3) any Eurodollar Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Eurodollar
Period) shall end on the last Business Day of a calendar month.
"Eurodollar Tranche" shall mean each portion of the Series
1999-A Invested Amount for which the Series 1999-A Monthly Interest is
calculated by reference to One-Month LIBOR for a particular Eurodollar Period.
8
<PAGE>
"Excess Program Costs" shall have the meaning assigned to such
term within the definition of "Program Costs".
"GMT/PPAP Rejection Period" shall mean the period commencing
on any date on which the Seller shall fail any GM Production Part Approval
Process with respect to the GMT 800 Program such that GM informs the Seller that
it does not intend to pay its outstanding obligations with respect to the GMT
800 Program and ending on the date that the Seller has received notice from GM
that the Seller has complied with such GM Production Part Approval Process, and
GM has informed the Seller that it intends to pay its obligations with respect
to the GMT 800 Program or has made any payments in respect thereof.
"Increase" shall have the meaning assigned in subsection
2.05(a).
"Increase Amount" shall have the meaning assigned in
subsection 2.05(a).
"Increase Date" shall have the meaning assigned in subsection
2.05(a).
"Initial Purchasers" shall have the meaning specified in the
recitals hereto.
"Initial Series 1999-A Invested Amount" shall mean the amount
set forth in the initial notice delivered pursuant to Section 2.05 as the
"Initial Series 1999-A Invested Amount".
"Initial Series 1999-A Subordinated Interest Amount" shall
mean the Series 1999-A Subordinated Interest Amount in respect of the Issuance
Date.
"Interest Shortfall" shall have the meaning assigned in
subsection 3A.04(b).
"Invested Amount" shall mean, with respect to Series 1999-A,
the Series 1999-A Invested Amount.
"Issuance Date" shall mean March 29, 1999.
"Majority Purchasers" shall mean, on any day, Purchasers
having, in the aggregate, more than 50% of the Aggregate Commitment Amount.
"Maximum Commitment Amount" shall mean $153,000,000.
"Maximum Invested Amount" shall mean, as of any day, the
lesser of (a) the Maximum Commitment Amount as of such day and (b) the Aggregate
Receivables Amount as of such day minus the Series 1999-A Required Subordinated
Amount as of such day.
"Minimum Ratio" shall mean 5.0%.
9
<PAGE>
"Monthly Interest Payment" shall have the meaning assigned in
subsection 3A.06(b).
"One-Month LIBOR" shall mean, with respect to any Eurodollar
Tranche for any Eurodollar Period, the rate per annum, as recorded by the
Trustee, which is the rate (rounded to the nearest 1/16 of 1%) at which U.S.
Dollar deposits in a principal amount of not less than $1,000,000 maturing in
one month are offered to the principal London office of the Trustee in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Eurodollar Period.
"Optional Repurchase Percentage" shall mean 10% of the largest
Series 1999-A Invested Amount at any time on or before the date of
determination.
"Optional Termination Date" shall have the meaning assigned in
subsection 2.06(d)(i).
"Optional Termination Notice" shall have the meaning assigned
in subsection 2.06(d)(i).
"Participants" shall have the meaning assigned in subsection
11.10(f).
"Program Costs" shall mean, for any Business Day, the sum of
(i) all expenses, indemnities and other amounts due and payable to the
Purchasers and the Agent under the Agreement or this Supplement (including,
without limitation, any Article VII Costs), (ii) the product of (A) all unpaid
fees and expenses due and payable to counsel to, and independent auditors of,
the Company (other than fees and expenses payable on or in connection with the
closing of the issuance of the VFC Certificates) and (B) a fraction, the
numerator of which is the Aggregate Commitment Amount on such Business Day and
the denominator of which is the sum of (x) the Aggregate Invested Amount on such
Business Day (excluding the Series 1999-A Invested Amount and the Invested
Amount in respect of any variable funding certificate of any other Outstanding
Series) and (y) the Aggregate Commitment Amount on such Business Day plus the
aggregate Commitment amount for any variable funding certificate of any other
Outstanding Series and (iii) all unpaid fees and expenses due and payable to
Rating Agencies rating the VFC Certificates; provided, however, that the amount
of Program Costs payable pursuant to Section 3A.06(b)(ii) shall not exceed
$100,000 in the aggregate in any fiscal year of the Servicer (any amount of the
foregoing expenses, indemnities and fees in excess of $100,000 shall be referred
to herein as "Excess Program Costs").
"Purchase Termination Event" shall have the meaning assigned
in Section 7.01 of the Receivables Sale Agreement.
"Purchaser" shall mean each Initial Purchaser and each
Acquiring Purchaser.
10
<PAGE>
"Rating Agency" shall mean DCR or any such other rating agency
that has rated the VFC Certificates, as applicable.
"Rating Agency Condition" shall, with respect to any action,
have the meaning assigned in Section 1.01 of the Agreement.
"Record Date" shall mean, with respect to any Distribution
Date, the Business Day immediately preceding such date.
"Register" shall have the meaning assigned in subsection
11.10(d).
"Scheduled Revolving Termination Date" shall mean the last day
of the Settlement Period ending in November, 2003.
"Series 1999-A" shall mean the Series of Investor Certificates
and Subordinated Company Interest, the Principal Terms of which are set forth in
this Supplement.
"Series 1999-A Accrued Interest Sub-subaccount" shall have the
meaning assigned in subsection 3A.02(a).
"Series 1999-A Adjusted Invested Amount" shall mean, as of any
date of determination, (i) the Series 1999-A Invested Amount on such date, minus
(ii) the amount on deposit in the Series 1999-A Principal Collection
Sub-subaccount on such date up to a maximum of the Series 1999-A Invested
Amount.
"Series 1999-A Allocable Charged-Off Amount" shall mean, with
respect to any Special Allocation Settlement Report Date, the "Allocable
Charged-Off Amount", if any, that has been allocated to Series 1999-A.
"Series 1999-A Allocable Recoveries Amount" shall mean, with
respect to any Special Allocation Settlement Report Date, the "Allocable
Recoveries Amount", if any, that has been allocated to Series 1999-A.
"Series 1999-A Allocated Receivables Amount" shall mean, on
any date of determination, the lower of (i) the Series 1999-A Target Receivables
Amount on such day and (ii) the Aggregate Receivables Amount on such day times
the percentage equivalent of a fraction, the numerator of which is the Series
1999-A Target Receivables Amount on such day and the denominator of which is the
Aggregate Target Receivables Amount on such day.
"Series 1999-A Amortization Period" shall mean the period
commencing on the Business Day following the earliest to occur of (i) the date
on which an Early Amortization Period is declared to commence or automatically
commences, (ii) the Optional Termination Date and (iii) the Scheduled Revolving
Termination Date and ending on the earlier of (i) the date when the Series
1999-A Invested Amount shall have been reduced to zero
11
<PAGE>
and all accrued interest and other amounts owing on the VFC Certificates and to
the Agent and the Purchasers hereunder shall have been paid and (ii) the Series
1999-A Termination Date.
"Series 1999-A Collections" shall mean, with respect to any
Business Day, an amount equal to the product of (i) the Series 1999-A Invested
Percentage on such Business Day and (ii) Aggregate Daily Collections.
"Series 1999-A Collection Subaccount" shall have the meaning
assigned in subsection 3A.02(a).
"Series 1999-A Invested Amount" shall mean, as of any date of
determination, the sum of the Series 1999-A Purchaser Invested Amounts of all
Purchasers on such date.
"Series 1999-A Invested Percentage" shall mean, with respect
to any Business Day (i) during the Series 1999-A Revolving Period, the
percentage equivalent of a fraction, the numerator of which is the Series 1999-A
Allocated Receivables Amount as of the end of the immediately preceding Business
Day and the denominator of which is the greater of (A) the Aggregate Receivables
Amount as of the end of the immediately preceding Business Day and (B) the sum
of the numerators used to calculate the Invested Percentage for all Outstanding
Series on the Business Day for which such percentage is determined and (ii)
during the Series 1999-A Amortization Period, the percentage equivalent of a
fraction, the numerator of which is the Series 1999-A Allocated Receivables
Amount as of the end of the last Business Day of the Series 1999-A Revolving
Period (provided that if during the Series 1999-A Amortization Period, the
amortization periods of all other Outstanding Series which were outstanding
prior to the commencement of the Series 1999-A Amortization Period commence,
then, from and after the date the last of such series commences its Amortization
Period, the numerator shall be the Series 1999-A Allocated Receivables Amount as
of the end of the Business Day preceding such date) and the denominator of which
is the greater of (A) the Aggregate Receivables Amount as of the end of the
immediately preceding Business Day and (B) the sum of the numerators used to
calculate the Invested Percentage for all Outstanding Series on the Business Day
for which such percentage is determined.
"Series 1999-A Monthly Interest" shall mean, with respect to
any Accrual Period, the sum of the Daily Interest Expense for each day in such
Accrual Period.
"Series 1999-A Monthly Interest Distribution" shall have the
meaning assigned in subsection 3A.04(a).
"Series 1999-A Monthly Principal Payment" shall have the
meaning assigned in Section 3A.05.
"Series 1999-A Monthly Servicing Fee" shall have the meaning
assigned in Section 6.01.
12
<PAGE>
"Series 1999-A Non-Principal Collection Sub-subaccount" shall
have the meaning assigned in subsection 3A.02(a).
"Series 1999-A Principal Collection Sub-subaccount" shall have
the meaning assigned in subsection 3A.02(a).
"Series 1999-A Purchaser Invested Amount" shall mean, with
respect to any Purchaser on the Issuance Date, an amount equal to the product of
such Purchaser's Commitment Percentage on such date and the Initial Series
1999-A Invested Amount, and with respect to such Purchaser on any date of
determination thereafter, an amount equal to (a) such Purchaser's Series 1999-A
Purchaser Invested Amount on the immediately preceding Business Day (or, with
respect to the day as of which such Purchaser becomes a party to this
Supplement, whether by executing a counterpart hereof, a Commitment Transfer
Supplement or otherwise, the portion of the transferor's Series 1999-A Purchaser
Invested Amount being purchased, in the case of an Acquiring Purchaser), plus
(b) the amount of any increases in such Purchaser's Series 1999-A Purchaser
Invested Amount pursuant to Section 2.05 made on such day, minus (c) the amount
of any distributions to such Purchaser pursuant to Section 2.06 or subsection
3A.06(c)(i) on such day minus (d) the aggregate Series 1999-A Allocable
Charged-Off Amount applied to such Purchaser on or prior to such date pursuant
to subsection 3A.05(b)(ii) plus (e) (but only to the extent of any unreimbursed
reductions made pursuant to clause (d) above) the aggregate Series 1999-A
Allocable Recoveries Amount applied to such Purchaser on or prior to such date
pursuant to subsection 3A.05(c)(i).
"Series 1999-A Required Reserves Ratio" shall mean, the
greater of (i) the Dilution Reserve Ratio and (ii) the Minimum Ratio.
"Series 1999-A Required Subordinated Amount" shall mean, (a)
on any date of determination during the Series 1999-A Revolving Period, an
amount equal to the sum of:
(i) an amount equal to the product of (A) the Series 1999-A
Adjusted Invested Amount on such day (after giving effect to any
increase or decrease thereof on such day) and (B) a fraction, the
numerator of which is the Series 1999-A Required Reserves Ratio and the
denominator of which is one minus the Series 1999-A Required Reserves
Ratio;
(ii) the product of (A) the Series 1999-A Invested Amount on
such day (after giving effect to any increase or decrease thereof on
such day) and (B) a fraction, the numerator of which is the Carrying
Cost Reserve Ratio and the denominator of which is one minus the Series
1999-A Required Reserves Ratio; and
(iii) the product of (A) the Principal Amount of Receivables
in the Trust on such day, (B) a fraction, the numerator of which is the
Series 1999-A Invested Amount on
13
<PAGE>
such day and the denominator of which is the Aggregate Invested Amount
on such day (after giving effect to any increase or decrease thereof on
such day) and (C) a fraction, the numerator of which is the Servicing
Reserve Ratio and the denominator of which is one minus the Series
1999-A Required Reserves Ratio;
and (b) on any date of determination during the Series 1999-A Amortization
Period, an amount equal to the Series 1999-A Required Subordinated Amount on the
last Business Day of the Series 1999-A Revolving Period; provided, in each of
the foregoing clauses (a) and (b), that such amount shall be adjusted on each
Special Allocation Settlement Report Date, if any, as set forth in Section
3A.05(b)(i) and Section 3A.05(c)(ii).
"Series 1999-A Revolving Period" shall mean the period
commencing on the Issuance Date and terminating on the earliest to occur of the
close of business on (i) the date on which an Early Amortization Period is
declared to commence or automatically commences, (ii) the Optional Termination
Date and (iii) the Commitment Termination Date.
"Series 1999-A Subordinated Interest" shall have the meaning
assigned in subsection 2.02(b).
"Series 1999-A Subordinated Interest Amount" shall mean, for
any date of determination, an amount equal to (i) the Series 1999-A Allocated
Receivables Amount minus (ii) the Series 1999-A Adjusted Invested Amount.
"Series 1999-A Subordinated Interest Increase Amount" shall
have the meaning assigned in subsection 2.05(a).
"Series 1999-A Subordinated Interest Reduction Amount" shall
have the meaning assigned in subsection 2.06(b).
"Series 1999-A Target Receivables Amount" shall mean, on any
date of determination, the sum of (i) the Series 1999-A Adjusted Invested Amount
on such day and (ii) the Series 1999-A Required Subordinated Amount for such
day.
"Series 1999-A Termination Date" shall mean the Distribution
Date that occurs in January 2005.
"Servicer Indemnified Person" shall have the meaning specified
in subsection 2.09(b).
"Servicing Reserve Ratio" shall mean, as of any Settlement
Report Date and continuing until (but not including) the next Settlement Report
Date, an amount (expressed as a percentage) equal to (i) the product of (A) the
Servicing Fee Percentage and (B) 2.0 times Days Sales Outstanding as of such
earlier Settlement Report Date divided by (c) 360.
14
<PAGE>
"Transfer Issuance Date" shall mean the date on which a
Commitment Transfer Supplement becomes effective pursuant to the terms of such
Commitment Transfer Supplement.
"Transferee" shall have the meaning assigned in subsection
11.10(f).
"Trust Accounts" shall have the meaning assigned in subsection
3A.02(a).
"Unallocated Balance" shall mean, as of any Business Day, the
Series 1999-A Invested Amount allocated to any Eurodollar Tranche the Eurodollar
Period in respect of which expires on such Business Day.
"VFC Certificate" shall mean a VFC Certificate, Series 1999-A,
which may be uncertificated or may be represented by an Investor Certificate
executed by the Company and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A.
"VFC Certificate holders" shall mean the Purchasers, and for
purposes of the Agreement, shall constitute Investor Certificateholders.
"VFC Certificate holders' Interest" shall have the meaning
assigned in subsection 2.02(a).
(b) If any term, definition or provision contained herein
conflicts with or is inconsistent with any term, definition or provision
contained in the Agreement, the terms and provisions of this Supplement shall
govern. All capitalized terms not otherwise defined herein are defined in the
Agreement. All Article, Section, subsection, Exhibit and Schedule references
herein shall mean Article, Section or subsection of or Exhibit or Schedule to
this Supplement, except as otherwise provided herein. Unless otherwise stated
herein, as the context otherwise requires or if such term is otherwise defined
in the Agreement, each capitalized term used or defined herein shall relate only
to the VFC Certificates and the Series 1999-A Subordinated Interest and to no
other Series of Investor Certificates or Subordinated Company Interest issued by
the Trust.
(c) Any reference herein to a Schedule or Exhibit to this
Supplement shall be deemed to be a reference to such Schedule or Exhibit as it
may be amended, modified or supplemented from time to time to the extent that
such Schedule or Exhibit may be amended, modified or supplemented (or any term
or provision of any Transaction Document may be amended that would have the
effect of amending, modifying or supplementing information contained in such
Schedule or Exhibit) in compliance with the terms of the Transaction Documents.
(d) Any reference in this Supplement to any representation,
warranty or covenant "deemed" to have been made
15
<PAGE>
is intended to encompass only representations, warranties or covenants that are
expressly stated to be repeated on or as of dates following the execution and
delivery of this Supplement, and no such reference shall be interpreted as a
reference to any implicit, inferred, tacit or otherwise unexpressed
representation, warranty or covenant.
(e) The words "include", "includes" or "including" shall be
interpreted as if followed, in each case, by the phrase "without limitation".
ARTICLE II
Designation of VFC Certificates; Purchase and
Sale of the VFC Certificates
SECTION 2.01 Designation. The Investor Certificates created
and authorized pursuant to the Agreement and this Supplement shall be designated
as the "VFC Certificates, Series 1999-A." The VFC Certificates shall be
designated FASIT Regular Interests for United States federal income tax
purposes. The VFC Certificates Series 1999-A shall be uncertificated, except
upon the written request of a VFC Certificate holder, the Trustee shall issue an
Investor Certificate in accordance with the terms of the Agreement and this
Supplement to such holder. The Purchasers shall be entitled to all rights of a
VFC Certificate holder whether or not such Purchaser holds a certificate
representing such VFC Certificate.
SECTION 2.02 The VFC Certificates and Series 1999-A
Subordinated Interest. (a) The VFC Certificates shall represent fractional
undivided interests in the Trust Assets, including the right of the VFC
Certificate holders to receive the distributions specified herein out of (i) the
Series 1999-A Invested Percentage (expressed as a decimal) of Collections
received with respect to the Receivables and all other funds on deposit in the
Collection Account and (ii) to the extent such interests appear herein, all
other funds on deposit in the Series 1999-A Collection Subaccount and any
subaccounts thereof (collectively, the "VFC Certificate holders' Interest").
(b) The Company shall retain a fractional undivided interest
in the Trust Assets, including the right of the holder of the Subordinated
Company Interest to receive the distributions specified herein out of (i) the
Series 1999-A Invested Percentage (expressed as a decimal) of Collections
received with respect to the Receivables and all other funds on deposit in the
Collection Account and (ii) to the extent such interests appear herein, all
other funds on deposit in the Series 1999-A Collection Subaccount and any
subaccounts thereof, in each case to the extent not required to be distributed
to or for the benefit of the VFC Certificate holders (the "Series 1999-A
Subordinated Interest"). The Exchangeable Company Interest and any other Series
of Investor Certificates or Subordinated Company Interests
16
<PAGE>
outstanding shall represent the ownership interests in the remainder of the
Trust Assets not allocated pursuant hereto to the VFC Certificate holders'
Interest or the Series 1999-A Subordinated Interest.
(c) The VFC Certificates, if certificated, shall be
substantially in the form of Exhibit A, and shall, upon issue, be executed and
delivered by the Company to the Trustee for authentication and redelivery as
provided in Section 2.04 hereof and Section 5.02 of the Agreement. The VFC
Certificates shall not be issued in the form of a single global certificate as
provided for in Section 5.01 of the Agreement, but, if certificated, shall
instead be issued in the form of one or more definitive certificates, each
registered in the name of a Purchaser as the holder thereof. The Series 1999-A
Subordinated Interest shall be uncertificated.
Section 2.03 Purchases of Interests in the VFC Certificates
and the Series 1999-A Subordinated Interest. (a) Initial Purchase. Subject to
the terms and conditions of this Supplement, including delivery of notice in
accordance with Section 2.04, (i) each Initial Purchaser hereby severally
agrees (A) to purchase on the Issuance Date a VFC Certificate in an amount
equal to such Initial Purchaser's Commitment Percentage of the Initial Series
1999-A Invested Amount and (B) to maintain its VFC Certificate, subject to
increase or decrease during the Series 1999-A Revolving Period, in accordance
with the provisions of this Supplement and (ii) the Company hereby agrees (A)
to purchase from the Trust on the Issuance Date the rights as holder of the
Series 1999-A Subordinated Interest in an amount equal to the Initial Series
1999-A Subordinated Interest Amount and (B) to maintain such interest in the
Series 1999-A Subordinated Interest, subject to increase or decrease during the
Series 1999-A Revolving Period, in accordance with the provisions of this
Supplement. Payments by the Initial Purchasers in respect of the VFC
Certificates shall be made in immediately available funds on the Issuance Date
to the Agent for payment to the Trust.
(b) Subsequent Purchases. Subject to the terms and conditions
of this Supplement, each Acquiring Purchaser agrees to maintain its VFC
Certificate, subject to increase or decrease during the Series 1999-A Revolving
Period, in accordance with the provisions of this Supplement.
(c) Maximum Series 1999-A Purchaser Invested Amount.
Notwithstanding anything to the contrary contained in this Supplement, at no
time shall the Series 1999-A Purchaser Invested Amount (calculated without
regard to clauses (d) and (e) of the definition thereof) of any Purchaser exceed
such Purchaser's Commitment at such time.
SECTION 2.04 Delivery. On the Issuance Date, if any Purchaser
has requested a VFC Certificate in accordance with Section 2.01, the Company
shall sign on behalf of the Trust and shall direct the Trustee in writing
pursuant to Section 5.02 of
17
<PAGE>
the Agreement to duly authenticate, and the Trustee, upon receiving such
direction, shall so authenticate the VFC Certificates in such names and such
denominations and deliver such VFC Certificates to the Initial Purchasers in
accordance with such written directions. The VFC Certificates, if certificated,
shall be issued in minimum denominations of $5,000,000 and integral multiples of
$1,000,000 in excess thereof; provided that notwithstanding the foregoing one
VFC Certificate may be issued in non-integral multiples of $1,000,000. The
Trustee shall mark on its books the actual Series 1999-A Purchaser Invested
Amount for each Purchaser and Series 1999-A Subordinated Interest Amount
outstanding on any date of determination which, absent manifest error, shall
constitute prima facie evidence of the outstanding Series 1999-A Purchaser
Invested Amount for each Purchaser and Series 1999-A Subordinated Interest
Amount from time to time.
SECTION 2.05 Procedure for Initial Issuance and for
Increasing the Series 1999-A Invested Amount. (a) Subject to subsection
2.05(b), on any Business Day during the Commitment Period, each Purchaser
agrees that the Series 1999-A Invested Amount may be increased by increasing
each Purchaser's Series 1999-A Purchaser Invested Amount (an "Increase"), up to
an amount not exceeding each Purchaser's Commitment, upon the request of the
Servicer or the Company on behalf of the Trust (each date, which may include
the Issuance Date, on which an increase in the Series 1999-A Invested Amount
occurs hereunder being herein referred to as the "Increase Date" applicable to
such Increase); provided, however, that the Servicer or the Company, as the
case may be, shall have given the Agent irrevocable written notice (effective
upon receipt), substantially in the form of Exhibit F hereto, of such request
no later than 1:00 p.m., New York City time, three Business Days prior to such
Increase Date, as the case may be; provided further that the provisions of this
subsection shall not restrict the allocations of Collections pursuant to
Article III. Such notice shall state (x) the Increase Date; (y) the Initial
Series 1999-A Invested Amount or the proposed amount of such Increase (the
"Increase Amount"), as the case may be; and (z) what portions thereof will be
allocated to each Eurodollar Tranche. No Purchaser shall be obligated to fund
any such Increase, unless concurrently with any such Increase in the Series
1999-A Invested Amount, the Series 1999-A Subordinated Interest Amount shall be
increased by an amount (the "Series 1999-A Subordinated Interest Increase
Amount") such that after giving effect to such increase, the Series 1999-A
Adjusted Invested Amount plus the Series 1999-A Subordinated Interest Amount
equals the Series 1999-A Target Receivables Amount.
18
<PAGE>
(b) The Purchasers shall not be required to make the initial
purchase of VFC Certificates or to increase their respective Series 1999-A
Invested Amounts on any Increase Date hereunder unless:
(i) the related aggregate initial purchase amount or Increase
Amount is equal to $500,000 or an integral multiple of $500,000 in
excess thereof;
(ii) after giving effect to the initial purchase amount or
Increase Amount, (A) the Series 1999-A Invested Amount (calculated
without regard to clauses (d) and (e) of the definition of Series
1999-A Purchaser Invested Amount) would not exceed the Maximum
Commitment Amount on such Increase Date, as the case may be, and (B)
the Series 1999-A Allocated Receivables Amount would not be less than
the Series 1999-A Target Receivables Amount on such Increase Date, as
the case may be; and
(iii) no Early Amortization Event or Potential Early
Amortization Event shall have occurred and be continuing.
(c) After receipt by the Agent of the notice required by
subsection 2.05(a) from the Servicer or the Company on behalf of the Trust, the
Agent shall, so long as the conditions set forth in subsections 2.05(a) and (b)
are satisfied, promptly provide telecopy notice to each Purchaser of the
Increase Date and of the portion of the Increase Amount allocable to such
Purchaser (which shall equal such Purchaser's Commitment Percentage of the
Increase Amount). The Servicer shall promptly notify the Company of the Increase
Date and the amount of the Series 1999-A Subordinated Interest Increase Amount.
Each Purchaser agrees to pay in immediately available funds such Purchaser's
Commitment Percentage of each Increase on the related Increase Date to the Agent
for payment to the Trust.
SECTION 2.06 Procedure for Decreasing the Series 1999-A
Invested Amount; Optional Termination. (a) On any Business Day during the Series
1999-A Revolving Period or the Series 1999-A Amortization Period (except for
Distribution Dates during the Series 1999-A Amortization Period (which shall be
governed by subsection 3A.06(c))), upon the written request of the Servicer or
the Company on behalf of the Trust, the Series 1999-A Invested Amount may be
reduced (a "Decrease") by the distribution by the Trustee to the Agent for the
pro rata benefit of the Purchasers in accordance with their Commitment
Percentages of some or all of the funds on deposit in the Series 1999-A
Principal Collection Sub-subaccount on such day; provided that the Servicer
shall have given the Agent and the Trustee irrevocable written notice (effective
upon receipt), prior to 1:00 p.m., New York City time, on the Business Day of
such Decrease and which notice shall state the amount of such Decrease, provided
further, that such Decrease shall be in an amount equal to $100,000 and integral
multiples of $100,000 in excess thereof, provided, however, that no prepayment
of any Eurodollar Tranche prior to the termination of a
19
<PAGE>
Eurodollar Period may occur unless, concurrently with such prepayment, the
Company shall have paid to the Purchasers any amounts due and payable pursuant
to Section 7.04.
(b) Simultaneously with any such Decrease during the Series
1999-A Revolving Period, the Series 1999-A Subordinated Interest Amount shall be
reduced by an amount (the "Series 1999-A Subordinated Interest Reduction
Amount") such that the Series 1999-A Subordinated Interest Amount shall equal
the Series 1999-A Required Subordinated Amount after giving effect to such
Decrease. During the Series 1999-A Revolving Period, after the distribution
described in subsection (a) above has been made, and the Series 1999-A
Subordinated Interest Amount shall have been reduced by the Series 1999-A
Subordinated Interest Reduction Amount, a distribution shall be made to the
holder of the Series 1999-A Subordinated Interest out of remaining funds on
deposit in the Series 1999-A Principal Collection Sub-subaccount in an amount
equal to the lesser of (x) the Series 1999-A Subordinated Interest Reduction
Amount and (y) the amount of such remaining funds on deposit in the Series
1999-A Principal Collection Sub-subaccount.
(c) Any reduction in the Series 1999-A Invested Amount on any
Business Day shall be allocated first to reduce the Available Pricing Amount.
(d)(i) On any Business Day to occur after the Issuance Date
and prior to the occurrence of the Scheduled Revolving Termination Date, an
Early Amortization Event or Potential Early Amortization Event, the Company
shall have the right to deliver an irrevocable notice (an "Optional Termination
Notice") to the Trustee and the Servicer in which the Company declares that the
Series 1999-A Revolving Period shall terminate on the date (the "Optional
Termination Date") set forth in such notice (which date, in any event, shall not
be less than 10 days from the date on which such notice is delivered).
(ii) From and after the Optional Termination Date, the Series
1999-A Amortization Period shall commence for all purposes under this Agreement
and the other Transaction Documents. The Trustee shall give prompt written
notice of its receipt of an Optional Termination Notice to the Purchasers and
each Rating Agency.
SECTION 2.07 Reductions of the Commitments. (a) On any
Business Day during the Series 1999-A Revolving Period, the Company, on behalf
of the Trust, may, upon three Business Days' prior written notice to the Agent
(effective upon receipt), with copies to the Servicer and the Trustee, reduce or
terminate the Commitments (a "Commitment Reduction") in an aggregate amount
equal to $5,000,000 or a whole multiple of $5,000,000 in excess thereof;
provided that no such termination or reduction shall be permitted if, after
giving effect thereto and to any reduction in the Series 1999-A Invested Amount
(calculated without regard to clauses (d) and (e) of the definition of Series
1999-A Purchaser
20
<PAGE>
Invested Amount) on such date, the Series 1999-A Invested Amount would exceed
the Aggregate Commitment Amount then in effect. Each Purchaser's Commitment
shall be reduced by such Purchaser's Commitment Percentage of the amount of
such Commitment Reduction.
(b) Once reduced, the Commitments may not be subsequently
reinstated. Upon effectiveness of any such reduction, the Agent shall prepare a
revised Schedule 1 to reflect the reduced Commitment of each Purchaser and
Schedule 1 of this Supplement shall be deemed to be automatically superseded by
such revised Schedule 1. The Agent shall distribute such revised Schedule 1 to
the Company, the Servicer, the Trustee and each Purchaser.
SECTION 2.08 Interest; Commitment Fee. (a) Interest shall be
payable on the VFC Certificates on each Distribution Date pursuant to subsection
3A.06(a).
(b) The Trustee (acting at and in accordance with the written
direction of the Servicer upon which the Trustee may conclusively rely) shall
pay to the Agent from amounts deposited by the Servicer into the Collection
Account, for the pro rata account of the Purchasers in accordance with their
Commitment Percentages, on each Distribution Date, a commitment fee (which the
Servicer shall specify in such written direction) with respect to each Accrual
Period or portion thereof ending on such date (the "Commitment Fee") during the
Series 1999-A Revolving Period at a rate equal to 0.25% per annum, in each case
of the average daily excess of the Aggregate Commitment Amount over the average
Series 1999-A Invested Amount (based on the Series 1999-A Purchaser Invested
Amounts calculated without regard to clauses (d) and (e) of the definition
thereof) during such Accrual Period; provided that, for purposes of calculating
clause (b) of the Accrued Expense Amount on any date of determination and clause
(a)(i) of the Accrued Expense Adjustment for purposes of clause (A) of the
proviso to subsection 3A.03(a)(i) of this Supplement, as they relate to the
Commitment Fee, it will be assumed that the average Series 1999-A Invested
Amount during the relevant Accrual Period is equal to zero. The Commitment Fee
shall be payable (a) monthly in arrears on each Distribution Date, (b) on the
Commitment Termination Date and (c) on the Optional Termination Date. To the
extent that funds on deposit in the Series 1999-A Accrued Interest
Sub-subaccount and the Series 1999-A Non-Principal Collection Sub-subaccount at
any such date are insufficient to pay the Commitment Fee due on such date, the
Trustee shall so notify the Company and the Company shall immediately pay the
Agent the amount of any such deficiency. The Trustee shall not be liable for the
payment of the Commitment Fee from its own funds.
(c) Calculations of per annum rates and fees under this
Supplement shall be made on the basis of a 365-day year with respect to
Commitment Fees, other fees, and, except with respect to Eurodollar Tranches,
interest rates. Each determination of
21
<PAGE>
One-Month LIBOR by the Agent shall be conclusive and binding upon each of the
parties hereto in the absence of manifest error.
SECTION 2.09 Indemnification by the Company and the Servicer.
(a) The Company agrees to indemnify and hold harmless the Agent, each Purchaser
and each of their respective officers, directors, agents and employees (each, a
"Company Indemnified Person") from and against any loss, liability, expense,
damage or injury (a "Claim") suffered or sustained by such Company Indemnified
Person by reason of (i) any acts, omissions or alleged acts or omissions arising
out of, or relating to, activities of the Company pursuant to any Pooling and
Servicing Agreement or the other Transaction Documents to which it is a party or
(ii) in the case of a Claim brought by a third party, (x) a breach of any
representation or warranty made or deemed made by the Company (or any of its
officers) in any Transaction Document, except to the extent that such Company
Indemnified Person would be indemnified and held harmless by an adjustment
payment in respect of Ineligible Receivables pursuant to Section 2.05 of the
Agreement or (y) a failure by the Company to comply with any applicable law or
regulation or to perform its covenants, agreements, duties or obligations
required to be performed or observed by it in accordance with the provisions of
any Pooling and Servicing Agreement or the other Transaction Documents, in any
such case including any judgment, award settlement, reasonable attorneys' fees
and other reasonable costs or expenses incurred in connection with the defense
of any actual or threatened action, proceeding or claim, except to the extent
such loss, liability, expense, damage or injury resulted from the gross
negligence, bad faith or wilful misconduct of such Company Indemnified Person or
its officers, directors, agents, principals, employees or employers; provided
that the Company shall not indemnify any Company Indemnified person for any
liability, cost or expense of such Company Indemnified Person arising solely
from a default by an Obligor with respect to any Receivable provided, further
however, that any payments made by the Company pursuant to this subsection shall
be Company Subordinated Obligations.
(b) The Servicer agrees to indemnify and hold harmless the
Agent, each Purchaser and each of their respective officers, directors, agents
and employees (each, a "Servicer Indemnified Person") from and against any Claim
by reason of (i) any acts, omissions or alleged acts or omissions arising out
of, or relating to, activities of the Servicer pursuant to any Pooling and
Servicing Agreement to which it is a party or (ii) in the case of a Claim
brought by a third party, (x) a breach of any representation or warranty made or
deemed made by the Servicer (or any of its respective officers) in any Pooling
and Servicing Agreement or (y) a failure by the Servicer to comply with any
applicable law or regulation or to perform its covenants, agreements, duties or
obligations required to be performed or observed by it in accordance with the
provisions of any Pooling and Servicing Agreement, in any such case including
but not limited to any judgment, award, settlement, reasonable attorneys
22
<PAGE>
fees and other reasonable costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim, except to the
extent such loss, liability, expense, damage or injury resulted from the gross
negligence, bad faith or wilful misconduct of such Servicer Indemnified Person
or its officers, directors, agents, principals, employees or employers, provided
that the Servicer shall not indemnify any Servicer Indemnified Person for any
liability, cost or expense of such Servicer Indemnified Person arising solely
from a default by an Obligor with respect to any Receivable (except that
indemnification shall be made to the extent that such default arises out of its
failure to perform its duties or obligations under the Servicing Agreement).
ARTICLE III
Article III of the Agreement
SECTION 3.01 of the Agreement and each other section of
Article III of the Agreement relating to another Series shall be read in its
entirety as provided in the Agreement. Article III of the Agreement (except for
Section 3.01 thereof and any portion thereof relating to another Series) shall
read in its entirety as follows and shall be exclusively applicable to Series
1999-A:
SECTION 3A.02. Establishment of Trust Accounts. (a) The
Trustee shall cause to be established and maintained in the name of the Trustee,
on behalf of the Trust, (i) for the benefit of the Purchasers and (ii) in the
case of clauses (A) and (B) below, for the benefit (subject to the prior and
senior interest of the Purchasers) of the holder of the Series 1999-A
Subordinated Interest, (A) a subaccount of the Collection Account (the "Series
1999-A Collection Subaccount"), which subaccount is the Series Collection
Subaccount with respect to Series 1999-A; (B) two subaccounts of the Series
1999-A Collection Subaccount: (1) the Series 1999-A Principal Collection
Sub-subaccount and (2) the Series 1999-A Non-Principal Collection Sub-subaccount
(respectively, the "Series 1999-A Principal Collection Sub-subaccount" and the
"Series 1999-A Non-Principal Collection Sub-subaccount"), and (C) a subaccount
of the Series 1999-A Non-Principal Collection Sub-subaccount (the "Series 1999-A
Accrued Interest Sub-subaccount"; all accounts established pursuant to this
subsection 3A.02(a) and listed on Schedule 2, collectively, the "Trust
Accounts"), each Trust Account to bear a designation indicating that the funds
deposited therein are held for the benefit of the Persons (and, for each such
Person, to the extent) set forth in clauses (i) and (ii) above. The Trustee, on
behalf of the Holders, shall possess all right, title and interest in all funds
from time to time on deposit in, and all Eligible Investments credited to, the
Trust Accounts and in all proceeds thereof. The Trust Accounts shall be under
the sole dominion and control of the Trustee for the exclusive benefit of the
Persons (and, for each such Person, to
23
<PAGE>
the extent) set forth in clauses (i) and (ii) above. In any case that the
Company has not provided applicable written direction as to Eligible Investments
to the Trustee, the Trustee shall invest in demand deposits or money market
funds that constitute Eligible Investments.
(b) All Eligible Investments in the Trust Accounts shall be
held by the Trustee, on behalf of the Holders, for the benefit of the Purchasers
and, subject to the prior interest of the Purchasers, of the holder of the
Series 1999-A Subordinated Interest; provided, however, that funds on deposit in
a Trust Account that is a Sub-subaccount of the Series 1999-A Collection
Subaccount shall, at the direction of the Company, be invested together with
funds held in other Sub-subaccounts of the Collection Account. After giving
effect to any distribution to the Company pursuant to subsection 3A.03(b)(i),
amounts on deposit and available for investment in the Series 1999-A Principal
Collection Sub-subaccount shall be invested by the Trustee at the written
direction of the Company in Eligible Investments that mature, or that are
payable or redeemable upon demand of the holder thereof, (i) in the case of any
such investment made during the Series 1999-A Revolving Period, on or prior to
the next Business Day and (ii) in the case of any such investment made during
the Series 1999-A Amortization Period, on or prior to the Business Day
immediately preceding the next Distribution Date. Amounts on deposit and
available for investment in the Series 1999-A Non-Principal Collection
Sub-subaccount and the Series 1999-A Accrued Interest Sub-subaccount shall be
invested by the Trustee at the written direction of the Company in Eligible
Investments that mature, or that are payable or redeemable upon demand of the
holder thereof, on or prior to the Business Day immediately preceding the
subsequent Distribution Date. As of the Business Day immediately preceding such
subsequent Distribution Date, all interest and other investment earnings (net of
losses and investment expenses) on funds deposited in the Series 1999-A Accrued
Interest Sub-subaccount shall be deposited in the Series 1999-A Non-Principal
Collection Sub-subaccount. All interest and investment earnings (net of losses
and investment expenses) on funds deposited in the Series 1999-A Principal
Collection Sub-subaccount shall be deposited in the Series 1999-A Non-Principal
Collection Sub-subaccount.
SECTION 3A.03. Daily Allocations. (a) The portion of the
Aggregate Daily Collections allocated to Series 1999-A pursuant to Article III
of the Agreement shall be allocated and distributed as set forth in this Article
III by the Trustee based solely on the information provided it by the Servicer
in the Daily Report (upon which the Trustee may conclusively rely):
(i) on each Business Day, an amount equal to the Accrued
Expense Amount for such day (or, during the Series 1999-A Revolving
Period, such greater amount as the Company may request in writing)
shall be transferred from the Series
24
<PAGE>
1999-A Collection Subaccount to the Series 1999-A Non-Principal
Collection Sub-subaccount; provided, that (A) on the tenth Business Day
of each Accrual Period (and each Business Day thereafter, if necessary,
until the full amount of any positive Accrued Expense Adjustment is
transferred), (B) on the day of any Increase occurring after the tenth
Business Day of the applicable Accrual Period (and each Business Day
thereafter, if necessary, until the full amount of any positive Accrued
Expense Adjustment is transferred), (C) on the day of any Decrease
occurring after the tenth Business Day of the applicable Accrual Period
and (D) on the last Business Day of each Accrual Period, an amount
equal to the Accrued Expense Adjustment shall, if such adjustment is a
positive amount, be transferred from the Series 1999-A Collection
Subaccount to the Series 1999-A Non-Principal Collection Sub-subaccount
or, if such adjustment is a negative amount, be transferred from the
Series 1999-A Non-Principal Collection Sub-subaccount to the Series
1999-A Collection Subaccount (or deducted from the transfer in respect
of the Accrued Expense Amount for such day); and
(ii) on each Business Day (including Distribution Dates),
following the transfers pursuant to clause (i) above, any remaining
funds on deposit in the Series 1999-A Collection Subaccount shall be
transferred by the Trustee to the Series 1999-A Principal Collection
Sub-subaccount.
(b) (i) On each Business Day during the Series 1999-A
Revolving Period (including Distribution Dates), after giving effect to (x) all
allocations of Aggregate Daily Collections referred to in subparagraphs (a)(i)
and (a)(ii) on such Business Day and (y) any deposit resulting from an Increase,
if any, pursuant to Subsection 2.05(c) on such Business Day, amounts on deposit
in the Series 1999-A Principal Collection Sub-subaccount shall be distributed by
the Trustee, based solely on the information provided to the Trustee by the
Servicer in the Daily Report (upon which the Trustee may conclusively rely), (A)
first, to pay Excess Program Costs and (B) second, to the Company (but only to
the extent that the Trustee has received a Daily Report which reflects the
receipt of the Collections on deposit therein) in accordance with directions
contained in the Daily Report or to such accounts or such persons as the Company
may direct in writing (which directions may consist of standing instructions
provided by the Company that shall remain in effect until changed by the Company
in writing); provided that such distribution, whether under clause (A) or (B),
shall be made only if no Early Amortization Event set forth in Section 7.01 of
the Agreement or subsections (a), (d) (but only with respect to a Servicer
Default set forth in subsection 6.01(e) of the Servicing Agreement), (g), (j) or
(k) of Section 5.01 of this Supplement or Potential Early Amortization Event
relating to any such Early Amortization Event (other than an event set forth in
clause (i) or (ii) of Section 7.01(a) of the Pooling Agreement has occurred and
is
25
<PAGE>
continuing and only to the extent that if, after giving effect to such
distribution, the Series 1999-A Target Receivables Amount would not exceed the
Series 1999-A Allocated Receivables Amount; provided further that if the Company
or the Servicer, on behalf of the Company, shall have given the Agent and the
Trustee irrevocable written notice (effective upon receipt) at least one
Business Day prior to such day, the Company or the Servicer may instruct the
Trustee in writing (specifying the related amount) to withdraw all or a portion
of such amounts on deposit in the Series 1999-A Principal Collection
Sub-subaccount and apply such withdrawn amounts toward the reduction of the
Series 1999-A Invested Amount and the Series 1999-A Subordinated Interest Amount
in accordance with Section 2.06. Amounts distributed to the Company hereunder
shall be deemed to be paid first from Collections received directly by the
Servicer and second from Collections received in the Lockboxes.
(ii) During the Series 1999-A Amortization Period, amounts on
deposit in the Series 1999-A Principal Collection Sub-subaccount on each
Distribution Date shall be distributed on such Distribution Date in accordance
with subsection 3A.06(c). No amounts on deposit in the Series 1999-A Principal
Collection Sub-subaccount shall be distributed by the Trustee to the Company or
the holder of the Series 1999-A Subordinated Interest during the Series 1999-A
Amortization Period.
(c) On each Business Day, an amount equal to the Daily
Interest Deposit for such day shall be transferred by the Trustee, based solely
on the information provided to the Trustee by the Servicer in the Daily Report
(upon which the Trustee may conclusively rely), from the Series 1999-A
Non-Principal Collection Sub-subaccount to the Series 1999-A Accrued Interest
Sub-subaccount provided, that, on each Business Day that a transfer of funds is
required to be made in respect of an Accrued Expense Adjustment pursuant to the
proviso contained in subsection 3A.03(a)(i), an amount equal to the Daily
Interest Adjustment shall, if such adjustment is a positive amount, be
transferred from the Series 1999-A Non-Principal Collection Sub-subaccount to
the Series 1999-A Accrued Interest Sub-subaccount or, if such adjustment is a
negative amount, be transferred from the Series 1999-A Accrued Interest
Sub-subaccount to the Series 1999-A Non-Principal Collection Sub-subaccount (or
deducted from the transfer in respect of the Daily Interest Deposit for such
day).
(d) The allocations to be made pursuant to this Section 3A.03
are subject to the provisions of Sections 2.05, 2.06, 7.02, 9.01 and 9.04 of the
Agreement.
SECTION 3A.04. Deterimation of Interest. (a) (i) The amount of
interest (as reported in writing by the Servicer to the Trustee) distributable
with respect to the VFC Certificates ("Series 1999-A Monthly Interest
Distribution") on each Distribution Date shall be the aggregate amount of Daily
26
<PAGE>
Interest Expense accrued during the immediately preceding Accrual Period.
(ii) Following any change in the amount of any Eurodollar
Tranche during an Accrual Period, the Series 1999-A Monthly Interest shall be
calculated by the Servicer with respect to such changed amount for the number of
days in the Accrual Period during which such changed amount is outstanding and
shall provide written notification to the Trustee of such calculation.
(iii) If the Certificate Rate changes during any Accrual
Period, the Servicer shall amend the Monthly Settlement Statement to reflect the
adjustment in the Series 1999-A Monthly Interest for such Accrual Period caused
by such change and any consequent adjustments and the Servicer shall also
provide written notification to the Trustee of any such change in the
Certificate Rate. Any amendment to the Monthly Settlement Statement pursuant to
this subsection 3A.04(a)(iii) shall be completed by 1:00 p.m. on the day
preceding the next Settlement Report Date.
(b) On each Distribution Date, the Servicer shall determine
the excess, if any (the "Interest Shortfall"), of (i) the aggregate Series
1999-A Monthly Interest Distribution for the immediately preceding Accrual
Period over (ii) the amount that will be available to be distributed to the
Purchasers on such Distribution Date in respect thereof pursuant to this
Supplement. If the Interest Shortfall with respect to any Distribution Date is
greater than zero, an additional amount ("Additional Interest") equal to the
product of (A) the number of days until such Interest Shortfall shall be repaid
divided by 365, (B) the Certificate Rate plus 1.0% per annum and (C) such
Interest Shortfall (or the portion thereof that has not been paid to the
Purchasers) shall be payable as provided herein with respect to the VFC
Certificates on each Distribution Date following such Distribution Date to but
excluding the Distribution Date on which such Interest Shortfall is paid to the
VFC Certificateholders.
(c) One Business Day each week, the Company may, subject to
subsection 3A.04(e), elect to allocate all or any portion of the Available
Pricing Amount to one or more Eurodollar Tranches with Eurodollar Periods
commencing on such Business Day by giving the Agent irrevocable written or
telephonic (confirmed in writing) notice thereof, which notice must be received
by the Agent prior to 1:00 p.m., New York City time, three Business Days prior
to such Business Day. Such notice shall specify (i) the applicable Business Day,
(ii) the Eurodollar Period for each Eurodollar Tranche to which a portion of the
Available Pricing Amount is to be allocated and (iii) the portion of the
Available Pricing Amount being allocated to each such Eurodollar Tranche.
Promptly upon receipt of each such notice the Agent shall notify each Purchaser
of the contents thereof.
27
<PAGE>
(d) Any reduction in the Series 1999-A Invested Amount on any
Business Day shall be allocated in the following order of priority:
first, to reduce the Unallocated Balance, as appropriate; and
second, to reduce the portion of the Series 1999-A Invested
Amount allocated to Eurodollar Tranches in such order as the Company
may select in order to minimize costs payable pursuant to Section 7.04.
(e) Notwithstanding anything to the contrary contained in this
Section 3A.04, (i) the portion of the Series 1999-A Invested Amount allocable to
each Eurodollar Tranche must be in an amount equal to $500,000 or an integral
multiple of $500,000 in excess thereof; (ii) no more than four Eurodollar
Tranches shall be outstanding at any one time; (iii) after the occurrence and
during the continuance of any Early Amortization Event or Potential Early
Amortization Event relating to an Early Amortization Event set forth in
subsections (a), (d) (but only with respect to a Servicer Default set forth in
subsection 6.01(e) of the Servicing Agreement), (g) or (j) of Section 5.01 of
this Supplement, the Company, may not elect to allocate any portion of the
Available Pricing Amount to a Eurodollar Tranche; and (iv) after the end of the
Series 1999-A Revolving Period, the Company may not select any Eurodollar Period
that does not end on or prior to the next succeeding Distribution Date.
SECTION 3A.05. Determination of Series 1999-A Monthly
Principal. (a) Payments of Series 1999-A Principal. The amount (the "Series
1999-A Monthly Principal Payment") distributable from the Series 1999-A
Principal Collection Sub-subaccount on each Distribution Date during the Series
1999-A Amortization Period shall be equal to the amount on deposit in such
account on the immediately preceding Settlement Report Date; provided, however,
that the Series 1999-A Monthly Principal Payment on any Distribution Date shall
not exceed the Series 1999-A Invested Amount on such Distribution Date after
giving effect to the reductions and increases pursuant to paragraphs (b) and
(c) below. Further, on any other Business Day during the Series 1999-A
Amortization Period, funds may be distributed from the Series 1999-A Principal
Collection Sub-subaccount to the Purchasers in accordance with Section 2.06 of
this Supplement.
(b) Reductions to Series 1999-A Principal. If, on any Special
Allocation Settlement Report Date, the Series 1999-A Allocable Charged-Off
Amount is greater than zero for the related Settlement Period, the Trustee shall
(in accordance with the
28
<PAGE>
written directions of the Servicer upon which the Trustee may conclusively
rely) make the following applications of such amounts in the following order of
priority:
(i) the Series 1999-A Required Subordinated Amount shall be
reduced (but not below zero) by an amount equal to the Series 1999-A
Allocable Charged-Off Amount (which shall also be reduced by the amount
so applied);
(ii) then, to the extent that the Series 1999-A Allocable
Charged-Off Amount is greater than zero following the application in
clause (i) above, the Series 1999-A Invested Amount shall be reduced
(but not below zero) by such remaining Series 1999-A Allocable
Charged-Off Amount (which shall also be reduced by the amount so
applied).
(c) Increases to Series 1999-A Principal. If, on any Special
Allocation Settlement Report Date, the Series 1999-A Allocable Recoveries Amount
is greater than zero for the related Settlement Period, the Trustee shall (in
accordance with written directions from the Servicer upon which the Trustee may
conclusively rely) make the following applications (after giving effect to the
applications in paragraph (b) of such amount in the following order of
priority):
(i) the Series 1999-A Invested Amount shall be increased (but
only to the extent of any previous reductions of the Series 1999-A
Invested Amount pursuant to subsection 3A.05(b)(ii)) by the amount of
the Series 1999-A Allocable Recoveries Amount (which shall also be
reduced by the amount so applied);
(ii) then, to the extent that the Series 1999-A Allocable
Recoveries Amount is greater than zero following the applications in
clause (i) above, the Series 1999-A Required Subordinated Amount shall
be increased (but only to the extent of any previous reductions of the
Series 1999-A Required Subordinated Amount pursuant to subsection
3A.05(b)(i)) by such remaining Series 1999-A Allocable Recoveries
Amount (which shall also be reduced by the amount so applied).
(d) Servicer Determination. With respect to any distribution
or allocations required in this Section 3A.05, the related amount shall be
determined by the Servicer and promptly provided in writing by the Servicer to
the Trustee.
SECTION 3A.06. Applications. (a) The Trustee shall
distribute, based solely on the information provided to the Trustee by the
Servicer in the Monthly Settlement Statement (upon which the Trustee may
conclusively rely) on each Distribution Date, from amounts on deposit in the
Series 1999-A Accrued Interest Sub-subaccount, an amount equal to the Series
1999-A Monthly Interest Distribution payable on such Distribution Date
29
<PAGE>
(such amount, the "Monthly Interest Payment"), plus the amount of any Monthly
Interest Payment previously due but not distributed to the Purchasers on a
prior Distribution Date, plus the amount of any Additional Interest for such
Distribution Date and any Additional Interest previously due but not
distributed to the Purchasers on a prior Distribution Date, to the Purchasers.
(b) On each Distribution Date, the Trustee shall, based solely
on the information provided to the Trustee by the Servicer in the Daily Report
(upon which the Trustee may conclusively rely), apply funds on deposit in the
Series 1999-A Non-Principal Collection Sub-subaccount in the following order of
priority to the extent funds are available:
(i) an amount equal to the Series 1999-A Monthly Servicing Fee
for the Accrual Period ending on such Distribution Date shall be
withdrawn from the Series 1999-A Non-Principal Collection
Sub-subaccount by the Trustee and paid to the Servicer (less any
amounts payable to the Trustee pursuant to Section 8.05 of the
Agreement which shall be paid to the Trustee); and
(ii) an amount equal to any Commitment Fees, first, and any
Program Costs, second, due and payable shall be withdrawn from the
Series 1999-A Non-Principal Collection Sub-subaccount by the Trustee
and paid to the Persons owed such amounts.
Any remaining amounts on deposit in the Series 1999-A Non-Principal Collection
Sub-subaccount (in excess of the Accrued Expense Amount as of such day) not
allocated pursuant to clauses (i) and (ii) above shall be paid to the holder of
the Series 1999-A Subordinated Interest; provided, however, that during the
Series 1999-A Amortization Period, such remaining amounts shall be deposited in
the Series 1999-A Principal Collection Sub-subaccount for distribution in
accordance with subsection 3A.06(c).
(c) During the Series 1999-A Amortization Period, the Trustee
shall, based solely on the information provided to the Trustee by the Servicer
in the Daily Report (upon which the Trustee may conclusively rely), apply, on
each Distribution Date, amounts on deposit in the Series 1999-A Principal
Collection Sub-subaccount in the following order of priority:
(i) if any amounts are owed to the Trustee or any other
Person, on account of Servicing Fees incurred in respect of the
performance of its responsibilities as Successor Servicer, an amount
equal to the product of (a) the amount so owed to such Successor
Servicer and (b) a fraction, the numerator of which shall be equal to
the Series 1999-A Invested Amount as of the end of the immediately
preceding Settlement Period and the denominator of which shall be equal
to the Aggregate Invested Amount as of the end of the
30
<PAGE>
immediately preceding Settlement Period shall be transferred from the
Series 1999-A Principal Collection Sub-subaccount to the Trustee or
such other Person;
(ii) following the repayment in full of all amounts set forth
in clause (i) above, an amount equal to the Series 1999-A Monthly
Principal Payment for such Distribution Date shall be distributed from
the Series 1999-A Principal Collection Sub-subaccount to the Purchasers
in reduction of the Series 1999-A Invested Amount;
(iii) if, following the repayment in full of all amounts set
forth in clauses (i) and (ii) above, any amounts are owed to the
Trustee or any other Person, on account of its fees, expenses and
disbursements incurred in respect of the performance of its
responsibilities hereunder (other than pursuant to clause (i) above in
the capacity as Successor Servicer), such amounts shall be transferred
from the Series 1999-A Principal Collection Sub-subaccount and paid to
the Trustee or such other Person; and
(iv) following the repayment in full of all amounts set forth
in clauses (i) through (iii) above, the remaining amount on deposit in
the Series 1999-A Principal Collection Sub-subaccount on such
Distribution Date, if any, shall be distributed to the holder of the
Series 1999-A Subordinated Interest.
ARTICLE IV
Distributions and Reports
Article IV of the Agreement (except for any portion thereof
relating to another Series) shall read in its entirety as follows and the
following shall be exclusively applicable to the VFC Certificates issued
pursuant to this Supplement:
section 4A.01. Distributions. (a) On each Distribution Date,
the Trustee shall distribute to each Purchaser from the account indicated in
Article III an amount equal to the product of (i) the amount to be distributed
to the Purchasers pursuant to Article III and (ii) such Purchaser's Commitment
Percentage.
(b) All allocations and distributions hereunder shall be in
accordance with the Daily Report and the Monthly Settlement Statement and shall
be made in accordance with the provisions of Section 11.04 hereof and subject to
Section 3.01(h) of the Agreement.
SECTION 4A.02. Daily Reports. The Servicer shall provide the
Agent and the Trustee with a Daily Report in accordance with subsection 4.02(a)
of the Servicing Agreement.
31
<PAGE>
The Agent shall make copies of the Daily Report available to the Purchasers at
their reasonable request at the Agent's office in The City of New York.
SECTION 4A.03. Statements and Notices. (a) Monthly Settlement
Statements. On each Settlement Report Date (commencing with the Settlement
Report Date occurring in April 1999), the Servicer shall deliver to the Trustee
and the Agent a Monthly Settlement Statement in the Form of Exhibit E setting
forth, among other things,, the Dilution Reserve Ratio, the Minimum Ratio, the
Carrying Cost Reserve Ratio and the Servicing Reserve Ratio, each as
recalculated for the next succeeding Settlement Period. The Agent shall forward
a copy of each Monthly Settlement Statement to any Purchaser upon request by
such Purchaser. The Company and the Servicer will deliver copies of all
notices, reports (other than Daily Reports), statements and other documents
delivered by it pursuant to the Pooling and Servicing Agreements to each Rating
Agency.
(b) Annual Certificate holders' Tax Statement. On or before
April 1 of each calendar year (or such earlier date as required by applicable
law), beginning with calendar year 1999, the Company on behalf of the Trustee
shall furnish, or cause to be furnished, to each Person who at any time during
the preceding calendar year was a Purchaser, a statement prepared by the Company
containing the aggregate amount distributed to such Person for such calendar
year or the applicable portion thereof during which such Person was a Purchaser,
together with such other information as is required to be provided by an issuer
of indebtedness under the Internal Revenue Code and such other customary
information as the Company deems necessary to enable the Purchasers to prepare
their tax returns. Such obligation of the Company shall be deemed to have been
satisfied to the extent that substantially comparable information shall have
been prepared by the Servicer and provided to the Trustee or the Agent and to
the Purchasers, in each case pursuant to any requirements of the Internal
Revenue Code as from time to time in effect. The Trustee shall be under no
obligation to prepare tax returns for the Trust.
(c) Early Amortization Event/Distribution of Principal
Notices. Upon the occurrence of an Early Amortization Event with respect to the
Series 1999-A, the Company or the Servicer, as the case may be, shall give
prompt written notice thereof to the Trustee and the Agent. As promptly as
reasonably practicable after its receipt of notice of the occurrence of an Early
Amortization Event with respect to Series 1999-A, the Trustee shall give notice
(i) to each Rating Agency (which notice shall be given, by telephone or
otherwise, not later than the second Business Day after such receipt) and (ii)
to the Agent, who in turn shall give notice to each Purchaser within one
Business Day after the Agent receives such notice. In addition, on the Business
Day preceding each day on which a distribution of principal is to be made during
the Series 1999-A Amortization
32
<PAGE>
Period, the Servicer shall direct the Agent to send notice to each Purchaser,
which notice shall set forth the amount of principal to be distributed on the
related date to the Purchasers with respect to the outstanding VFC
Certificates.
ARTICLE V
Additional Early Amortization Events
SECTION 5.01 Early Amortization Events. If any one of the
events specified in Section 7.01 of the Agreement (after any grace periods or
consents applicable thereto) or any one of the following events (each, an
"Early Amortization Event") shall occur during the Series 1999-A Revolving
Period:
(a)(i) failure on the part of the Servicer to direct any
payment or deposit to be made, or failure of any payment or deposit to
be made, in respect of interest owing on any VFC Certificate or the
Commitment Fee within five Business Days of the date such interest or
Commitment Fee is due or (ii) failure on the part of the Servicer to
direct any payment or deposit to be made, or of the Company to make any
payment or deposit in respect of any other amounts owing by the
Company, under any Pooling and Servicing Agreement to or for the
benefit of the Purchasers within five Business Days of the date such
other amount is due or such deposit is required to be made;
(b) failure on the part of the Company duly to observe or
perform in any material respect any covenant or agreement of the
Company set forth in any Pooling and Servicing Agreement (including
each covenant contained in Sections 2.07 and 2.08 of the Agreement)
that continues unremedied 30 days after the earlier of (i) the date on
which a Responsible Officer of the Company or, so long as the Servicer
is an Affiliate of the Company, a Responsible Officer of the Servicer
has knowledge of such failure and (ii) the date on which written notice
of such failure, requiring the same to be remedied, shall have been
given to the Company by the Trustee, or to the Company and the Trustee
by the Agent or Purchasers evidencing 25% or more of the Series 1999-A
Invested Amount;
(c) any representation or warranty made or deemed made by the
Company in any Pooling and Servicing Agreement to or for the benefit of
the Purchasers shall prove to have been incorrect in any material
respect when made or when deemed made that continues to be incorrect 30
days after the earlier of (i) the date on which a Responsible Officer
of the Company or, so long as the Servicer is an Affiliate of the
Company, a Responsible Officer of the Servicer has knowledge of such
failure and (ii) the date on which notice of such failure, requiring
the same to be remedied, shall
33
<PAGE>
have been given to the Company by the Trustee or to the Company and
the Trustee by the Agent or Purchasers evidencing 25% or more of the
Series 1999-A Invested Amount and as a result of such incorrectness,
the interests, rights or remedies of the Purchasers have been
materially and adversely affected; provided, however, that an Early
Amortization Event with respect to Series 1999-A shall not be deemed
to have occurred under this paragraph if the incorrectness of such
representation or warranty gives rise to an obligation to repurchase
or make an adjustment payment in respect of the related Receivables
and the Company has repurchased or made an adjustment payment in
respect of the related Receivable or all such Receivables, if
applicable, in accordance with the provisions of any Pooling and
Servicing Agreement within 10 Business Days of the day on which the
Company was obligated to do so;
(d) a Servicer Default with respect to the Servicer other than
any Servicer Default that is within subsection 5.01(a) above shall have
occurred and be continuing;
(e) a Purchase Termination Event shall have occurred and be
continuing;
(f) a Change in Control shall have occurred;
(g) the Series 1999-A Allocated Receivables Amount shall be
less than the Series 1999-A Target Receivables Amount for a period of
five consecutive Business Days;
(h) any of the Agreement, the Servicing Agreement, this
Supplement or the Receivables Sale Agreement shall cease, for any
reason, to be in full force and effect, or the Company, the Servicer,
the Seller or any Affiliate thereof shall so assert in writing;
(i) the Trust shall for any reason cease to have a valid and
perfected first priority undivided ownership or first priority security
interest in any of the Trust Assets (subject to no other Liens other
than any Permitted Liens) and such cessation would, individually or
together with other cessations, have a Material Adverse Effect;
(j) a federal tax notice of Lien, in an amount equal to or
greater than $2,000,000, shall have been filed against the Company or
the Trust unless such Lien is being contested in compliance with the
standard set forth in clause (i) of subsection 2.07(l) of the Agreement
or there shall have been delivered to the Trustee and the Rating
Agencies proof of release of such Lien;
(k) a notice of Lien shall have been filed by the Pension
Benefit Guaranty Corporation against the Company or the Trust under
Section 412(n) of the Code or Section 302(f)
34
<PAGE>
of ERISA for a failure to make a required installment or other payment
to a plan to which Section 412(n) of the Code or Section 302(f) of
ERISA applies and such notice could reasonably be expected to have a
Material Adverse Effect with respect to the Company or the Trust
unless there shall have been delivered to the Trustee and the Rating
Agencies proof of the release of such Lien; or
(l) one or more judgments for the payment of money (to the
extent not bonded or covered by insurance to the reasonable
satisfaction of the Agent) shall be rendered against the Company in an
aggregate amount greater than $50,000 and the same shall remain
undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken
by a judgment creditor to levy upon assets or properties of the
Company, the Servicer or the Seller to enforce such judgment or
judgments; or
(m) GM delivers a notice of termination to AAM that it has
terminated a Lifetime Program Contract (an "LPC") with GM which
accounted for at least 10% of the dollar amount of all sales by AAM to
GM and its affiliates for the most recently ended 12 month period
ending prior to the date of such notice, and such termination was
caused by GM's determination that the products produced under such LPC
are no longer competitive in terms of technology, design or quality and
such termination has a Material Adverse Effect.
then, in the case of (x) any event described in Section 7.01 of the Agreement
(after the applicable grace period (if any) provided for therein), automatically
without any notice or action on the part of the Trustee or Purchasers, an early
amortization period shall immediately commence or (y) any other event described
above, after the applicable grace period (if any) set forth in the applicable
subsection, the Trustee may, and at the written direction of the Majority
Purchasers shall, by written notice then given to the Company and the Servicer,
declare that an early amortization period has commenced as of the date of such
notice with respect to Series 1999-A (any such period under clause (x) or (y)
above, an "Early Amortization Period"); provided, however, that in the case of
the event described in clause (g) above, if an Early Amortization Period has not
been declared within 10 Business Days from the occurrence of such event, then an
Early Amortization Period shall occur automatically unless, (i) prior to the end
of such 10 Business Day period, the Series 1999-A Allocated Receivables Amount
shall no longer be less than the Series 1999-A Target Receivables Amount and
(ii) so long as the Series 1999-A Allocated Receivables Amount continues to be
equal to or greater than the Series 1999-A Target Receivables Amount, VFC
Certificate holders evidencing 66-2/3% or more of the Series 1999-A Invested
Amount shall have waived the occurrence of such event.
35
<PAGE>
Notwithstanding the foregoing, a delay or failure in
performance referred to in clause (a) above for a period of up to five Business
Days after the applicable grace period, or in clause (b) above for a period of
up to 30 Business Days after the applicable grace period, will not constitute an
Early Amortization Event if such delay or failure could not have been prevented
by the exercise of reasonable diligence by the Company and such delay or failure
was caused by a Force Majeure Delay. The Company will nevertheless be required
to use its best efforts to perform its obligations in a timely manner in
accordance with the terms of the Transaction Documents, and the Company shall
promptly give the Trustee an Officer's Certificate notifying it of any such
delay or failure.
ARTICLE VI
Servicing Fee
SECTION 6.01 Servicing Compensation. The portion of the
Servicing Fee allocable to Series 1999-A (the "Series 1999-A Monthly Servicing
Fee") shall be payable to the Servicer on each Distribution Date for the
preceding Settlement Period, in an amount equal to the product of (a) the
Servicing Fee and (b) a fraction, the numerator of which shall be equal to the
Series 1999-A Invested Amount as of the end of the second preceding Settlement
Period and the denominator of which shall be equal to the Aggregate Invested
Amount as of the end of such second preceding Settlement Period; provided,
however, that, for the purposes of calculating the Accrued Expense Adjustment
on the last Business Day of any Accrual Period, such calculation shall be based
on the Series 1999-A Invested Amount and Aggregate Invested Amount as of the
end of the most recent Settlement Period that has elapsed. To the extent that
funds on deposit in the Series 1999-A Non-Principal Collection Sub-subaccount
on any such Distribution Date are insufficient to pay the Series 1999-A Monthly
Servicing Fee due on such date as set forth in the Monthly Settlement Statement
delivered by the Servicer to the Trustee, the Trustee shall so notify the
Company and the Company shall immediately pay the Servicer the amount of any
such deficiency.
ARTICLE VII
Change in Circumstances
SECTION 7.01 Illegality. Notwithstanding any other provision
herein, if, after the Issuance Date, the adoption of or any change in any law
or regulation or in the interpretation thereof by any Governmental Authority
charged with the administration or interpretation thereof shall make it
unlawful for any Purchaser to make or maintain its portion of the VFC
Certificate holders' Interest in any Eurodollar Tranche then, by
36
<PAGE>
written notice to the Agent, the Trustee and the Company, such Purchaser may
declare that the portion of each Eurodollar Tranche applicable to such
Purchaser shall thereafter be calculated by reference to the ABR (such
calculation to be performed by the Servicer). For purposes of this Section
7.01, a notice to the Agent, the Trustee or the Company by any Purchaser shall
be effective as to each Eurodollar Tranche, if lawful, on the last day of the
Eurodollar Period currently applicable to such Eurodollar Tranche; in all other
cases such notice shall be effective on the date of receipt by the Agent, the
Trustee or the Company, as applicable.
SECTION 7.02 Requirements of Law. (a) Notwithstanding any
other provision herein, if after the Issuance Date any change in applicable law
or regulation or in the interpretation or administration thereof by any
Governmental Authority charged with the interpretation or administration
thereof (whether or not having the force of law):
(i) shall change the basis of taxation of payments to any
Purchaser in respect of its VFC Certificate (except for changes in
respect of (A) taxes imposed on the overall net income of such
Purchaser by the jurisdiction which such Purchaser has its principal
office or by any political subdivision or taxing authority therein and
(B) Excluded Taxes described in Section 7.03); or
(ii) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets or deposits with
or for the account of credit extended by, any office of such Purchaser
which is not otherwise included in the determination of the Eurodollar
Rate;
and the result of any of the foregoing shall be to increase the cost to such
Purchaser by an amount deemed by such Purchaser to be material, of making,
converting into, continuing or maintaining Eurodollar Tranches or to reduce any
amount receivable hereunder in respect thereof, then, from time to time, the
Company will pay to such Purchaser upon demand such additional amount or amounts
as will compensate such Purchaser for such additional costs incurred or
reduction suffered.
(b) If any Purchaser shall have determined that the adoption
after the Issuance Date of any law, rule, regulation or guideline regarding
capital adequacy or any change after the Issuance Date in any of the foregoing
or in the interpretation or administration of any of the foregoing by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof or compliance by such Purchaser or any
corporation controlling such Purchaser with any request or directive regarding
capital adequacy (whether or not having the force of law) made or issued after
the date hereof by any such authority, central bank or comparable agency, has or
37
<PAGE>
would have the effect of reducing the rate of return on such Purchaser's or
such corporation's capital as a consequence of this Agreement or its
obligations pursuant hereto to a level below that which such Purchaser or such
corporation would have achieved but for such adoption, change or compliance
(taking into consideration such Purchaser's or such corporation's policies with
respect to capital adequacy) by an amount deemed by such Purchaser or such
corporation to be material, then from time to time, the Company shall promptly
pay to such Purchaser or such corporation such additional amount or amounts as
will compensate such Purchaser or such corporation for any such reduction
suffered.
(c) A certificate of each Purchaser setting forth such amount
or amounts as shall be necessary to compensate such Purchaser or any corporation
controlling such Purchaser as specified in paragraph (a) or (b) above, as the
case may be, shall be delivered to the Company (with a copy to the Agent) and
shall be conclusive absent manifest error. The Company shall pay each Purchaser
the amount shown as due on any such certificate delivered by it within 10 days
of its receipt of same.
(d) In the event any Purchaser delivers a notice pursuant to
paragraph (e) below, the Company may require, at the Company's expense and
subject to Section 7.04, such Purchaser to assign, at par plus accrued interest
and fees, without recourse (in accordance with Section 11.10) all its interests,
rights and obligations hereunder (including, in the case of a Purchaser, all of
its portion of the VFC Certificate holders' Interest) to a financial institution
specified by the Company, provided that (i) such assignment shall not conflict
with or violate any law, rule or regulation or order of any court or other
Governmental Authority, (ii) the Company shall have received the written consent
of the Agent (which consent shall not be unreasonably withheld) to such
assignment and (iii) the Company shall have paid to the assigning Purchaser all
monies accrued and owing hereunder to it (including pursuant to this Section
7.02).
(e) Promptly after any Purchaser has determined, in its sole
judgment, that it will make a request for increased compensation pursuant to
this Section 7.02, such Purchaser will notify the Company thereof. Failure on
the part of any Purchaser so to notify the Company or to demand compensation for
any increased costs or reduction in amounts received or receivable or reduction
in return on capital with respect to any period shall not constitute a waiver of
such Purchaser's right to demand compensation with respect to such period or any
other period, provided that the Company shall not be under any obligation to
compensate any Purchaser under paragraph (b) above with respect to increased
costs or reductions with respect to any period prior to the date that is six
months prior to such request if such Purchaser knew or could reasonably have
been expected to be aware of the circumstances giving rise to such increased
costs or reductions and of the fact that such circumstances would in fact
38
<PAGE>
result in a claim for increased compensation by reason of such increased costs
or reductions and provided further that the foregoing limitation shall not
apply to any increased costs or reductions arising out of the retroactive
application of any law, regulation, rule, guideline or directive as aforesaid
within such six-month period. The protection of this Section 7.02 shall be
available to each Purchaser regardless of any possible contention as to the
invalidity or inapplicability of the law, rule, regulation, guideline or other
change or condition which shall have occurred or been imposed.
SECTION 7.03 Taxes. (a) Any and all payments by the Company
to the Agent or the Purchasers hereunder or under the other Transaction
Documents shall be made free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, excluding (i) in the case of the
Agent or any Purchaser, taxes that would not be imposed but for a connection
between such Purchaser or the Agent (as the case may be) and the jurisdiction
imposing such tax, other than a connection arising solely by virtue of the
activities of such Purchaser or the Agent (as the case may be) pursuant to or
in respect of this Agreement or under any other Transaction Document or any
transaction hereunder or thereunder; (ii) any taxes imposed on the Agent or
such Purchaser as a result of payments not related to the VFC Certificates or
this Supplement; (iii) any taxes that would not have been imposed but for the
failure of the Agent or such Purchaser, as applicable, to provide and keep
current to the extent required by law any certification or other documentation
required to be furnished by the Agent or such Purchaser under Subsection
7.03(f) of this Supplement; and (iv) any taxes imposed as a result of a change
(other than a change mandated by law or this Agreement) by the Agent or any
Purchaser of the office in which any VFC Certificate is held, accounted for or
booked; (all such excluded taxes being referred to hereinafter as "Excluded
Taxes" and all such taxes, levies, imposts, deductions, charges, withholdings
and liabilities other than Excluded Taxes being hereinafter referred to as
"Taxes"). If any Taxes shall be required by law to be deducted from or in
respect of any sum payable hereunder or under any other Transaction Document to
any Purchaser or the Agent, (i) the sum payable by the Company shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
7.03) such Purchaser or the Agent, as the case may be, receives an amount equal
to the sum it would have received had no such deductions been made, (ii) the
Company shall make such deductions and (iii) the Company shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, the Company agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from the
39
<PAGE>
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Transaction Document (hereinafter referred to as "Other
Taxes").
(c) The Company will indemnify each Purchaser and the Agent
for the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 7.03) paid by
such Purchaser or the Agent, as the case may be, and any liability (including
penalties, interest and expenses including reasonable attorney's fees and
expenses) arising therefrom or with respect thereto whether or not such Taxes or
Other Taxes were correctly or legally asserted. A certificate as to the amount
of such payment or liability prepared by a Purchaser or the Agent, absent
manifest error, shall be final, conclusive and binding for all purposes,
provided that if the Company reasonably believes that such Taxes were not
correctly or legally asserted, such Purchaser or the Agent, as the case may be
shall use reasonable efforts to cooperate with the Company to obtain a refund of
such Taxes or Other Taxes. Such indemnification shall be made within 10 days
after the date any Purchaser or the Agent, as the case may be, makes written
demand therefor. If a Purchaser or the Agent shall become aware that it is
entitled to receive a refund in respect of Taxes or Other Taxes, it shall
promptly notify the Company of the availability of such refund and shall, within
30 days after receipt of a request by the Company, pursue or timely claim such
refund at the Company's expense. If any Purchaser or the Agent receives a refund
in respect of any Taxes or Other Taxes for which such Purchaser or the Agent has
received payment from the Company hereunder, it shall promptly repay such refund
(plus any interest received) to the Company (but only to the extent of indemnity
payments made, or additional amounts paid, by the Company under this Section
7.03 with respect to the Taxes or Other Taxes giving rise to such refund),
provided that the Company, upon the request of such Purchaser or the Agent,
agrees to return such refund (plus any penalties, interest or other charges
required to be paid) to such Purchaser or the Agent in the event such Purchaser
or the Agent is required to repay such refund to the relevant taxing authority.
(d) Within 30 days after the date of any payment of Taxes or
Other Taxes withheld by the Company in respect of any payment to any Purchaser
or the Agent, the Company will furnish to the Administrative Agent, at its
address referred to in Section 11.09, the original or a certified copy of a
receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 7.03
shall survive the payment in full of principal and interest hereunder and the
termination of the Trust.
40
<PAGE>
(f) The Agent and each of the Purchasers (or Transferees)
agrees that, prior to the date on which the first interest payment on a VFC
Certificate is due hereunder, it will deliver to the Servicer and the Trustee
(i) if the Agent or such Purchaser is not incorporated under the laws of the
United States or any State thereof (a "Non-U.S. Person"), two duly completed
copies of the United States Internal Revenue Service Form 1001 or Form 4224 or
successor applicable or required form, in each case, establishing a complete
exemption from United States federal income withholding taxes, and (ii) an
Internal Revenue Service Form W-8 or W-9 or successor applicable or required
form. The Agent and each Purchaser also agree to deliver to the Servicer and the
Trustee two further copies of the said Form 1001 or 4224 and Form W-8 or W-9, or
successor applicable forms or other manner of certification, as the case may be,
on or before the date that any such form expires or becomes obsolete or after
the occurrence of any event requiring a change in the most recent form
previously delivered by it to the Servicer and the Trustee and such extensions
or renewals thereof as may reasonably be requested by the Servicer or the
Trustee, unless in any such case the Agent or such Purchaser is unable to
deliver any such form due to a change in law prior to the date on which any such
delivery would otherwise be required which renders any such form inapplicable.
Notwithstanding any provision of this Supplement or the Agreement to the
contrary, the Servicer and the Trustee shall withhold or cause such withholding,
and additional amounts in respect of Taxes need not be paid under this Section
7.03, with respect to the Agent, a Purchaser, a Participant or an Acquiring
Purchaser in the event that such Person fails to provide all of the forms and
statements required pursuant to this paragraph (f) to the Servicer and the
Trustee.
(g) Notwithstanding any other provision contained in this
Agreement or in any Supplement, the Servicer and the Company shall be required
to determine and notify the Trustee when withholding is appropriate under this
Section 7.03, and the Trustee shall not be liable for, and shall not be required
to pay from its own funds, the amount of any Withholding Taxes or any related
penalties or fines. To the extent that any amounts relating to any such
withholding are paid by the Trustee from its own funds, such amounts shall be
promptly reimbursed to the Trustee by the Company, the Servicer and each
Purchaser.
SECTION 7.04 Indemnity. The Company agrees to indemnify each
Purchaser and to hold each Purchaser harmless from any loss or expense which
such Purchaser may sustain or incur as a consequence of (a) default by the
Company in making an increase of, conversion into or continuation of, a
Eurodollar Tranche after the Company has given irrevocable notice requesting
the same in accordance with the provisions of this Supplement, or (b) default
by the Company in making any prepayment in connection with a Decrease after the
Company has given irrevocable notice thereof in accordance with the provisions
of Section 2.06 of this Supplement or (c) the making of a prepayment of a
Eurodollar
41
<PAGE>
Tranche prior to the termination of the Eurodollar Period for such Eurodollar
Tranche. Such indemnification may include an amount equal to the excess, if
any, of (i) the amount of interest which would have accrued on the amount so
prepaid or not so increased, converted or continued, for the period from the
date of such prepayment or of such failure to increase, convert or continue to
the last day of the Eurodollar Period (or in the case of a failure to increase,
convert or continue, the Eurodollar Period that would have commenced on the
date of such prepayment or of such failure) in each case at the applicable rate
of interest for such Eurodollar Tranche provided for herein (excluding,
however, the Applicable Margin included therein, if any) over (ii) the amount
of interest (as reasonably determined by such Purchaser) which would have
accrued to such Purchaser on such amount by placing such amount on deposit for
a comparable period with leading banks in the interbank Eurodollar market;
provided that any payments made by the Company pursuant to this Section shall
be Company Subordinated Obligations. This covenant shall survive the
termination of this Supplement and the payment of all amounts payable
hereunder. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by any Purchaser to the Company shall be
conclusive absent manifest error.
SECTION 7.05 Assignment of Commitments Under Certain
Circumstances; Duty to Mitigate. If (a)(i) any Purchaser delivers a notice
described in Section 7.02 or (ii) the Company is required to pay any additional
amount or indemnification payment to any Purchaser pursuant to Sections 7.03 or
7.04, the Company may, at its sole expense and effort (including with respect
to the processing and recordation fee referred to in subsection 11.10(b)), upon
notice to such Purchaser and the Agent, require such Purchaser to transfer and
assign, without recourse (in accordance with and subject to the restrictions
contained in Section 11.10), all of its interests, rights and obligations under
this Agreement to an assignee that shall assume such assigned obligations
(which assignee may be another Purchaser, if another Purchaser accepts such
assignment); provided that (A) such assignment shall not conflict with any law,
rule or regulation or order of any court or other Governmental Authority having
jurisdiction, (B) the Company shall have received the prior written consent of
the Agent, which consent shall not unreasonably be withheld, and (C) the
Company or such assignee shall have paid to the affected Purchaser in
immediately available funds an amount equal to the sum of the principal of, and
interest accrued to the date of such payment on, the outstanding VFC
Certificates of such Purchaser plus all fees and other amounts accrued for the
account of such Purchaser hereunder (including any amounts under Sections 7.02,
7.03 and 7.04); and provided further that, if prior to any such transfer and
assignment the circumstances or event that resulted in such Purchaser's notice
under Section 7.02 or the amounts paid pursuant to Sections 7.03 or 7.04, as
the case may be, cease to cause such Purchaser to suffer increased costs or
reductions in
42
<PAGE>
amounts received or receivable or reduction in return on capital, or cease to
have the consequences specified in Section 7.02, or cease to result in amounts
being payable under Sections 7.03 or 7.04, as the case may be (including as a
result of any action taken by such Purchaser pursuant to subsection 7.05(b)
below), or if such Purchaser shall withdraw its notice under Section 7.02 or
shall waive its right to further payments under Sections 7.03 or 7.04 in
respect of such circumstances or event, as the case may be, then such Purchaser
shall not thereafter be required to make any such transfer and assignment
hereunder.
(b) If (i) any Purchaser delivers a notice described in
Section 7.02 or (ii) the Company is required to pay any additional amount to any
Purchaser (or Transferee), pursuant to Sections 7.03 or 7.04, then such
Purchaser shall use reasonable efforts (which shall not require such Purchaser
to incur an unreimbursed loss or unreimbursed cost or expense or otherwise take
any action inconsistent with its internal policies or legal or regulatory
restrictions or suffer any disadvantage or burden reasonably deemed by it to be
significant) (A) to file any certificate or document reasonably requested in
writing by the Company or (B) to assign its rights and delegate and transfer its
obligations hereunder to another of its offices, branches or affiliates, if such
filing or assignment would enable it to withdraw its notice pursuant to Section
7.02 or would reduce amounts payable pursuant to Sections 7.03 or 7.04, as the
case may be, in the future. The Company hereby agrees to pay all reasonable
costs and expenses incurred by any Purchaser in connection with any such filing
or assignment, delegation and transfer.
SECTION 7.06 Limitation. The obligations of the Company
under this Article VII shall be limited by Section 11.13.
ARTICLE VIII
Covenants, Representations and Warranties
SECTION 8.01 Representations and Warranties of the Company
and the Servicer. The Company and the Servicer each hereby represents and
warrants to the Trustee, the Agent and each of the Purchasers that each and
every of their respective representations and warranties contained in the
Agreement and, in the case of the Servicer, the Servicing Agreement is true and
correct in all material respects as of the Issuance Date and as of the date of
each Increase.
SECTION 8.02 Covenants of the Company and the Servicer. The
Company and the Servicer hereby agree, in addition to their obligations under
the Agreement and the Servicing Agreement, that:
43
<PAGE>
(a) they shall not terminate the Agreement unless in
compliance with the terms of the Agreement and the Supplement relating
to each Outstanding Series;
(b) they will (i) provide the Agent with evidence,
satisfactory to the Agent, of the establishment of computer back-up
systems (in accordance with the time limits set forth in Schedule 3)
and (ii) within 90 days of the Issuance Date, deliver to the Trustee
executed copies of any landlord waivers (or the lease containing such
waiver provisions), in a form reasonably acceptable to the Trustee,
that may be necessary to grant to the Trustee access to any leased
premises of the Servicer for which the Trustee may require access to
perform the collection and administrative functions to be performed by
the Trustee under the Transaction Documents;
(c) they shall observe in all material respects each and every
of their respective covenants (both affirmative and negative) contained
in the Agreement, the Servicing Agreement, this Supplement and all
other Transaction Documents to which each is a party;
(d) they shall afford the Agent or any representative of the
Agent access to all records relating to the Receivables at any
reasonable time during regular business hours, upon reasonable prior
notice, for purposes of inspection and shall permit the Agent or any
representative of the Agent to visit any of the Company's or the
Servicer's, as the case may be, offices or properties during regular
business hours and as often as may reasonably be requested, subject to
the Company's or the Servicer's, as the case may be, normal security
and confidentiality requirements and to discuss the business,
operations, properties, financial and other conditions of the Company
or the Servicer with their respective officers and employees and with
their Independent Public Accountants; provided that the Agent shall
notify the Company or the Servicer, as the case may be, prior to any
contact with such accountants and shall give the Company or the
Servicer the opportunity to participate in such discussions; and
(e) they shall not waive the provisions of subsections
7.01(d), (e)(i),(g) and (h)of the Receivables Sale Agreement without
the consent of the Agent.
SECTION 8.03 Covenants of the Servicer. The Servicer hereby
agrees that it shall:
(i) observe each and all of its respective covenants (both
affirmative and negative) contained in each Pooling and Servicing
Agreement in all material respects;
44
<PAGE>
(ii) provide to the Agent, simultaneously with delivery to the
Trustee or the Rating Agencies, all reports, notices, certificates,
statements and other documents required to be delivered to the Trustee
or the Rating Agencies pursuant to the Agreement, the Servicing
Agreement and the other Transaction Documents and furnish to the Agent
promptly after receipt thereof a copy of each material notice, material
demand or other material communication (excluding routine
communications) received by or on behalf of the Company or the Servicer
with respect to the Transaction Documents; and
(iii) provide notice to the Agent of the appointment of a
Successor Servicer pursuant to Section 6.02 of the Servicing Agreement;
and
(iv) (A) immediately notify the Trustee and the Agent upon
receipt of notification from the Seller that in connection with any
Supplier Quality Assurance review relating to the GMT 800 Program, an
officer of the Seller has received notice from GM that such review is
unsatisfactory in any material respect, (B) keep the Trustee and the
Agent reasonably informed of the corrective actions being taken by the
Seller and (C) promptly notify the Trustee and the Agent of the
commencement and termination of any GMT/PPAP Rejection Period; and the
Agent shall provide copies of each such notification to each Purchaser
within one Business Day after receipt of such notification.
SECTION 8.04 Covenant of the Company. The Company hereby
agrees that it shall not permit any amendment, supplement, modification or
waiver or exercise any consent rights granted to it under the Receivables Sale
Agreement with respect to the GM Agreements unless (i) such amendment,
supplement, modification or waiver or such exercise of consent rights would not
have a material adverse effect on the interests, rights or remedies of the
Trustee or the Investor Certificateholders under or with respect to the
Transaction Documents or (ii) the Agent, as directed by the Majority
Purchasers, shall have consented in writing to such amendment, supplement,
modification or waiver or such exercise of consent rights.
SECTION 8.05 Obligations Unaffected. The obligations of the
Company and the Servicer to the Agent and the Purchasers under this Supplement
shall not be affected by reason of any invalidity, illegality or irregularity
of any of the Receivables or any sale of any of the Receivables.
45
<PAGE>
SECTION 8.06 Representations and Warranties of the Initial
Purchasers and any Acquiring Purchasers. Each Initial Purchaser and any
Acquiring Purchaser represents, warrants and covenants to the Company that:
(a) it is not a trust, estate, partnership or "S Corporation"
(within the meaning of Section 1361(a) of the Code) for United States federal
income tax purposes, or if it is such an entity, less than 50% of the value of
the relevant Initial Purchaser's or Acquiring Purchaser's equity interest in
such entity is attributable to such entity's interest in the VFC Certificates;
(b) it has not acquired and agrees that it will not sell,
trade or transfer any interest in a VFC Certificate or cause a Participation or
any other interest in a VFC Certificate or this Supplement, to be marketed on or
through an "established securities market" within the meaning of Section
7704(b)(1) of the Code (and the Treasury regulations promulgated thereunder)
including, without limitation, an over-the-counter market or an interdealer
quotation system that regularly disseminates firm buy or sell quotations;
(c) it is the sole beneficial owner of its VFC Certificates
and it will remain the sole beneficial owner of such VFC Certificates until such
time as such VFC Certificates, or any Participation or other interest therein,
are sold, assigned or otherwise transferred in accordance with Section 11.10 of
this Supplement;
(d) it will not sell, assign or transfer any VFC Certificate,
or any Participation or other interest therein, except as allowed and to the
extent permitted under Section 11.10 of this Supplement; and
(e) the representations and warranties set forth on Schedule 3
to this Supplement are true and correct with respect to such Purchaser.
ARTICLE IX
Conditions Precedent
SECTION 9.01 Conitions Precedent to Effectiveness of
Supplement. This Supplement will become effective on the date (the "Effective
Date") on which the following conditions precedent have been satisfied:
(a) Transaction Documents. The Agent shall have received an
original copy for itself and photocopies for each Purchaser, each executed and
delivered in form and substance satisfactory to the Agent, of (i) the Agreement
executed by a duly authorized officer of each of the Company, the Servicer and
46
<PAGE>
the Trustee, (ii) this Supplement executed by a duly authorized officer of each
of the Company, the Servicer, the Trustee, the Agent and the Initial Purchasers
and (iii) the other Transaction Documents duly executed by the parties thereto.
(b) Corporate Documents; Corporate Proceedings of the Company
and Servicer. The Agent shall have received, with a copy for each Purchaser,
from the Company, the Seller and the Servicer, complete copies of:
(i) the certificate of incorporation including all amendments
thereto, of such Person, certified as of a recent date by the Secretary
of State or other appropriate authority of the state of incorporation,
as the case may be, and a certificate of compliance, of status or of
good standing, as and to the extent applicable, of each such Person as
of a recent date, from the Secretary of State or other appropriate
authority of such jurisdiction;
(ii) a certificate of the Secretary or Assistant Secretary of
such Person dated the Effective Date and certifying (A) that attached
thereto is a true and complete copy of the By-laws of such Person, as
in effect on the Effective Date and at all times since a date prior to
the date of the resolutions described in clause (B) below, (B) that
attached thereto is a true and complete copy of the resolutions of the
Board of Directors of such Person or committees thereof authorizing the
execution, delivery and performance of the Transaction Documents to
which it is a party and the transactions contemplated thereby, and in
the case of the Company, the execution, sale and delivery of the VFC
Certificates, and that such resolutions have not been amended,
modified, revoked or rescinded and are in full force and effect on the
Effective Date, (C) that the certificate of incorporation of such
Person has not been amended since the date of the last amendment
thereto shown on the certificate of the Secretary of State of the state
of incorporation of such Person furnished pursuant to clause (i) above
and (D) as to the incumbency and specimen signature of each officer
executing any Transaction Documents or any other document delivered in
connection herewith or therewith on behalf of such Person; and
(iii) a certificate of another officer as to the incumbency
and specimen signature of the Secretary or Assistant Secretary
executing the certificate pursuant to clause (ii) above.
(c) Good Standing Certificates. The Agent shall have received
copies of certificates of compliance, of status or of good standing, dated as of
a recent date from the Secretary of State or other appropriate authority of such
jurisdiction, with respect to the Company, the Servicer and the Seller, in each
State where the ownership, lease or operation of property or the
47
<PAGE>
conduct of business requires it to qualify as a foreign corporation, except
where the failure to so qualify would not have a material adverse effect on the
business, operations, properties or condition (financial or otherwise) of the
Company, the Servicer or the Seller, as the case may be.
(d) Consents, Licenses, Approvals, Etc. The Agent shall have
received, with a photocopy for each Purchaser, certificates dated the Effective
Date of the President, Vice Chairman, Chief Financial Officer or any Vice
President of the Company, the Servicer and the Seller either (i) attaching
copies of all material consents, licenses and approvals required in connection
with the execution, delivery and performance by the Company, the Servicer or the
Seller, as the case may be, of the Agreement, this Supplement, the Receivables
Sale Agreement and/or the Servicing Agreement, as the case may be, and the
validity and enforceability of the Agreement, this Supplement, the Receivables
Sale Agreement and/or the Servicing Agreement against the Company, the Servicer
or the Seller, as the case may be, and such consents, licenses and approvals
shall be in full force and effect or (ii) stating that no such consents,
licenses or approvals are so required.
(e) Filings, Registrations and Recordings. Any documents
(including, without limitation, financing statements) required to be filed in
order (i) to perfect the sale of the Receivables by the Seller to the Company
pursuant to the Receivables Sale Agreement and (ii) to create, in favor of the
Trustee, a perfected ownership/perfected first security interest in the Trust
Assets under the Agreement with respect to which an ownership/security interest
may be perfected by a filing under the UCC or other comparable statute shall, in
each case, have been properly prepared for filing in each office in each
jurisdiction where required pursuant to the Agreement or the Receivables Sale
Agreement, as the case may be. The Agent shall have received evidence reasonably
satisfactory to it of each such filing, registration or recordation and
reasonably satisfactory evidence of the payment of any necessary fee, tax or
expense relating thereto.
(f) Lien Searches. The Agent and the Trustee shall have
received the results of a recent search satisfactory to the Agent of any UCC
filings (or equivalent filings) made with respect to the Company and the Seller
in the states (or other jurisdictions) in which the chief executive office of
the Company and the Seller is located, any offices of the Company and the Seller
in which records have been kept relating to the Receivables and the other
jurisdictions in which UCC filings (or equivalent filings) were made pursuant to
the preceding subsection, together with copies of the financing statements (or
similar documents) disclosed by such search, and accompanied by evidence
satisfactory to the Agent that any Liens disclosed by such search would be
Permitted Liens or have been released.
48
<PAGE>
(g) Legal Opinions. The Agent and the Trustee shall have
received, with a counterpart for each Purchaser, opinions (i) of counsel to the
Company, the Servicer and the Seller, dated the Issuance Date, as to corporate,
tax, bankruptcy, perfection and other matters, in form and substance reasonably
acceptable to the Agent and its counsel and (ii) opinions of local counsel to
the Company, the Servicer and the Seller, dated the Issuance Date, as to certain
corporate, state tax, perfection, priority and other matters, in form and
substance reasonably acceptable to the Agent and its counsel.
(h) Fees. The Agent and the Trustee shall have received
payment of all fees and other amounts due and payable to any of them on or
before the Effective Date.
(i) Conditions Under the Receivables Sale Agreement. A
Responsible Officer of the Company shall have certified that all conditions to
the obligations of the Company and the Seller under the Receivables Sale
Agreement shall have been satisfied in all material respects.
(j) Copies of Written Policies. The Agent and the Trustee
shall have received copies of the written Policies of the Seller in form and
substance reasonably acceptable to the Agent.
(k) Company's Board of Directors. The composition of the
Company's Board of Directors (including one independent director) shall be
reasonably acceptable to the Agent.
(l) Financial Statements. The Agent and the Trustee shall have
received a balance sheet for the Company for the fiscal year ended December 31,
1998. The Agent shall have received the consolidated balance sheets and
statements of income, stockholders' equity and cash flows of the Relevant Entity
and its respective subsidiaries on a consolidated basis as of and for the fiscal
year ended December 31, 1998, audited by and accompanied by the opinion of
Deloitte & Touche LLP, independent public accountants. For purposes of this
Section 9.01(l), the "Relevant Entity" shall be American Axle & Manufacturing
Holdings, Inc. ("Holdings") so long as Holdings has no significant assets other
than its investment in American Axle & Manufacturing, Inc. However, if Holdings
has significant assets other than its investment in American Axle &
Manufacturing, Inc., such "Relevant Entity" shall be American Axle &
Manufacturing, Inc.
(m) Representations and Warranties. The representations and
warranties of the Company and the Servicer in the Agreement and this Supplement
shall be true and correct in all material respects.
49
<PAGE>
ARTICLE X
The Agent
SECTION 10.01 Appointment. Each Purchaser hereby irrevocably
designates and appoints the Agent as the agent of such Purchaser under this
Supplement and each such Purchaser irrevocably authorizes the Agent, in such
capacity, to take such action on its behalf under the provisions of this
Supplement and to exercise such powers and perform such duties as are expressly
delegated to the Agent by the terms of this Supplement, together with such
other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in this Supplement, the Agent shall not
have any duties or responsibilities, except those expressly set forth herein,
or any fiduciary relationship with any Purchaser, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Supplement or otherwise exist against the Agent.
SECTION 10.02 Delegation of Duties. The Agent may execute
any of its duties under this Supplement by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel (who may be
counsel for the Company or the Servicer), independent public accountants and
other experts selected by it concerning all matters pertaining to such duties.
The Agent shall not be responsible for the negligence or misconduct of any
agents or attorneys-in-fact selected by it with reasonable care.
SECTION 10.03 Exculpatory Provisions. Neither the Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with the Agreement or this
Supplement (x) with the consent or at the request of the Majority Purchasers or
(y) in the absence of its own gross negligence or wilful misconduct or (ii)
responsible in any manner to any of the Purchasers for any recitals,
statements, representations or warranties made by the Company or any officer
thereof contained in this Supplement or any other Transaction Document or in
any certificate, report, statement or other document referred to or provided
for in, or received by the Agent under or in connection with, this Supplement
or any other Transaction Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Supplement or any other
Transaction Document or for any failure of the Company to perform its
obligations hereunder or thereunder. The Agent shall not be under any
obligation to any Purchaser to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Supplement or any other Transaction Document, or to inspect the properties,
books or records of the Company.
50
<PAGE>
SECTION 10.04 Reliance by Agent. The Agent shall be entitled
to rely, and shall be fully protected in relying, upon any VFC Certificate,
writing, resolution, notice, consent, certificate, affidavit, letter, telecopy,
telex or teletype message, statement, order or other documents or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Company or the Servicer),
independent accountants and other experts selected by the Agent and shall not
be liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts. The Agent
may deem and treat the payee of any VFC Certificate as the owner thereof for
all purposes unless a written notice of assignment, negotiation or transfer
thereof shall have been filed with the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Supplement or
any other Transaction Document unless it shall first receive such advice or
concurrence of the Majority Purchasers as it deems appropriate and it shall
first be indemnified to its satisfaction by the Purchasers against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Supplement and
the other Transaction Documents in accordance with a request of the Majority
Purchasers, and such request and any action taken or failure to act pursuant
thereto shall be binding.
SECTION 10.05 Notice of Servicer Default or Early
Amortization Event or Potential Early Amortization Event. Notice of Servicer
Default or Early Amortization Event or Potential Early Amortization. The Agent
shall not be deemed to have knowledge or notice of the occurrence of any
Servicer Default with respect to the Servicer or any Early Amortization Event
or Potential Early Amortization Event hereunder unless the Agent has received
written notice from a Purchaser, the Company or the Servicer referring to the
Agreement or this Supplement, describing such Servicer Default or Early
Amortization Event or Potential Early Amortization Event and stating that such
notice is a "notice of a Servicer Default with respect to the Servicer" or a
"notice of an Early Amortization Event or Potential Early Amortization Event",
as the case may be. In the event that the Agent receives such a notice, the
Agent shall give notice thereof to the Purchasers, the Trustee, the Company and
the Servicer. The Agent shall take such action with respect to such Servicer
Default or Early Amortization Event or Potential Early Amortization Event as
shall be reasonably directed by the Majority Purchasers; provided that unless
and until the Agent shall have received such directions and indemnification
satisfactory to the Agent from the Purchasers, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such Servicer Default or Early Amortization Event or Potential Early
Amortization Event as it shall deem advisable in the best interests of the
Purchasers.
51
<PAGE>
SECTION 10.06 Non-Reliance on Agent and Other Purchasers.
Each Purchaser expressly acknowledges that neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the Agent
hereinafter taken, including any review of the affairs of the Company, shall be
deemed to constitute any representation or warranty by the Agent to any
Purchaser. Each Purchaser represents to the Agent that it has, independently
and without reliance upon the Agent or any other Purchaser, and based on such
documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, operations, property, financial and
other condition and creditworthiness of the Company and made its own decision
to enter into this Supplement. Each Purchaser also represents that it will,
independently and without reliance upon the Agent or any other Purchaser, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Supplement and the other Transaction
Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of the Company. Except for notices, reports and other
documents expressly required to be furnished to the Purchasers by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Purchaser with any credit or other information concerning the business,
operations, property, condition (financial or otherwise), prospects or
creditworthiness of the Borrower which may come into the possession of the
Agent or any of its officers, directors, employees, agents, attorneys-in-fact
or Affiliates.
SECTION 10.07 Indemnification. The Purchasers agree to
indemnify the Agent in its capacity as such (to the extent not reimbursed by
the Company and the Servicer and without limiting the obligation of the Company
and the Servicer to do so), ratably according to their respective Commitment
Percentages in effect on the date on which indemnification is sought (or, if
indemnification is sought after the Commitment Termination Date, ratably in
accordance with their Commitment Percentages immediately prior to such date),
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of, the Commitments,
this Supplement any of the other Transaction Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent
under or in connection with any of the foregoing; provided that no Purchaser
shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's gross negligence or wilful
misconduct. The agreements in
52
<PAGE>
this Section shall survive the payment of all amounts payable hereunder.
SECTION 10.08 Agent in Its Individual Capacity. The Agent
and its Affiliates may make loans to, accept deposits from and generally engage
in any kind of business with the Company, the Servicer or any of their
Affiliates as though the Agent were not the Agent hereunder. With respect to
any VFC Certificate held by the Agent, the Agent shall have the same rights and
powers under this Supplement and the other Transaction Documents as any
Purchaser and may exercise the same as though it were not the Agent, and the
terms "Purchaser" and "Purchasers" shall include the Agent in its individual
capacity.
SECTION 10.09 Successor Agent. The Agent may resign as Agent
upon 10 days' notice to the Purchasers. If the Agent shall resign as Agent
under this Supplement, then the Majority Purchasers shall appoint from among
the Purchasers a successor agent for the Purchasers, which successor agent, so
long as no Early Amortization Event set forth in clauses (a), (b), (c) or (d)
of Section 5.01 shall have occurred and be continuing, shall be approved by the
Company and the Servicer (which approval shall not be unreasonably withheld),
whereupon such successor agent shall succeed to the rights, powers and duties
of the Agent, and the term "Agent" shall mean such successor agent effective
upon such appointment and approval, and the former Agent's rights, powers and
duties as Agent shall be terminated, without any other or further act or deed
on the part of such former Agent or any of the parties to this Supplement.
After any retiring Agent's resignation as Agent, the provisions of this Article
X shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Supplement.
ARTICLE XI
Miscellaneous
SECTION 11.01 Ratification of Agreement. As supplemented by
this Supplement, the Agreement is in all respects ratified and confirmed and
the Agreement as so supplemented by this Supplement shall be read, taken and
construed as one and the same instrument.
SECTION 11.02 Governing Law. THIS SUPPLEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 11.03 Further Assurances. Each of the Company, the
Servicer and the Trustee agrees, from time to time, to do and perform any and
all acts and to execute any and all further instruments required or reasonably
requested by the Agent or Majority Purchasers more fully to effect the purposes
of this Supplement and the sale of the VFC Certificates hereunder,
53
<PAGE>
including, without limitation, in the case of the Company and the Servicer, the
execution of any financing or continuation statements or similar documents
relating to the Receivables and the other Trust Assets for filing or
registration under the provisions of the UCC or similar legislation of any
applicable jurisdiction; provided that in the case of the Trustee, in
furtherance and without limiting the generality of subsection 8.01(d) of the
Agreement, the Trustee shall have received a reasonable assurance of adequate
reimbursement and indemnity in connection with taking such action before the
Trustee shall be required to take any such action.
SECTION 11.04 Payments. Each payment to be made hereunder
shall be made on the required payment date in lawful money of the United States
and in immediately available funds, if to the Purchasers, at the office of the
Agent set forth below its signature hereto. On each Distribution Date, the
Agent shall remit in like funds to each Purchaser its applicable pro rata share
(based on each such Purchaser's Series 1999-A Invested Amount) of each such
payment received by the Agent for the account of the Purchasers.
SECTION 11.05 Costs and Expenses. The Company agrees to pay
all reasonable fees, out-of-pocket costs and expenses of the Agent (including,
without limitation, reasonable fees and disbursements of one counsel to the
Agent) in connection with (i) the preparation, execution and delivery of this
Supplement, the Agreement and the other Transaction Documents and amendments or
waivers of any such documents and (ii) the enforcement by the Agent (on behalf
of the Purchasers) of the obligations and liabilities of the Company and the
Servicer under the Agreement, this Supplement or any related document;
provided, however, that any payments made by the Company pursuant to this
Section shall be Company Subordinated Obligations.
SECTION 11.06 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Trustee, the Agent or
any Purchaser, any right, remedy, power or privilege hereunder, shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges herein provided are cumulative and not
exhaustive of any rights, remedies, powers and privileges provided by law.
SECTION 11.07 Amendments. (a) Subject to subsection (c) of
this Section 11.07, this Supplement may be amended in writing from time to time
by the Servicer, the Company and the Trustee, with the consent of the Agent but
without the consent of any holder of any outstanding VFC Certificate, to cure
any ambiguity, to correct or supplement any provisions herein or therein which
may be inconsistent with any other provisions herein or therein or to add any
other provisions to or changing
54
<PAGE>
in any manner or eliminating any of the provisions with respect to matters or
questions raised under this Supplement which shall not be inconsistent with the
provisions of any Pooling and Servicing Agreement; provided, however, that such
action shall not, as evidenced by an Officer's Certificate delivered to the
Trustee upon which the Trustee may conclusively rely, have a material adverse
effect on the interests of the VFC Certificateholders (but, to the extent that
the determination of whether such action would have such a material adverse
effect requires a conclusion as to a question of law, an Opinion of Counsel
shall be delivered to the Trustee in addition to such Officer's Certificate);
provided further that any amendment that is entered into to provide additional
Enhancement for any Outstanding Series shall be deemed to have no such material
adverse effect. The Trustee may, but shall not be obligated to, enter into any
such amendment pursuant to this paragraph or paragraph (b) below that affects
the Trustee's rights, duties or immunities under any Pooling and Servicing
Agreement or otherwise.
(b) Subject to subsection (c) of this Section 11.07, this
Supplement may also be amended (other than in the circumstances referred to in
subsection (a)) in writing from time to time by the Servicer, the Company and
the Trustee with the consent of the Majority Purchasers for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Supplement or of modifying in any manner the rights of the
VFC Certificateholders; provided, however, that no such amendment shall, unless
signed or consented to in writing by all Purchasers, (i) extend the time for
payment, or reduce the amount, of any amount of money payable to or for the
account of any Purchaser under any provision of this Supplement, (ii) subject
any Purchaser to any additional obligation (including, without limitation, any
change in the determination of any amount payable by any Purchaser) (iii) change
the Aggregate Commitment Amount or the number of Purchasers which shall be
required for any action under this subsection or any other provision of this
Supplement or (iv) release the security interest (as defined in the UCC) in any
Eligible Receivables if after giving effect thereto the Series 199A-A Allocated
Receivables Amount would be less than the Series 1999-A Target Receivables
Amount.
(c) Any amendment hereof can be affected without the Agent
being a party thereto; provided, however, that no such amendment, modification
or waiver of this Supplement that affects rights or duties of the Agent shall be
effective unless the Agent shall have given its prior written consent thereto.
(d) No amendment hereof pursuant to clause (b) above shall be
effective until the Rating Agency Condition is satisfied (unless Series 1999-A
is not then rated, in which case this Subsection 11.07(d) shall not apply).
55
<PAGE>
SECTION 11.08 Severability. If any provision hereof is void
or unenforceable in any jurisdiction, such voidness or unenforceability shall
not affect the validity or enforceability of (i) such provision in any other
jurisdiction or (ii) any other provision hereof in such or any other
jurisdiction.
SECTION 11.09 Notices. All notices, requests and demands to
or upon any party hereto to be effective shall be given (i) in the case of the
Company, the Servicer and the Trustee, in the manner set forth in Section 10.05
of the Agreement and (ii) in the case of the Agent, each Purchaser and the
Rating Agencies, in writing (including a confirmed transmission by telecopy),
and, unless otherwise expressly provided herein, shall be deemed to have been
duly given or made when delivered by hand or three days after being deposited
in the mail, postage prepaid, or, in the case of telecopy notice, when
received, (A) in the case of the Agent and each Purchaser, at their respective
addresses set forth below their names on Schedule 1 hereto and (B) in the case
of the Rating Agencies, at the addresses notified by such Rating Agencies; or
to such other address as may be hereafter notified by the respective parties
hereto.
SECTION 11.10 Successors and Assigns. (a) Subject to
subsection 11.10(h), this Supplement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
(b) Any Purchaser may assign to one or more assignees (any
such assignee shall be referred to herein as an "Acquiring Purchaser") all or a
portion of its interests, rights and obligations under this Supplement and the
Transaction Documents; provided, however, that (i) except in the case of an
assignment to a Purchaser or an Affiliate thereof, the Company must give its
prior written consent to such assignment (which consent shall not in either case
be unreasonably withheld or delayed), (ii) except in the case of an assignment
to a Purchaser, the amount of the Commitment of the assigning Purchaser subject
to each such assignment (determined as of the date the Commitment Transfer
Supplement with respect to such assignment is delivered to the Agent) shall not
be less than $5,000,000, (iii) the parties to each such assignment shall execute
and deliver to the Agent the Commitment Transfer Supplement, substantially in
the form of Exhibit B, together with a processing and recordation fee of $3,500
and (iv) the Acquiring Purchaser, if it shall not be a Purchaser, shall deliver
to the Agent an Administrative Questionnaire, substantially in the form of
Exhibit C. Upon acceptance and recording pursuant to paragraph (e) of this
Section 11.10, from and after the effective date specified in each Commitment
Transfer Supplement, which effective date shall be at least five Business Days
after the execution thereof, (A) the Acquiring Purchaser thereunder shall be a
party hereto and, to the extent of the interest assigned by such Commitment
Transfer Supplement, have the rights and obligations of a
56
<PAGE>
Purchaser under this Supplement and (B) the assigning Purchaser thereunder
shall, to the extent of the interest assigned by such Commitment Transfer
Supplement, be released from its obligations under this Supplement and the
other Transaction Documents (and, in the case of an Commitment Transfer
Supplement covering all or the remaining portion of an assigning Purchaser's
rights and obligations under this Supplement and the other Transaction
Documents, such Purchaser shall cease to be a party hereto but shall continue
to be entitled to the benefits of Sections 7.01, 7.02, 7.03, 7.04 and 11.05, as
well as to any fees accrued for its account and not yet paid).
(c) By executing and delivering a Commitment Transfer
Supplement, the assigning Purchaser thereunder and the Acquiring Purchaser
thereunder shall be deemed to confirm to and agree with each other and the other
parties hereto as follows: (i) such assigning Purchaser warrants that it is the
legal and beneficial owner of the interest being assigned thereby free and clear
of any adverse claim and that its Commitment, and the outstanding balances of
its VFC Certificates, in each case without giving effect to assignments thereof
which have not become effective, are as set forth in such Commitment Transfer
Supplement; (ii) except as set forth in (i) above, such assigning Purchaser
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
this Supplement, or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Supplement, any other Transaction
Document or any other instrument or document furnished pursuant hereto or
thereto, or the financial condition of the Seller, the Company or the Servicer,
or the performance or observance by the Seller, the Company or the Servicer of
any of its obligations under this Supplement, any other Transaction Document or
any other instrument or document furnished pursuant hereto or thereto; (iii)
such Acquiring Purchaser represents and warrants that it is legally authorized
to enter into such Commitment Transfer Supplement; (iv) such Acquiring Purchaser
confirms that it has received a copy of this Supplement and such other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Commitment Transfer Supplement; (v) such Acquiring
Purchaser will independently and without reliance upon the Agent, the Trustee,
the assigning Purchaser or any other Purchaser and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Supplement or any
other Transaction Document; (vi) such Acquiring Purchaser appoints and
authorizes the Agent and the Trustee to take such action as agent on its behalf
and to exercise such powers under this Supplement as are delegated to the Agent
and the Trustee, respectively, by the terms hereof, together with such powers as
are reasonably incidental thereto; and (vii) such Acquiring Purchaser agrees
that it will perform in accordance with their terms all the obligations which by
the
57
<PAGE>
terms of this Supplement are required to be performed by it as a Purchaser.
(d) Notwithstanding and in addition to the provisions of
Section 5.03 of the Agreement, the Agent shall maintain at one of its offices in
The City of New York a copy of each Commitment Transfer Supplement delivered to
it and a register for the recordation of the names and addresses of the
Purchasers, and the Commitments of, and the principal amount of the VFC
Certificates issued to, each Purchaser pursuant to the terms hereof from time to
time (the "Register"). Such Register need not be a separate register from the
Certificate Register set forth in Section 5.03(a) of the Pooling Agreement.
Notwithstanding the provisions of Section 5.05 of the Agreement, the entries in
the Register as provided in this subsection 11.10(d) shall be conclusive and the
Company, the Servicer, the Purchasers, the Paying Agent, the Transfer Agent and
Registrar, the Agent and the Trustee shall treat each person whose name is
recorded in the Register pursuant to the terms hereof as a Purchaser hereunder
for all purposes of this Supplement, notwithstanding notice to the contrary.
However, in accordance with Section 5.05 of the Agreement, in determining
whether the holders of the requisite Fractional Undivided Interests have given
any request, demand, authorization, direction, notice, consent or waiver
hereunder, VFC Certificates owned by the Company, the Servicer or any Affiliate
thereof, shall be disregarded and deemed not to be outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only VFC
Certificates which a Responsible Officer of the Trustee actually knows to be so
owned shall be so disregarded. VFC Certificates so owned by the Company, the
Servicer or any Affiliate thereof which have been pledged in good faith shall
not be disregarded and may be regarded as outstanding if the pledgee establishes
to the satisfaction of the trustee the pledgee's right so to act with respect to
such VFC Certificates and that the pledgee is not the Company, the Servicer or
any Affiliate thereof. The Register shall be available for inspection by the
Company, the Servicer, the Purchasers and the Trustee, at any reasonable time
and from time to time upon reasonable prior notice.
(e) Upon its receipt of a copy of the written consent of the
Trustee, the Company and the Servicer (as required under Section 11.10(b) above)
and a duly completed Commitment Transfer Supplement executed by an assigning
Purchaser and an Acquiring Purchaser, an Administrative Questionnaire completed
in respect of the Acquiring Purchaser (unless the Acquiring Purchaser shall
already be a Purchaser hereunder) and the processing and recordation fee
referred to in paragraph (b) above, the Agent shall (i) accept such Commitment
Transfer Supplement, (ii) record the information contained therein in the
Register and (iii) give prompt written notice thereof to the Purchasers, the
Company, the Servicer and the Trustee. No assignment shall be effective
58
<PAGE>
unless and until it has been recorded in the Register as provided in this
paragraph (e).
(f) Any Purchaser may sell participations to one or more banks
or other entities (the "Participants") in all or a portion of its rights and
obligations under this Supplement and the other Transaction Documents (including
all or a portion of its Commitment and VFC Certificates); provided that any
Participant shall, prior to entering into a Participation, execute and deliver
to the Company and the Trustee a participation certification in substantially
the form of Exhibit G (a "Participation Certification"); and provided further,
that (i) such Purchaser's obligations under this Agreement shall remain
unchanged, (ii) such Purchaser shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) the Participants
shall be entitled to the benefit of the cost protection provisions contained in
Sections 7.01, 7.02, 7.03 and 7.04, and shall be required to provide the tax
forms and certifications described in Section 7.03(b), to the same extent as if
they were Purchasers, provided that no such Participant shall be entitled to
receive any greater amount pursuant to such Sections than a Purchaser would have
been entitled to receive in respect of the amount of Participation sold by such
Purchaser to such Participant had no sale occurred, (iv) the Company, the
Servicer, the other Purchasers, the Agent and the Trustee, shall continue to
deal solely and directly with such Purchaser in connection with such Purchaser's
rights and obligations under this Supplement, and such Purchaser shall retain
the sole right to enforce its rights under VFC Certificates and to approve any
amendment, modification or waiver of any provision of this Supplement (other
than amendments, modifications or waivers decreasing any fees payable hereunder
or the amount of principal of or the rate at which interest is payable on the
VFC Certificates, extending any scheduled principal payment date or date fixed
for the payment of interest on the VFC Certificates or increasing or extending
the Commitments) and (v) the sum of the aggregate amount of any Commitment or
portion thereof subject to each such Participation plus the portion of the
Series 1999-A Invested Amount represented by any VFC Certificates subject to
such Participation shall not be less than $5,000,000. Each Purchaser that grants
a Participation to a Non-U.S. Person pursuant to this Subsection shall provide
the Company and the Trustee with appropriately executed copies of an Internal
Revenue Service Form 1001 or Form 4224, in each case, establishing a complete
exemption from United States federal income withholding taxes, with respect to
each Participant (i) prior to or promptly after any such disposition and (ii)
upon the occurrence of any event which would require the amendment or
resubmission of any such form previously provided hereunder. No Participant may
grant a subparticipation in a VFC Certificate or this Supplement under any
circumstances.
(g) Any Purchaser may, in connection with any assignment or
participation or proposed assignment or participation
59
<PAGE>
pursuant to this Section 11.10, disclose to the Acquiring Purchaser or
Participant or proposed Acquiring Purchaser or Participant any information
relating to the Seller, the Servicer, the Trust or the Company furnished to such
Purchaser by or on behalf of such entities, provided that, prior to any such
disclosure of information, each such Acquiring Purchaser or Participant or
proposed Acquiring Purchaser or Participant shall execute a confidentiality
agreement in the form of Exhibit H.
(h) The Company shall not assign or delegate any of its rights
or duties hereunder without the prior written consent of the Agent, the Trustee
and each Purchaser, and any attempted assignment without such consent shall be
null and void.
(i) If, pursuant to this Supplement, any interest in this
Supplement or in a VFC Certificate is transferred to any Transferee which is a
Non-U.S. Person, the Purchaser making such transfer shall cause such Transferee,
concurrently with the effectiveness of such Transfer, (i) to furnish to the
assigning Purchaser (and, in the case of any Acquiring Purchaser, the Agent, the
Company and the Trustee), with copies to the Servicer, United States Internal
Revenue Service Form 1001 or Form 4224 (or successor applicable forms) unless a
change in law has occurred prior to the date on which such delivery would
otherwise be required which renders such form inapplicable and (ii) to agree
(for the benefit of the Purchasers, the Agent, the Servicer, the Company and the
Trustee) to provide the assigning Purchaser (and, in the case of any Acquiring
Purchaser, the Agent, the Company and the Trustee) a new Form 1001 or Form 4224,
as the case may be (or successor applicable forms), upon the expiration or
obsolescence of any previously delivered form and comparable statements in
accordance with applicable United States laws and regulations and amendments
duly executed and completed by such Transferee unless a change in law has
occurred prior to the date on which such delivery would otherwise be required
which renders such form inapplicable, and to comply from time to time with all
applicable United States laws and regulations with regard to such withholding
tax exemption.
(j) Notwithstanding any other provisions herein, no transfer
or assignment of any interests or obligations of any Purchaser hereunder or any
grant of participations therein shall be permitted if such transfer, assignment
or grant would result in a prohibited transaction under Section 4975 of the
Internal Revenue Code or Section 406 of ERISA or cause the Trust Assets to be
regarded as "plan assets" pursuant to 29 C.F.R. Section 2510.3-101, or require
the Company or the Seller to file a registration statement with the Securities
and Exchange Commission or to qualify under the "blue sky" laws of any state.
SECTION 11.11 Counterparts. This Supplement may be executed
in any number of counterparts and by the different parties hereto in separate
counterparts, each of which when so
60
<PAGE>
executed shall be deemed to be an original, and all of which taken together
shall constitute one and the same agreement.
SECTION 11.12 Adjustments; Setoff. (a) If any Purchaser (a
"Benefitted Purchaser") shall at any time receive in respect of its Series
1999-A Purchaser Invested Amount any distribution of principal, interest,
Commitment Fees or other fees, or any interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by setoff,
or otherwise) in a greater proportion than any such distribution received by
any other Purchaser, if any, in respect of such other Purchaser's Series 1999-A
Purchaser Invested Amount, or interest thereon, such Benefitted Purchaser shall
purchase for cash from the other Purchasers such portion of each such other
Purchaser's interest in the VFC Certificates, or shall provide such other
Purchasers with the benefits of any such collateral, or the proceeds thereof,
as shall be necessary to cause such Benefitted Purchaser to share the excess
payment or benefits of such collateral or proceeds ratably with each of the
Purchasers; provided, however, that if all or any portion of such excess
payment or benefits is thereafter recovered from such Benefitted Purchaser,
such purchase shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest. The Company agrees that
each Purchaser so purchasing a portion of the VFC Certificate holders' Interest
may exercise all rights of payment (including, without limitation, rights of
setoff) with respect to such portion as fully as if such Purchaser were the
direct holder of such portion.
(b) In addition to any rights and remedies of the Purchasers
provided by law, each Purchaser shall have the right, without prior notice to
the Company, any such notice being expressly waived by the Company to the extent
permitted by applicable law, upon any amount becoming due and payable by the
Company hereunder or under the VFC Certificates to setoff and appropriate and
apply against any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Purchaser to
or for the credit or the account of the Company. Each Purchaser agrees promptly
to notify the Company and the Agent after any such setoff and application made
by such Purchaser; provided that the failure to give such notice shall not
affect the validity of such setoff and application.
SECTION 11.13 Limitation of Payments by Company. The
Company's obligations under Article VII shall be limited to the funds available
to the Company which have been properly distributed to the Company pursuant to
the Agreement and any Supplement and neither the Agent nor any Purchaser shall
have any actionable claim against the Company for failure to satisfy such
obligation because it does not have funds available therefor from amounts
properly distributed.
61
<PAGE>
SECTION 11.14 No Bankruptcy Petition. Each Purchaser hereby
covenants and agrees that, prior to the date which is one year and one day
after the later of (i) the last day of the Series 1999-A Amortization Period
and (ii) the date on which all Investor Certificates of each other Outstanding
Series are repaid in full, it will not institute against, or join any other
Person in instituting against, the Company any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other similar
proceedings under any Federal or state bankruptcy or similar law.
ARTICLE XII
Final Distributions
SECTION 12.01 Certain Distributions. (a) Not later than 2:00
p.m., New York City time, on the Distribution Date following the date on which
the proceeds from the disposition of the Receivables pursuant to subsection
7.02(b) of the Agreement are deposited into the Series 1999-A Non-Principal
Collection Sub-subaccount and the Series 1999-A Principal Collection
Sub-subaccount, the Trustee shall distribute such amounts pursuant to Article
III of this Supplement.
(b) Notwithstanding anything to the contrary in this
Supplement or the Agreement, any distribution made pursuant to this Section
shall be deemed to be a final distribution pursuant to Section 9.03 of the
Agreement with respect to the VFC Certificates.
62
<PAGE>
IN WITNESS WHEREOF, the Company, the Servicer, the Trustee,
the Agent and the Initial Purchasers have caused this Series 1999-A Supplement
to be duly executed by their respective officers as of the day and year first
above written.
AAM RECEIVABLES CORP.,
by
--------------------------------------------
Name:
Title:
AMERICAN AXLE & MANUFACTURING INC., as Servicer,
by
--------------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, not in its individual
capacity but solely as Trustee,
by
--------------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as Agent,
by
--------------------------------------------
Name:
Title:
<PAGE>
CREDIT COMMUNAL DE BELGIQUE,
as Initial Purchaser,
by
--------------------------------------------
Name:
Title:
DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN
BRANCHES, as Initial Purchaser,
by
--------------------------------------------
Name:
Title:
RZB FINANCE LLC, as Initial
Purchaser,
by
--------------------------------------------
Name:
Title:
BANQUE NATIONALE DE PARIS, as
Initial Purchaser,
by
--------------------------------------------
Name:
Title:
CREDIT AGRICOLE INDOSUEZ, as
Initial Purchaser,
by
--------------------------------------------
Name:
Title:
BANQUE ET CAISSE D'EPARGNE DE
L'ETAT, LUXEMBOURG, as Initial
Purchaser,
by
--------------------------------------------
Name:
Title:
<PAGE>
BANK INTERNATIONALE
LUXEMBOURG, as Initial
Purchaser,
by
--------------------------------------------
Name:
Title:
CAISSE DES DEPOTS ET
CONSIGNATIONS, as Initial
Purchaser,
by
--------------------------------------------
Name:
Title:
VIA BANQUE, as Initial
Purchaser,
by
--------------------------------------------
Name:
Title:
<PAGE>
THE TRAVELERS INSURANCE
COMPANY, as Initial Purchaser,
account TLAC and its separate
account SMGA
by
--------------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A TO SERIES
1999-A SUPPLEMENT
AAM MASTER TRUST
FORM OF VFC CERTIFICATE, Series 1999-A
REGISTERED UP TO $_____________.00 SERIES
NO. VFC-[ ] 1999-A PURCHASER INVESTED AMOUNT*
(OF UP TO $_____________.00 SERIES
1999-A INVESTED AMOUNT ISSUED)
*THE Series 1999-A PURCHASER INVESTED AMOUNT OF
THIS VFC CERTIFICATE IS SUBJECT TO CHANGE AS DESCRIBED HEREIN.
THIS VFC CERTIFICATE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"). NEITHER THIS VFC
CERTIFICATE NOR ANY PORTION HEREOF MAY BE OFFERED OR SOLD EXCEPT IN
COMPLIANCE WITH THE REGISTRATION PROVISIONS OF THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION PROVISIONS.
THIS VFC CERTIFICATE IS NOT PERMITTED TO BE
TRANSFERRED, ASSIGNED, EXCHANGED OR OTHERWISE PLEDGED OR CONVEYED
EXCEPT IN COMPLIANCE WITH THE TERMS OF THE POOLING AGREEMENT AND
SUPPLEMENT REFERRED TO HEREIN (INCLUDING, WITHOUT LIMITATION, SECTION
11.10 OF THE SUPPLEMENT). THIS VFC CERTIFICATE MAY NOT BE TRANSFERRED
TO ANY PERSON UNLESS SUCH PERSON BECOMES A PURCHASER UNDER SUCH
SUPPLEMENT.
This VFC Certificate evidences a fractional
undivided interest in the assets of the
AAM MASTER TRUST
the corpus of which consists of receivables representing amounts
payable for goods or services, which receivables have been purchased by
AAM Receivables Corp., a Delaware corporation, which in turn
transferred and assigned such receivables to the AAM Master Trust.
(Not an interest in or obligation of
AAM Receivables Corp., the Seller
under the Receivables Sale Agreement
or any Affiliate thereof)
This certifies that
[NAME OF CERTIFICATEHOLDER]
(the "VFC Certificateholder") is the registered owner of a fractional
undivided interest in the assets of AAM Master Trust (the "Trust")
created pursuant to the Pooling Agreement, dated as of October 29,
1997, as amended
1
<PAGE>
and restated as of March 25, 1999 (as the same may from time to time
be amended, restated, supplemented or otherwise modified thereafter,
the "Pooling Agreement"), by and among AAM Receivables Corp., a
Delaware corporation (the "Company"), American Axle & Manufacturing,
Inc., a Delaware corporation, as servicer (the "Servicer"), and The
Chase Manhattan Bank, a New York banking corporation, not in its
individual capacity but solely as trustee (in such capacity, the
"Trustee") for the Trust, as supplemented by the Series 1999-A
Supplement, dated as of March 25, 1999 (as amended, supplemented or
otherwise modified from time to time, the "Supplement", collectively,
with the Pooling Agreement, the "Agreement"), by and among the
Company, the Servicer, the Trustee, the purchasers named therein and
from time to time parties thereto (the "Purchasers") and The Chase
Manhattan Bank, a New York corporation, as agent for the Purchasers
(in such capacity, the "Agent"). The corpus of the Trust consists of
receivables (the "Receivables") representing amounts payable for goods
or services and all other Trust Assets referred to in the Agreement.
Although a summary of certain provisions of the Agreement is set forth
below, this VFC Certificate does not purport to summarize the
Agreement, is qualified in its entirety by the terms and provisions of
the Agreement and reference is made to the Agreement for information
with respect to the interests, rights, benefits, obligations, proceeds
and duties evidenced hereby and the rights, duties and obligations of
the Trustee. A copy of the Agreement may be requested by a holder
hereof by writing to the Trustee at The Chase Manhattan Bank, 450 W.
33rd Street, 14th Floor, New York, New York 10001, Attention of
Structured Finance Services, AAM Master Trust. To the extent not
defined herein, the capitalized terms used herein have the meanings
ascribed to them in the Agreement.
This VFC Certificate is issued under and is subject
to the terms, provisions and conditions of the Agreement, to which
Agreement the VFC Certificateholder, by virtue of the acceptance
hereof, assents and is bound.
It is the intent of the Servicer, the Company, each
VFC Certificateholder, each beneficial owner of a VFC Certificate (or
any interest therein) and the Trustee that for U.S. Federal, state and
local income and franchise tax purposes, and for Michigan single
business tax and intangibles tax purposes, the VFC Certificates be
considered as indebtedness of the Company secured by the Trust Assets
and the Trust be treated as a mere security device or arrangement. The
VFC Certificates shall be designated FASIT Regular Interests for U.S.
federal income tax purposes. The VFC Certificateholder, by the
acceptance hereof, and the beneficial owner of the VFC Certificate (or
any interest therein), by acquiring a beneficial ownership interest in
such VFC Certificate (or interest), agree to treat the VFC Certificates
in such manner for such purposes.
2
<PAGE>
This VFC Certificate is one in a Series of Investor
Certificates entitled "AAM Master Trust, VFC Certificates, Series
1999-A" (the "VFC Certificates") representing a fractional undivided
interest in the Trust Assets, including the right to receive the
distributions specified in the Supplement out of (i) the Series 1999-A
Invested Percentage (expressed as a decimal) of Collections received
with respect to the Receivables and all other funds on deposit in the
Collection Account and (ii) to the extent such interests appear in the
Supplement, all other funds on deposit in the Series 1999-A Collection
Subaccount and any subaccounts thereof (collectively, the "VFC
Certificate holders' Interest"). Concurrent with the issuance of the
VFC Certificates, the Trust shall also issue a Subordinated Company
Interest to the Company representing a fractional undivided interest in
the Trust Assets, consisting of the right to receive the distributions
specified in the Supplement out of (i) the Series 1999-A Invested
Percentage (expressed as a decimal) of Collections received with
respect to the Receivables and all other funds on deposit in the
Collection Account and (ii) to the extent such interests appear in the
Supplement, all other funds on deposit in the Series 1999-A Collection
Subaccount and any subaccounts thereof, in each case to the extent not
required to be distributed to or for the benefit of the VFC Certificate
holders (the "Series 1999-A Subordinated Interest"). The Trust Assets
are allocated in part to the VFC Certificate holders and the holders of
the Series 1999-A Subordinated Interest with the remainder allocated to
the Investor Certificate holders and the holders of the Subordinated
Company Interests of other Series, if any, and to the Company. An
Exchangeable Company Interest representing the Company's interest in
the Trust was issued to the Company pursuant to the Pooling Agreement.
The Exchangeable Company Interest represents the interest in the Trust
Assets not represented by the Investor Certificates and the
Subordinated Company Interests of each Outstanding Series. The
Exchangeable Company Interest may be decreased by the Company pursuant
to the Pooling Agreement in exchange for an increase in the Invested
Amount of a Class of Investor Certificates of an Outstanding Series and
an increase in the related Series Subordinated Company Interest, or one
or more newly issued Series of Investor Certificates and the related
newly issued Series Subordinated Company Interest, upon the conditions
set forth in the Agreement.
Distributions with respect to this VFC Certificate
shall be paid in immediately available funds to the VFC
Certificateholder at the office of the Agent set forth in the
Agreement. Final payment of this VFC Certificate shall be made only
upon presentation and surrender of this VFC Certificate at the office
or agency specified in the notice of final distribution delivered by
the Trustee to the VFC Certificate holders in accordance with the
Agreement.
3
<PAGE>
This VFC Certificate does not represent an obligation
of, or an interest in, the Company, the Servicer or any Affiliate of
either of them.
The transfer of this VFC Certificate shall be
registered in the Certificate Register upon surrender of this VFC
Certificate for registration of transfer at any office or agency
maintained by the Transfer Agent and Registrar accompanied by a written
instrument of transfer, in a form satisfactory to the Trustee and the
Transfer Agent and Registrar, duly executed by the VFC
Certificateholder or the VFC Certificateholder's attorney, and duly
authorized in writing with such signature guaranteed, and thereupon one
or more new VFC Certificates of authorized denominations and of like
aggregate Fractional Undivided Interests will be issued to the
designated transferee or transferees. In addition, the Agent shall
maintain at one of its offices in the City of New York the Register for
the recordation of the names and addresses of the Purchasers, and the
Commitment of, and the principal amount of VFC Certificates issued to,
each Purchaser.
It is understood and agreed by the VFC
Certificateholder and the Agent that each will deliver certain United
States Internal Revenue Service forms, including Form 1001 or Form
4224, Form W-8 or W-9, as provided in Section 7.03 of the Supplement,
and that failure to provide such Forms may entitle the Servicer and the
Trustee to withhold amounts in respect of taxes.
The Company, the Trustee, the Servicer, the Transfer
Agent and Registrar, the Agent and any agent of any of them, may treat
the person whose name is recorded in the Register as a Purchaser for
all purposes of the Supplement, notwithstanding notice to the contrary
(other than notice in connection with an assignment effected or to be
effected in accordance with Section 11.10 of the Supplement).
It is expressly understood and agreed by the Company
and the VFC Certificateholder that (i) the Agreement is executed and
delivered by the Trustee, not individually or personally but solely as
Trustee of the Trust, in the exercise of the powers and authority
conferred and vested in it, (ii) the representations, undertakings and
agreements made on the part of the Trust in the Agreement are made and
intended not as personal representations, undertakings and agreements
by the Trustee, but are made and intended for the purpose of binding
only the Trust, (iii) nothing herein contained shall be construed as
creating any liability of the Trustee, individually or personally, to
perform any covenant either expressed or implied made on the part of
the Trust in the Agreement, all such liability, if any, being expressly
waived by the parties who are signatories to the Agreement and by any
Person claiming by, through or under
4
<PAGE>
such parties; provided, however, the Trustee shall be liable in its
individual capacity for its own wilful misconduct or gross negligence
and for any tax assessed against the Trustee based on or measured by
any fees, commission or compensation received by it for acting as
Trustee and (iv) under no circumstances shall the Trustee be
personally liable for the payment of any indebtedness or expenses of
the Trust or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Trust
under the Agreement.
The holder of this VFC Certificate is authorized to
record the date and amount of each increase and decrease in the Series
1999-A Purchaser Invested Amount with respect to such holder on the
schedules annexed hereto and made a part hereof and any such
recordation shall constitute prima facie evidence of the accuracy of
the information so recorded, absent manifest error, provided that the
failure of the holder of this VFC Certificate to make such recordation
(or any error in such recordation) shall not affect the obligations of
the Company, the Servicer or the Trustee under the Agreement.
This VFC Certificate shall be construed in
accordance with and governed by the laws of the State of New York
without reference to any conflict of law principles.
By acceptance of this VFC Certificate, the VFC
Certificateholder hereby agrees that, prior to the date which is one
year and one day after the later of (i) the last day of the Series
1999-A Amortization Period and (ii) the date on which all Investor
Certificates of each other Outstanding Series are repaid in full, it
will not institute against, or join any other Person in instituting
against, the Company any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any
federal or state bankruptcy or similar law.
5
<PAGE>
Unless the certificate of authentication hereon has
been executed by or on behalf of the Trustee, by manual signature, this
VFC Certificate shall not be entitled to any benefit under the
Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Company has caused this VFC
Certificate to be duly executed.
Dated:___________________ , ____
AAM RECEIVABLES CORP.,
as authorized pursuant to
Section 5.01 of the Pooling
Agreement,
by
-------------------------
Title
6
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the VFC Certificates described in the
within-mentioned Agreement.
THE CHASE MANHATTAN BANK, not
in its individual capacity but
solely as Trustee,
By
-----------------------------
Authorized Signatory
OR
By
-----------------------------
Authorized Signatory
OR
By
-----------------------------
Authorized Signatory
7
<PAGE>
Schedule 1
to VFC Certificate
===============================================================================
Increase Decrease
in Series in Series
1999-A 1999-A Series 1999-A
Purchaser Purchaser Purchaser
Invested Invested Invested Notation
Date Amount Amount Amount Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
===============================================================================
1
<PAGE>
EXHIBIT B TO SERIES
1999-A SUPPLEMENT
[FORM OF COMMITMENT TRANSFER SUPPLEMENT]
COMMITMENT TRANSFER SUPPLEMENT, dated as of [ , ]
among [ ] (the "Transferor"), each purchaser listed as an
Acquiring Pur chaser on the signature pages hereof (each, an "Acquiring
Purchaser") and [ ], a [ ] corporation, as Agent for
the Purchasers under the Supplement described below (in such capacity, the
"Agent").
W I T N E S S E T H :
WHEREAS this Commitment Transfer Supplement is being executed
and delivered in accordance with subsection 11.10(b) of the Series 1999-A
Supplement, dated as of March 25, 1999 (as from time to time amended,
supplemented or otherwise modified in accordance with the terms thereof, the
"Supplement"; terms defined therein being used herein as therein defined), among
AAM Receivables Corp. (the "Company"), American Axle and Manufacturing Inc. (the
"Servicer"), the other Purchasers from time to time parties thereto, the Trustee
and the Agent, to the Pooling Agreement, dated as of October 29, 1997, as
amended and restated as of March 25, 1999, among the Company, the Servicer and
the Trustee (as the same may be from time to time amended, supplemented or
otherwise modified, the "Pooling Agreement");
WHEREAS each Acquiring Purchaser (if it is not already a
Purchaser party to the Supplement) wishes to become a Purchaser party to the
Supplement; and
WHEREAS the Transferor is selling and assigning to each
Acquiring Purchaser, rights, obligations and commitments under the Supplement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Upon the execution and delivery of this Commitment Transfer
Supplement by each Acquiring Purchaser, the Transferor and the Agent
(the date of such execution and delivery, the "Transfer Issuance
Date"), each Acquiring Purchaser shall be a Purchaser party to the
Supplement for all purposes thereof.
1
<PAGE>
2. This Commitment Transfer Supplement is being delivered to
the Agent together with (i) if the Acquiring Purchaser is organized
under the laws of a jurisdiction outside the United States, the forms
specified in Section 7.03(f) of the Supplement, duly completed and
executed by such Acquiring Purchaser, (ii) if the Acquiring Purchaser
is not already a Purchaser under the Supplement, an Administrative
Questionnaire in the form of Exhibit C to the Supplement and (iii) a
processing and recordation fee of $3,500.
3. The Transferor acknowledges receipt from each Acquiring
Purchaser of an amount equal to the purchase price, as agreed between
the Transferor and such Acquiring Purchaser (the "Purchase Price"), of
the portion being purchased by such Acquiring Purchaser (such Acquiring
Purchaser's "Purchased Percentage") of the undivided interest in the
VFC Certificate owned by, and other amounts owing to, the Transferor
under the Supplement. The Transferor hereby irrevocably sells, assigns
and transfers to each Acquiring Purchaser, without recourse,
representation or warranty (except as set forth in paragraph 8(i)
below), and each Acquiring Purchaser hereby irrevocably purchases,
takes and assumes from the Transferor, such Acquiring Purchaser's
Purchased Percentage of the commitment of the Transferor to increase
its VFC Invested Amount under, and the portion of the undivided
interest in, the VFC Certificate, Series 1999-A owned by, and other
amounts owing to, the Transferor, in each case under the Supplement
together with all instruments, documents and collateral security
pertaining thereto.
4. The Transferor has made arrangements with each Acquiring
Purchaser with respect to (i) the portion, if any, to be paid, and the
date or dates for payment, by the Transferor to such Acquiring
Purchaser of any Commitment Fees heretofore received by the Transferor
pursuant to the Supplement prior to the Transfer Issuance Date and (ii)
the portion, if any, to be paid, and the date or dates for payment, by
such Acquiring Purchaser to the Transferor of Commitment Fees or Series
1999-A Monthly Interest received by such Acquiring Purchaser pursuant
to the Supplement from and after the Transfer Issuance Date.
5. From and after the Transfer Issuance Date, amounts that
would otherwise by payable to or for the account of the Transferor
pursuant to the Supplement shall, instead, be payable to or for the
account of the Transferor and the Acquiring Purchasers, as the case may
be, in accordance with their respective interests as reflected in this
Commitment Transfer Supplement,
2
<PAGE>
whether such amounts have accrued prior to the Transfer Issuance Date
or accrue subsequent to the Transfer Issuance Date.
6. Prior to or concurrently with the execution and delivery
hereof, the Agent will, at the expense of the Transferor, provide to
each Acquiring Purchaser (if it is not already a Purchaser party to the
Supplement) photocopies of all documents delivered to the Agent on the
Issuance Date in satisfaction of the conditions precedent set forth in
the Supplement.
7. Each of the parties to this Commitment Transfer Supplement
agrees that at any time and from time to time upon the written request
of any other party, it will execute and deliver such further documents
and do such further acts and things as such other party may reasonably
request in order to effect the purposes of this Commitment Transfer
Supplement.
8. By executing and delivering this Commitment Transfer
Supplement, the Transferor and each Acquiring Purchaser confirm to and
agree with each other and the Purchasers as follows: (i) the Transferor
warrants that it is the legal and beneficial owner of the interest
being assigned hereby free and clear of any adverse claim and that its
Commitment, and the outstanding balances of its VFC Certificates, in
each case without giving effect to assignments thereof which have not
become effective, are [ ] and [ ], respectively;
(ii) except as set forth in (i) above, the Transferor makes no
representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in
connection with the Supplement, or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Supplement,
any other Transaction Document or any other instrument or document
furnished pursuant hereto or thereto, or the financial condition of the
Seller, the Company or the Servicer, or the performance or observance
by the Seller, the Company or the Servicer of any of its obligations
under the Supplement, any other Transaction Document or any other
instrument or document furnished pursuant hereto or thereto; (iii) the
Acquiring Purchaser represents and warrants that it is legally
authorized to enter into this Commitment Transfer Supplement; (iv) the
Acquiring Purchaser confirms that it has received a copy of the
Supplement, the other Transaction Documents and such other documents
and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Commitment Transfer
Supplement; (v) the Acquiring Purchaser will independently and without
reliance upon
3
<PAGE>
the Agent, the Trustee, the assigning Purchaser or any other Purchaser
and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Supplement or any other
Transaction Document; (vi) the Acquiring Purchaser appoints and
authorizes the Agent and the Trustee to take such action as agent on
its behalf and to exercise such powers under the Supplement as are
delegated to the Agent and the Trustee, respectively, by the terms
hereof, together with such powers as are reasonably incidental
thereto; and (vii) the Acquiring Purchaser agrees that it will perform
in accordance with their terms all the obligations which by the terms
of the Supplement are required to be performed by it as a Purchaser.
9. The Acquiring Purchaser confirms that, by executing and
delivering this Commitment Transfer Supplement, it shall be deemed to
have made the representations and warranties in Section 8.06 of the
Supplement.
10. Schedule I hereto sets forth the revised Commitment
Percentages of the Transferor and each Acquiring Purchaser as well as
administrative information with respect to each Acquiring Purchaser.
11. This Commitment Transfer Supplement shall be governed by,
and construed in accordance with, the laws of the State of New York
without giving effect to principles of conflict of laws.
IN WITNESS WHEREOF, the parties hereto have caused this
Commitment Transfer Supplement to be executed by their respective duly
authorized officers as of the date first set forth above.
[NAME OF SELLING PURCHASER],
as Transferor,
by
------------------------------------
Title
4
<PAGE>
[NAME OF PURCHASING
PURCHASER], as Acquiring
Purchaser,
by
------------------------------------
Title
[ ],
as Agent,
by
------------------------------------
Title
5
<PAGE>
SCHEDULE I
TO EXHIBIT B
TO Series 1999-A
SUPPLEMENT
LIST OF ADDRESSES FOR NOTICES
AND OF COMMITMENT PERCENTAGES
[ , as Agent
Address: [ ]
[ ]
Attention of
Telecopier:
[TRANSFEROR]
Address:
Prior Commitment Percentage:
Revised Commitment Percentage:
[ACQUIRING PURCHASER]
Address:
[Prior] Commitment Percentage:
[Revised Commitment Percentage:]
1
<PAGE>
EXHIBIT C TO SERIES
1999-A SUPPLEMENT
[Form of]
[ ]
ADMINISTRATIVE QUESTIONNAIRE
Please accurately complete the following information and return via Telecopy
to the attention of [ ] at [ ] as soon as possible, at Telecopy
No. ( ) [ ].
- -------------------------------------------------------------------------------
PURCHASER LEGAL NAME TO APPEAR IN DOCUMENTATION:
- -------------------------------------------------------------------------------
GENERAL INFORMATION:
Institution Name:
--------------------------------------------------------------
Street Address:
--------------------------------------------------------------
City, State, Zip Code:
---------------------------------------------------------
POST-CLOSING, ONGOING CREDIT CONTACTS/NOTIFICATION METHODS:
CREDIT CONTACTS:
Primary Contact:
- -------------------------------------------------------------------------------
Street Address:
----------------------------------------------------------------
City, State, Zip Code:
---------------------------------------------------------
Phone Number:
------------------------------------------------------------------
Telecopy Number:
---------------------------------------------------------------
Backup Contact:
----------------------------------------------------------------
Street Address:
----------------------------------------------------------------
City, State, Zip Code:
---------------------------------------------------------
Phone Number:
------------------------------------------------------------------
Telecopy Number:
---------------------------------------------------------------
1
<PAGE>
TAX WITHHOLDING:
Nonresident Alien Y* N
------ -----------
* Form 4224 Enclosed
Tax ID Number
-----------------------------
POST-CLOSING, ONGOING ADMINISTRATIVE CONTACTS/NOTIFICATION METHODS:
ADMINISTRATIVE CONTACTS - PAYMENTS, FEES, ETC.
Contact:
-----------------------------------------------------------------------
Street Address:
----------------------------------------------------------------
City, State, Zip Code:
---------------------------------------------------------
Phone Number:
------------------------------------------------------------------
Telecopy Number:
---------------------------------------------------------------
PAYMENT INSTRUCTIONS:
Name of Bank to which funds are to be transferred:
- -------------------------------------------------------------------------------
Routing Transit/ABA number of Bank to which funds are to be transferred:
- -------------------------------------------------------------------------------
Name of Account, if applicable:
- -------------------------------------------------------------------------------
Account Number:
----------------------------------------------------------------
Additional information:
--------------------------------------------------------
It is very important that all the above information be accurately completed and
that this questionnaire be returned to the person specified in the introductory
paragraph of this questionnaire as soon as possible. If there is someone other
than yourself who should receive this questionnaire, please notify us of that
person's name and telecopy number and we will telecopy a copy of the
questionnaire. If you have any questions about this form, please call [ ]
at ( ) [ ].
2
<PAGE>
EXHIBIT F TO SERIES
1999-A SUPPLEMENT
FORM OF ISSUANCE/INCREASE NOTICE
________, 199__
[Agent/Address of Agent]
Telecopier:
Attention:
Ladies and Gentlemen:
Reference is hereby made to the Series 1999-A Supplement,
dated as of March 25, 1999 (as amended or supplemented, the "Supplement"), among
AAM Receivables Corp. (the "Company"), American Axle & Manufacturing, Inc. (the
"Servicer"), the purchasers named therein and from time to time party thereto,
The Chase Manhattan Bank, as Agent, and The Chase Manhattan Bank, as Trustee.
Capitalized terms used in this Notice and not otherwise defined herein shall
have the meanings assigned thereto in the Supplement.
This Notice constitutes the notice required in connection with
[the initial issuance] [any Increase] pursuant to subsection 2.05(a) of the
Supplement.
The [Servicer] [Company] hereby requests [a purchase in
respect of the initial issuance of Investor Certificates] [an Increase] be made
by the Purchasers on ______, ___ in the aggregate amount of $_______, such
[purchase] [Increase] to be allocated to a Eurodollar Tranche with a Eurodollar
Period of one month.
The [Servicer] [Company] hereby represents and warrants, as of
the date of such [purchase] [Increase] after giving effect thereto, that the
conditions set forth in subsections 2.05(a) and (b) of the Supplement with
respect to such [purchase] [Increase] have been satisfied.
IN WITNESS WHEREOF, the undersigned has caused this Notice to
be executed by its duly authorized officer as of the date first above written.
[AMERICAN AXLE & MANUFACTURING,
INC., as Servicer] [AAM
RECEIVABLES CORP.]
By:
-------------------------------------
Name:
Title:
1
<PAGE>
EXHIBIT G TO SERIES
1999-A SUPPLEMENT
PARTICIPATION CERTIFICATION
AAM Receivables Corp.
1840 Holbrook Avenue, Suite 2A
Detroit, MI 48212
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
In connection with our proposed entrance into a participation
in respect of the VFC Certificate held by [insert name of Purchaser] (the
"Participation") and pursuant to Section 11.10(f) of the AAM Master Trust Series
1999-A Supplement (the "Supplement") to the Pooling Agreement, dated as of March
25, 1999 (the "Agreement"), among AAM Receivables Corp. (the "Company"),
American Axle & Manufacturing, Inc., as Servicer, and The Chase Manhattan Bank,
as Trustee, we confirm that:
1. Certain terms of the Participation are as follows:
(a) The effective date of the Participation
is _______________________.
(b) The expected maturity date of the Participation
is _______________________.
(c) The aggregate principal amount of the VFC
Certification being participated is
$ ________________________.
2. We are not a trust, estate, partnership, or "S Corporation"
(within the meaning of Section 1361(a) of the Code) for United States federal
income tax purposes, or if we are such an entity, less than 50% of the value of
our equity interest in such entity is attributable to such entity's interest in
the VFC Certificates.
3. We have acquired the Participation described herein for our
own account and we are and will remain the sole beneficial owner of such
Participation, or any interest therein, at all times.
4. We understand that we may not at any time grant any
participation or other interest in the Participation or
1
<PAGE>
otherwise subdivide our interest therein, and we further understand that the
Participation is not transferable unless we obtain the prior written consent of
the Company and the Trustee and that we may not sell, assign, trade, pledge or
otherwise transfer the Participation except in accordance with and to the
extent permitted under Section 11.10 of the Supplement.
5. We have neither acquired nor will we sell, trade or
transfer any interest in the Participation, the VFC Certificate or the
Supplement or cause an interest in the Participation, VFC Certificate or the
Supplement to be marketed on or through an "established securities market"
within the meaning of Section 7704(b)(1) of the Code (and Treasury regulations
promulgated thereunder) including, without limitation, an over-the-counter or an
interdealer quotation system that regularly disseminates firm buy or sell
quotations. We are aware that counsel's opinion to the effect that the Trust
will not be treated as a publicly traded partnership taxable as a corporation is
dependent in part on the accuracy of the preceding sentence.
All capitalized terms used but not defined herein shall have
the meanings ascribed to such terms in the Supplement or the Agreement, as the
case may be.
You are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours
[PARTICIPANT]
By:
-----------------------------------------
Name:
Title:
2
<PAGE>
EXHIBIT H TO SERIES
1999-A SUPPLEMENT
Form of Confidentiality Agreement
(Telecopy to [ ] at - )
[Name of assignor Purchaser]
Ladies and Gentlemen:
You are prepared to furnish to the undersigned [describe
information to be provided]. The [described information] and any other
materials, documents and information which you, the Seller, the Servicer, the
Company and the Trustee, on behalf of the Trust, or any of your or their
respective affiliates may furnish to us in connection with our evaluation of a
possible assignment or participation are collectively called the "Information".
Terms used herein that are not otherwise defined herein shall have the meaning
ascribed to such terms in the Pooling Agreement, dated as of October 29, 1997,
as amended and restated as of March 25, 1999, among American Axle &
Manufacturing, Inc., AAM Receivables Corp. and The Chase Manhattan Bank, as
Trustee.
We agree to keep confidential, and to not publish, disclose or
otherwise divulge, the Information (and to cause our officers, directors,
employees, agents and representatives to keep confidential, and to not publish,
disclose or otherwise divulge, the Information) and, at your, the Seller's, the
Servicer's, the Company's or the Trustee's request (except as provided below),
promptly to return to you, the Seller, the Servicer, the Company or the Trustee
(as applicable), or destroy, the Information and all copies thereof, extracts
therefrom and analyses or other materials based thereon, except that we shall be
permitted to disclose Information (i) to such of our officers, directors,
employees, agents and representatives as need to know such Information in
connection with our evaluation of a possible assignment or participation (who
will be informed of the confidential nature of the Information); (ii) to the
extent required by applicable laws or regulations or by any subpoena or similar
legal process, or requested by any bank regulatory authority (in any which event
we will notify you, the Seller, the Servicer, the Company or the Trustee to the
extent not prohibited by applicable law); (iii) to the extent such Information
(A) becomes publicly available other than as a result of a breach of this
agreement, (B) becomes available to us on a
1
<PAGE>
non-confidential basis from a source other than you, the Seller, the Servicer,
the Company or the Trustee or any of your Affiliates or (C) was available to us
on a non-confidential basis prior to its disclosure to us by you; (iv) to the
extent you, the Seller, the Servicer, the Company and the Trustee shall have
consented to such disclosure in writing; or (v) pursuant to the last paragraph
of this letter.
We further agree that we will use the Information (except to
the extent the conditions referred to in subclauses (A), (B) and (C) of clause
(iii) above have been met and as provided in the last paragraph of this letter)
only to evaluate a possible assignment or participation.
We further agree, in the event we participate in an assignment
or participation, that we will not disclose any of the Information to any
assignee or participant or proposed assignee or participant unless and until
such assignee or participant or proposed assignee or participant first executes
and delivers to you a letter substantially in the form hereof.
Our obligations under this letter are for the benefit of you,
the Seller, the Servicer, the Company and the Trustee and your and their
Affiliates and you and each of them may pursue remedies against us for the
breach hereof, either in equity or at law.
Notwithstanding anything to the contrary contained above if we
participate in an assignment or participation, we will be entitled to retain all
Information and to use it in monitoring our investment and in exercising our
rights with respect thereto. This agreement shall be governed by the laws of the
State of New York.
Name of Recipient:
by:
-----------------------------
Authorized Officer
------------------------------
[Name of Assignee/Participant/
Proposed Assignee/Proposed
Participant]
2
<PAGE>
Schedule 1 to the
Series 1999-A Supplement
COMMITMENTS
Purchasers Commitment
- ---------- ----------
The Travelers Insurance Company, for itself and two of its $ 35,000,000
separate accounts
Credit Agricole Indosuez 25,000,000
Dresdner Bank New York 25,000,000
Caisse des Depots et Consignations 20,000,000
Banque Nationale de Paris 10,000,000
Credit Comunal de Beigique 10,000,000
RZB Finance LLC, New York 10,000,000
Via Banque 10,000,000
Banque Internationale Luxembourg 5,000,000
Banque et Caisse D'Epargne de L'Etat, Luxembourg 3,000,000
------------
$153,000,000
<PAGE>
Schedule 2 to the
Series 1999-A Supplement
Trust Accounts
Account Account Number
------- --------------
AAM Collection Account 507-831454
AAM Company Collection Sub-Account 507-830555
AAM 99-A Collection Subaccount 507-885147
AAM 99-A Principal Collection Sub- 507-885163
subaccount
AAM 99-A Non-Principal Collection Sub- 507-885171
subaccount
AAM 99-A Accrued Interest Sub- 507-885198
subaccount
1
<PAGE>
Schedule 3 to the
Series 1999-A Supplement
Representations and Warranties of Each Initial Purchaser and Acquiring
Purchaser
(1) except as otherwise agreed by the Company, it is not (a) an "employee
benefit plan" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended, or other retirement arrangement,
individual retirement account or Keogh plan, whether or not it is subject to
the provisions of Title I thereof, (b) any plan described in Section 4975(e)(1)
of the Code or (c) any other entity that would be deemed to be a "benefit plan
investor" within the meaning of Department of Labor Regulation Section
2510.3-101(f)(2);
(2) if the VFC Certificates constitute a security, as defined in the Securities
Act of 1933, as amended (the "Securities Act"),
(a) it is an "institutional accredited investor" within the
meaning of Rule 501(a)(1),(2),(3) or (7) of Regulation D under the Securities
Act of 1933, as amended;
(b) it is purchasing the VFC Certificates for its own account
or for the account of one or more other institutional accredited investors;
(c) it has such knowledge and experience in financial and
business matters, it is capable of evaluating the merits and risks of purchasing
the VFC Certificates and it, or the account for which it is purchasing the VFC
Certificates, can bear the economic risks in the VFC Certificates for an
indefinite period of time;
(d) it is acquiring the VFC Certificates for investment and
not with a view to any distribution thereof in a transaction that would violate
the Securities Act or the securities laws of any state of the United States or
any other applicable jurisdiction, provided that the disposition of its property
and the property of any accounts for which it is acting as fiduciary shall
remain at all times within its control;
(e) it understands that the VFC Certificates are being offered
in a transaction not involving any public offering within the meaning of the
Securities Act and that the VFC Certificates have not been registered under the
Securities Act or any state securities law and will contain, or be deemed to
contain, the legends set forth in Exhibit A to the Series 1999-A Supplement-The
AAM Master Trust, Form of VFC Certificate, Series 1999-A, and it agrees, on its
own behalf and on behalf of each account for which it acquires
2
<PAGE>
any VFC Certificates, that such VFC Certificates may not be resold, pledged or
transferred except to a person who is an institutional accredited investor
pursuant to a transaction that is exempt from the registration requirements of
the Securities Act and in compliance with any applicable state securities law.
3
<PAGE>
EXECUTION COPY
================================================================================
RECEIVABLES SALE AGREEMENT
Dated as of October 29, 1997,
as amended and restated as of March 25, 1999,
Between
AAM RECEIVABLES CORP.,
as Company
and
AMERICAN AXLE & MANUFACTURING, INC.
as Seller and Servicer
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
Definitions ............................................ 2
SECTION 1.01 Defined Terms .................................................. 2
SECTION 1.02 Other Definitional Provisions .................................. 6
ARTICLE II
Purchase and Sale of Receivables .......................... 7
SECTION 2.01 Purchase and Sale of Receivables ............................... 7
SECTION 2.02 Purchase Price ................................................. 10
SECTION 2.03 Payment of Purchase Price ...................................... 10
SECTION 2.04 No Repurchase .................................................. 11
SECTION 2.05 Rebates, Adjustments, Returns, Reductions and Modifications .... 12
SECTION 2.06 Seller Repurchase Payments ..................................... 12
SECTION 2.07 Certain Charges ................................................ 13
SECTION 2.08 Certain Allocations ............................................ 13
SECTION 2.09 Further Assurances ............................................. 13
SECTION 2.10 GMT/PPAP Rejection Period ...................................... 14
ARTICLE III
Conditions to Purchase and Sale .......................... 14
SECTION 3.01 Conditions Precedent to the Company's Purchase of Receivables
on the Effective Date .......................................... 14
SECTION 3.02 Conditions Precedent to All the Company's Purchases of
Receivables .................................................... 15
SECTION 3.03 Conditions Precedent to the Seller's Obligations on the
Effective Date ................................................. 16
SECTION 3.04 Conditions Precedent to All the Seller's Obligations ........... 16
ARTICLE IV
Representations and Warranties ........................... 17
SECTION 4.01 Representations and Warranties of the Seller Relating to
Itself ......................................................... 17
SECTION 4.02 Representations and Warranties of the Seller Relating to
the Receivables ................................................ 21
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 4.03 Representations and Warranties of the Company .................. 21
ARTICLE V
Affirmative Covenants ................................ 22
SECTION 5.01 Certificates; Other Information ................................ 22
SECTION 5.02 Compliance with Law and Policies ............................... 23
SECTION 5.03 Preservation of Corporate Existence ............................ 23
SECTION 5.05 Maintaining Records; Access to Properties and Inspections ...... 24
SECTION 5.06 Location of Records ............................................ 24
SECTION 5.07 Computer Files ................................................. 25
SECTION 5.08 Payment of and Compliance with Obligations ..................... 25
SECTION 5.09 Collections .................................................... 25
SECTION 5.10 Furnishing Copies, Etc. ........................................ 26
SECTION 5.11 Obligations with Respect to Obligors and Receivables ........... 26
SECTION 5.12 Responsibilities of the Seller ................................. 26
SECTION 5.13 Assessments .................................................... 26
SECTION 5.14 Further Action ................................................. 26
SECTION 5.15 Sale of Receivables ............................................ 27
SECTION 5.16 GMT/PPAP Rejection Period ...................................... 27
ARTICLE VI
Negative Covenants ................................. 27
SECTION 6.01 Limitations on Transfers of Receivables, Etc. .................. 28
SECTION 6.02 Extension or Amendment of Receivables .......................... 28
SECTION 6.03 Change in Payment Instructions to Obligors ..................... 28
SECTION 6.04 Change in Name ................................................. 28
SECTION 6.05 Policies ....................................................... 28
SECTION 6.06 Modification of Ledger ......................................... 29
SECTION 6.07 Accounting for Purchases ....................................... 29
SECTION 6.08 Instruments .................................................... 29
SECTION 6.09 Ineligible Receivables ......................................... 29
SECTION 6.10 Business of the Seller ......................................... 29
SECTION 6.11 Limitation on Fundamental Changes .............................. 29
SECTION 6.12 Amendment of GM Agreements ..................................... 30
ARTICLE VII
Purchase Termination Events ............................. 30
SECTION 7.01 Purchase Termination Events .................................... 30
SECTION 7.02 Remedies ....................................................... 32
ARTICLE VIII
Seller Note ..................................... 33
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 8.01 Seller Note .................................................... 33
SECTION 8.02 Restrictions on Transfer of Seller Note ........................ 34
SECTION 8.03 Aggregate Amount ............................................... 34
ARTICLE IX
Miscellaneous .................................... 34
SECTION 9.01 Payments ....................................................... 34
SECTION 9.02 Costs and Expenses ............................................. 35
SECTION 9.03 Successors and Assigns ......................................... 36
SECTION 9.04 Governing Law .................................................. 36
SECTION 9.05 No Waiver; Cumulative Remedies ................................. 36
SECTION 9.06 Amendments and Waivers ......................................... 36
SECTION 9.07 Severability ................................................... 36
SECTION 9.08 Notices ........................................................ 36
SECTION 9.09 Counterparts ................................................... 37
SECTION 9.10 Waivers of Jury Trial .......................................... 37
SECTION 9.11 Jurisdiction; Consent to Service of Process .................... 37
SECTION 9.12 Integration .................................................... 38
SECTION 9.13 No Bankruptcy Petition ......................................... 38
SECTION 9.14 Termination .................................................... 38
SECTION 9.15 Construction of Agreement ...................................... 39
</TABLE>
Exhibit A Form of Seller Note
SCHEDULES
Schedule 1 Receivables
Schedule 2 Lockboxes
Schedule 3 Chief Executive Office
Schedule 4 Names
Schedule 5 Discounted Percentage
Schedule 6 Financial Statement Note
<PAGE>
RECEIVABLES SALE AGREEMENT, dated as of October 29, 1997,
as amended and restated as of March 25, 1999 (this
"Agreement"), between AMERICAN AXLE & MANUFACTURING, INC., a
Delaware corporation, as seller (in such capacity, the
"Seller") and as servicer (in such capacity, the "Servicer")
and AAM RECEIVABLES CORP., a Delaware corporation (the
"Company").
W I T N E S S E T H :
WHEREAS, in the ordinary course of business, the Seller
generates Receivables (such term and all other capitalized terms being defined
or referenced in Article I);
WHEREAS, the Seller is willing to sell to the Company, and the
Company is willing to purchase from the Seller, all of the Seller's right, title
and interest in, to and under the Receivables then existing and thereafter
created and all other Receivable Assets;
WHEREAS, the Seller and the Company desire the sale of
Receivables and Receivable Assets from the Seller to the Company to be a true
sale providing the Company with the full benefits of ownership of the
Receivables;
WHEREAS, the parties hereto have entered into the Receivables
Sale Agreement, dated as of October 29, 1997 (the "Existing Receivables Sale
Agreement"), pursuant to which the Seller sells to the Company, and the Company
purchases from the Seller, all the Seller's right, title and interest in, to and
under the Receivables then existing and thereafter created and all other
Receivable Assets;
WHEREAS, the Servicer, the Company and The Chase Manhattan
Bank, as Trustee, have entered into a Pooling Agreement dated as of October 29,
1997, as amended and restated as of March 25, 1999 (as amended, modified or
otherwise supplemented from time to time, the "Pooling Agreement") in order to
create a master trust into which the Company will transfer all its right, title
and interest in, to and under the Receivables and certain other assets then or
hereafter owned by the Company; and
WHEREAS, the parties hereto wish to amend and restate the
Existing Receivables Sale Agreement in its entirety.
<PAGE>
2
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, and other good and valuable consideration,
the receipt and sufficiency of which are hereby expressly acknowledged, the
parties hereto agree that the Existing Receivables Sales Agreement shall be and
hereby is amended and restated in its entirety follows:
ARTICLE I
Definitions
SECTION 1.01 Defined Terms. Capitalized terms defined or
referenced in the Pooling Agreement shall be used herein as therein defined
(unless otherwise defined or referenced herein), and the following terms shall
have the following meanings:
"Adjustment Amount" shall have the meaning specified in
subsection 2.06(a).
"Applicable Insolvency Laws" shall have the meaning specified
in subsection 7.01(d).
"Collections" shall mean all collections and all amounts
received in respect of the Receivables assigned to the Company, including
Recoveries, Adjustment Payments, indemnification payments made by the Servicer
and payments received in respect of Dilution Adjustments, together with all
collections received in respect of the Related Property in the form of cash,
checks, wire transfers or any other form of cash payment, and all proceeds of
Receivables and collections thereof (including, without limitation, collections
evidenced by an account, note, instrument, letter of credit, security, contract,
security agreement, chattel paper, general intangible or other evidence of
indebtedness or security, whatever is received upon the sale, exchange,
collection or other disposition of, or any indemnity, warranty or guaranty
payable in respect of, the foregoing and all "proceeds" as defined in Section
9-306 of the UCC as in effect in the State of New York).
"Credit Agreement" shall mean the Credit Agreement dated as of
October 27, 1997, among American Axle & Manufacturing of Michigan, Inc., the
Seller, the lenders named therein, The Chase Manhattan Bank, as Administrative
Agent and Collateral Agent, and Chase Manhattan Bank of Delaware, as Fronting
Bank (including any amendments or modifications thereto or refinancing thereof).
"Cut-Off Date" shall mean the close of business on October
24, 1997.
"Discounted Percentage" shall have the meaning specified in
Schedule 5.
"Documents" shall have the meaning specified in subsection
7.02(b)(iii).
<PAGE>
3
"Early Termination" shall have the meaning specified in
Article VII.
"Effective Date" shall mean October 29, 1997.
"ERISA Affiliate" shall mean with respect to any Person, any
trade or business (whether or not incorporated) that is a member of a group of
which such Person is a member and which is treated as a single employer under
Section 414 of the Internal Revenue Code.
"GM Agreements" shall mean (i) the Component Supply Agreement,
as amended, dated as of February 29, 1994, between the Seller and General Motors
Corporation, (ii) the GMCL Purchase Order Agreement, as amended, dated as of
February 17, 1994, and effective on March 1, 1994, between the Seller and
General Motors of Canada Limited ("GMCL"), (iii) the Amended and Restated
Memorandum of Understanding dated as of September 22, 1997, as amended pursuant
to an Extension Agreement dated as of September 22, 1997 between the Seller and
General Motors Corporation, (iv) the letter agreement, dated as of February 20,
1996, between the Seller and General Motors Corporation and (v) any agreements
entered into between the Seller and General Motors or GMCL succeeding or
replacing the agreements in clauses (i) and (ii), including "Lifetime Program
Contracts".
"Ineligibility Event" shall have the meaning specified in
subsection 2.06.
"Ineligible Receivable" shall have the meaning specified in
subsection 2.06.
"Insolvency Event" with respect to the Seller, shall mean the
occurrence of any one or more of the Purchase Termination Events specified in
subsection 7.01(d).
"Multiemployer Plan" shall mean with respect to any Person, a
multiemployer plan as defined in Section 4001(a)(3) of ERISA to which such
Person or any ERISA Affiliate of such Person (other than one considered an ERISA
Affiliate only pursuant to subsection (m) or (o) of Section 414 of the Internal
Revenue Code) is making or accruing an obligation to make contributions, or has
within any of the preceding five plan years made or accrued an obligation to
make contributions.
"Payment Date" shall have the meaning specified in subsection
2.03(a).
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA, or any successor
thereto.
"Plan" shall mean, with respect to any Person, any pension
plan (other than a Multiemployer Plan) subject to the provisions of Title IV of
ERISA or Section 412 of the Internal
<PAGE>
4
Revenue Code which is maintained for employees of such Person or any ERISA
Affiliate of such Person.
"Pooling Agreement" shall have the meaning specified in the
recitals hereto.
"Potential Purchase Termination Event" shall mean any
condition or act specified in Article VII that, with the giving of notice or the
lapse of time or both, would become a Purchase Termination Event.
"Purchase Price" shall have the meaning specified in Section
2.02.
"Purchase Termination Event" shall have the meaning specified
in Section 7.01.
"Purchased Receivable" shall mean, at any time, any Receivable
sold to the Company by the Seller pursuant to, and in accordance with the terms
of, this Agreement.
"Receivable" shall mean the indebtedness and payment
obligations of any Person to the Seller (including, without limitation,
obligations constituting an account or general intangible or evidenced by a
note, instrument, contract, security agreement, chattel paper or other evidence
of indebtedness or security and whether or not any invoice or other bill has
been rendered by the Seller or any other Person) arising from (x) a sale of
merchandise or services by the Seller (including, without limitation, any right
to payment for goods sold or for services rendered), (y) an obligation of any
Person to provide rebates to the Seller with respect to, or to reimburse the
Seller for, a portion of the costs of materials and parts to be used in the
manufacturing of products for such Person or its affiliates, or (z) an
obligation of any Person to pay for tooling or equipment purchased or built by
the Seller for the purpose of manufacturing products for such Person, including
the right to payment of any interest, sales taxes, finance charges, returned
check or late charges and other obligations of such Person with respect thereto;
provided that any Tooling Receivable that is not generated as part of the GMT
800 program or any other program providing for periodic payments to the Seller
shall not constitute a "Receivable" until the Production Part Approval Process
(PPAP) has been completed with respect to the tooling giving rise to such
Tooling Receivable; provided further that in no event shall any intercompany or
intracompany obligation owed to the Seller by any of its Subsidiaries, divisions
or other operating units constitute a "Receivable".
"Receivable Assets" shall have the meaning specified in
subsection 2.01(a).
"Reference Rate" shall mean, for any day, a rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of
(a) the Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day
<PAGE>
5
plus 1/2 of 1%. If The Chase Manhattan Bank shall have determined (which
determination shall be conclusive absent manifest error) that it is unable to
ascertain the Federal Funds Effective Rate for any reason, including the failure
of the Federal Reserve Bank of New York to publish rates or the inability of The
Chase Manhattan Bank to obtain quotations in accordance with the terms of the
definition thereof, the Reference Rate shall be determined without regard to
clause (b) of the immediately preceding sentence, as appropriate, until the
circumstances giving rise to such inability no longer exist. Any change in the
Reference Rate due to a change in the Prime Rate or the Federal Funds Effective
Rate shall be effective on the effective date of such change in the Prime Rate
or the Federal Funds Effective Rate, respectively. The term "Prime Rate" shall
mean the rate of interest per annum publicly announced from time to time by The
Chase Manhattan Bank as its prime rate in effect at its principal office in New
York City; each change in the Prime Rate shall be effective on the date such
change is publicly announced as being effective. The term "Federal Funds
Effective Rate" shall mean, for any day, the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average of the quotations for
the day for such transactions received by The Chase Manhattan Bank from three
Federal funds brokers of recognized standing selected by it.
"Related Property" shall mean, with respect to each
Receivable:
(a) all of the Seller's interest in the goods (including
returned goods), if any, relating to the sale which gave rise to such
Receivable;
(b) all other security interests or Liens, and the Seller's
interest in the property subject thereto, from time to time purporting to secure
payment of such Receivable, whether pursuant to the contract related to such
Receivable or otherwise, together with all financing statements signed by an
Obligor describing any collateral securing such Receivable; and
(c) all guarantees, insurance, letters of credit and other
agreements or arrangements of whatever character from time to time supporting or
securing payment of such Receivable whether pursuant to the contract related to
such Receivable or otherwise;
including in the case of clauses (b) and (c), without limitation, pursuant to
any obligations evidenced by a note, instrument, contract, security agreement,
chattel paper or other evidence of indebtedness or security.
"Reportable Event" shall mean any reportable event as defined
in Section 4043(b) of ERISA or the regulations issued thereunder with respect to
a Plan (other than a Plan maintained by an ERISA Affiliate which is considered
an ERISA Affiliate only
<PAGE>
6
pursuant to subsection (m) or (o) of Section 414 of the Internal Revenue Code).
"Sale Documents" shall mean this Agreement and the Seller
Note.
"Sale Termination Date" shall have the meaning specified in
subsection 9.13(b).
"Seller" shall have the meaning specified in the recitals
hereto.
"Seller Dilution Adjustment Payment" shall have the meaning
specified in Section 2.05.
"Seller Note" shall have the meaning specified in Section
8.01.
"Seller Repurchase Payment" shall have the meaning specified
in subsection 2.06.
"Tooling Receivable" shall mean any Receivable described in
clause (z) of the definition thereof.
"Transactions" shall have the meaning specified in subsection
4.01(b).
"Withdrawal Liability" shall mean liability to a Multiemployer
Plan as a result of a complete or partial withdrawal from such Multiemployer
Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02 Other Definitional Provisions. (a) The words
"hereof", "herein", "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and article, section, subsection, schedule and
exhibit references are to this Agreement unless otherwise specified.
(b) As used herein and in any certificate or other document
made or delivered pursuant hereto, accounting terms relating to the Seller and
the Company, unless otherwise defined herein, shall have the respective meanings
given to them under GAAP.
(c) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
(d) Any reference herein to a Schedule or Exhibit to this
Agreement shall be deemed to be a reference to such Schedule or Exhibit as it
may be amended, modified or supplemented from time to time to the extent that
such Schedule or Exhibit may be amended, modified or supplemented (or any term
or provision of any Transaction Document may be amended that would have the
effect of amending, modifying or supplementing information
<PAGE>
7
contained in such Schedule or Exhibit) in compliance with the terms of the
Transaction Documents.
(e) Any reference in this Agreement to any representation,
warranty or covenant "deemed" to have been made is intended to encompass only
representations, warranties or covenants that are expressly stated to be
repeated on or as of dates following the execution and delivery of this
Agreement, and no such reference shall be interpreted as a reference to any
implicit, inferred, tacit or otherwise unexpressed representation, warranty or
covenant.
(f) The words "include", "includes" or "including" shall be
interpreted as if followed, in each case, by the phrase "without limitation".
ARTICLE II
Purchase and Sale of Receivables
SECTION 2.01 Purchase and Sale of Receivables. (a) The Seller
hereby sells, transfers, assigns, and conveys, without recourse (except as
expressly provided herein), to the Company, all its present and future right,
title and interest in, to and under:
(i) all Receivables, including those existing at the close of
business on the Effective Date and all such Receivables thereafter
arising from time to time until but not including the date an Early
Termination occurs;
(ii) the Related Property;
(iii) all Collections;
(iv) all rights (including rescission, replevin or reclamation)
relating to any Receivable or arising therefrom;
(v) all proceeds of or payments in respect of any and all of the
foregoing clauses (i) through (iv) (including Collections).
Such property described in the foregoing clauses (i) through (v) shall be
referred to herein as the "Receivable Assets". Subject to the terms and
conditions of this Agreement, the Company hereby agrees to purchase the
Receivables Assets.
(b) On the Effective Date and on the date of creation of
each newly created Receivable (but only so long as no Early Termination shall
have occurred and be continuing), all of the Seller's right, title and interest
in and to (i) in the case of the Effective Date, all then existing Receivables
and all other Receivable Assets in respect of such Receivables and (ii) in the
case of each such date of creation, all such newly created
<PAGE>
8
Receivables and all other Receivable Assets in respect of such Receivables shall
be considered to be part of the assets that have been sold, transferred,
assigned, set over and otherwise conveyed to the Company pursuant to paragraph
(a) above without any further action by the Seller or any other Person. Anything
herein to the contrary notwithstanding, to the extent the Seller shall not have
received payment from the Company of the Purchase Price for any Receivable and
other related Receivable Assets in accordance with the terms of Section 2.03,
such Receivable and Receivable Assets shall, upon receipt of notice from the
Seller of such failure to receive payment, immediately and automatically be
sold, assigned, transferred and reconveyed by the Company to the Seller without
any further action by the Company or any other Person.
(c) The parties to this Agreement intend that, for
accounting and commercial purposes, the transactions contemplated by Section
2.01 hereby shall be, and shall be treated as, a purchase by the Company and a
sale by the Seller of the Purchased Receivables and other Receivable Assets and
not a lending transaction. All sales of Receivables and other Receivable Assets
by the Seller hereunder shall be without recourse to, or representation or
warranty of any kind (express or implied) by, the Seller, except as otherwise
specifically provided herein. The foregoing sale, assignment, transfer and
conveyance does not constitute and is not intended to result in the creation or
assumption by the Company of any obligation of the Seller or any other Person in
connection with the Receivables, the other Receivable Assets or any agreement or
instrument relating thereto, including any obligation to any Obligor. Although
it is the intent of the parties to this Agreement that the conveyance of the
Seller's right, title and interest in, to and under the Receivables and other
Receivable Assets pursuant to this Agreement shall constitute purchases and
sales and not loans, in the event that any such conveyance is deemed to be a
loan, it is the intent of the parties to this Agreement that the Seller hereby
grants to the Company a security interest (as defined in the UCC as in effect in
the States of New York and Michigan) in all of the Seller's present and future
right, title and interest in, to and under the Receivables, the Related
Property, all Collections, all rights (including rescission, replevin or
reclamation) relating to any Receivable or arising therefrom and all proceeds or
payments in respect of any of the foregoing (it is understood and agreed that
the parties intend that such security interest shall be perfected and first
priority upon the filing of UCC-1 financing statements with the appropriate
authorities) and that this Agreement shall constitute a security agreement under
applicable law in favor of the Company.
(d) In connection with the foregoing conveyances, the Seller
agrees to record and file, or cause to be recorded and filed, at its own
expense, financing statements (and continuation statements with respect to such
financing statements when applicable), (i) with respect to the Receivables now
existing and hereafter acquired pursuant to this Agreement by the Company from
the Seller and (ii) with respect to any other Receivable Assets
<PAGE>
9
for which a security interest may be perfected under the relevant UCC,
legislation or similar statute by such filing, in each case meeting the
requirements of applicable law in such manner and in such jurisdictions as are
necessary to perfect and maintain perfection of the conveyance of such
Receivables and any other Receivable Assets to the Company, and to deliver to
the Company no later than 10 days after the Effective Date (i) where available,
a file-stamped copy or certified statement of such financing statement or other
evidence of such filing and (ii) otherwise, a photocopy, certified by a
Responsible Officer to be a true and correct copy, of each such financing
statement or other filing made no later than 10 days after the Effective Date.
(e) In connection with the foregoing sales, transfers,
assignments and conveyances, the Seller agrees at its own expense, no later than
30 days after the Effective Date with respect to the Receivables and any other
similar receivables that it will, as agent of the Company, (i) indicate or cause
to be indicated on the computer files (but not on individual invoices or
individual collection files) relating to such Receivables and any such other
receivables (by means of a general legend that will automatically appear at or
near the beginning of any screen, list or print-out of such Receivables) that,
unless otherwise specifically identified on such screen, list or print-out as a
receivable not so sold, transferred, assigned and conveyed, all Receivables (and
any such other receivables) included in such screen, list or print-out and all
other Receivable Assets (and any other similar related property) have been sold,
transferred, assigned and conveyed to the Company in accordance with this
Agreement and (ii) deliver or transmit or cause to be delivered or transmitted
to the Company a computer tape, diskette or data transmission containing at
least the information specified in Schedule 1 as to all such Receivables, as of
a date no later than the Cut-Off Date.
(f) As further confirmation of the sale of the Receivables,
but subject to Section 7.02, it is understood and agreed that the Company shall
have the following rights:
(i) the Company (and its assignees) shall have the right at
any time to notify, or require that the Seller at its own expense
notify, the respective Obligors of the Company's ownership of the
Purchased Receivables and other Receivable Assets and may direct that
payment of all amounts due or to become due under the Purchased
Receivables be made directly to the Company or its designee;
(ii) the Company (and its assignees) shall have the right to
(A) sue for collection on any Purchased Receivables or (B) sell any
Purchased Receivables to any Person for a price that is acceptable to
the Company.
(iii) the Seller shall, upon the Company's written request
and at the Seller's expense, (A) assemble all of the Seller's
documents, instruments and other records (including
<PAGE>
10
credit files and computer tapes or disks) that (1) evidence or will
evidence or record Receivables sold by the Seller and (2) are otherwise
necessary or desirable to effect Collections of such Purchased
Receivables (collectively, the "Documents") and (B) deliver the
Documents to the Company or its designee at a place designated by the
Company. In recognition of the Seller's need to have access to any
Documents which may be transferred to the Company hereunder, whether as
a result of its continuing business relationship with any Obligor for
Receivables purchased hereunder or as a result of its responsibilities
as a Servicer, the Company hereby grants to the Seller an irrevocable
license to access the Documents transferred by the Seller to the
Company and to access any such transferred computer software in
connection with any activity arising in the ordinary course of the
Seller's business or in performance of the Seller's duties as a
Servicer; provided that the Seller shall not disrupt or otherwise
interfere with the Company's use of and access to the Documents and its
computer software during such license period;
(iv) the Seller hereby grants to the Company an irrevocable
power of attorney (coupled with an interest) to take any and all steps
in the Seller's name necessary or desirable, in the reasonable opinion
of the Company, to collect all amounts due under the Purchased
Receivables, including, without limitation, enforcing the Purchased
Receivables and exercising all rights and remedies in respect thereof
and (without regard to the limitation set forth in subsection 7.02(b))
endorsing the Seller's name on checks and other instruments
representing Collections; and
(v) upon written request of the Company, the Seller will (A)
deliver to the Company all licenses, rights, computer programs, related
material, computer tapes, disks, cassettes and data necessary for the
immediate collection of the Purchased Receivables by the Company, with
or without the participation of the Seller (excluding software licenses
which by their terms are not permitted to be so delivered; provided
that the Seller shall use reasonable efforts to obtain the consent of
the relevant licensor to such delivery) and (B) make such arrangements
with respect to the collection of the Purchased Receivables as may be
reasonably required by the Company.
SECTION 2.02 Purchase Price. The aggregate purchase price
payable by the Company to the Seller (the "Purchase Price") for Receivables and
other Receivable Assets on any Payment Date under this Agreement shall be equal
to the product of (a) the aggregate outstanding Principal Amount of Receivables
as set forth in the applicable Daily Report created since the previous Daily
Report and (b) the Discounted Percentage then in effect.
SECTION 2.03 Payment of Purchase Price. (a) The Company shall
pay or provide for the Purchase Price for Receivables and other Receivable
Assets (net of the deductions
<PAGE>
12
referred to in Section 2.03(d)) in the manner provided below on each day for
which Daily Reports are prepared and delivered to the Company (each such day, a
"Payment Date").
(b) The Purchase Price (net of the deductions referred to in
Section 2.03(d)) shall be paid by the Company to the Seller or to such accounts
or such Persons as the Seller may direct in writing (which direction may consist
of standing instructions provided by the Seller that shall remain in effect
until changed by the Seller in writing), on each Payment Date as follows:
(i) to the extent available for such purpose, in cash from the
net proceeds of a transfer of such Purchased Receivables by the Company
to other Persons (including the Trustee pursuant to the Pooling
Agreement);
(ii) to the extent available for such purpose, in cash from
Collections received by the Company from other Persons (including from
the Trustee pursuant to the Pooling Agreement and any Supplement
thereto);
(iii) at the option of the Company (subject to the provisions of
Sections 8.03), by incurring Indebtedness to the Seller evidenced by
the Seller Note; and
(iv) in cash from the proceeds of capital contributed by the
Seller to the Company, if any, in respect of its equity interest in the
Company.
(c) Any increase in the principal amount of the Seller Note,
in payment of any Purchase Price pursuant to Section 2.03(b), shall be applied
to the Purchase Price in an amount equal to such increase.
(d) The Company shall deduct from the Purchase Price
otherwise payable to the Seller on any Payment Date, any outstanding Seller
Dilution Adjustment Payments and Seller Repurchase Payments pursuant to Section
2.05, and 2.06, respectively.
(e) All cash payments under this Agreement shall be made not
later than 3:30 p.m. (New York City time) on the date specified therefor in same
day funds.
(f) Whenever any payment to be made under this Agreement
shall be stated to be due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day. Amounts not paid when due in
accordance with the terms of this Agreement shall bear interest at a rate equal
at all times to the Reference Rate, payable on demand.
SECTION 2.04 No Repurchase. Except to the extent expressly set
forth herein, the Seller shall not have any right or obligation under this
Agreement, by implication or otherwise, to repurchase from the Company any
Purchased Receivables or other Receivable Assets or to rescind or otherwise
retroactively effect
<PAGE>
any purchase of any such Purchased Receivables or other Receivable Assets after
the Payment Date relating thereto.
SECTION 2.05 Rebates, Adjustments, Returns, Reductions and
Modifications. From time to time the Seller may make Dilution Adjustments to
Receivables in accordance with this Section 2.05 and Section 6.02.
The Seller agrees to pay to the Company, on the Payment Date
immediately succeeding the date of the grant of any Dilution Adjustment, the
amount of any such Dilution Adjustment (a "Seller Dilution Adjustment Payment").
The amount of any Dilution Adjustment shall be set forth on the first Daily
Report prepared after the date of the grant thereof.
SECTION 2.06 Seller Repurchase Payments. If (i) any
representation or warranty under subsection 4.02(a) or (b) is not true and
correct in any material respect as of the date specified therein with respect to
any Receivable sold to the Company or any Receivable encompassed by the
representation or warranty under subsection 4.02(c) is determined not to be an
Eligible Receivable as of its date of purchase, (ii) there is a breach of any
covenant under Section 6.01 with respect to any Receivable and such breach has a
material adverse effect on the Company's interest in such Receivable, (iii) the
Company's interest in any Receivable is not a first priority perfected ownership
or security interest at any time as a result of any action taken by, or the
failure to take action by, the Seller, (iv) any Eligible Receivable becomes
subject to any asserted defense, dispute, offset or counterclaim of any kind as
a result of any action taken by, any failure to take action by, or any event
relating to the Seller (other than as expressly permitted by this Agreement or
the Pooling Agreement)(provided that in the case of any Eligible Receivable that
becomes subject only in part to any of the foregoing, this Section 2.06 shall
apply only to the portion thereof that is so subject) or (v) there is a breach
by the Seller of any covenant contained in Section 5.02, 5.08, 5.09, 6.02, 6.03,
6.04 or 6.05 with respect to any Receivable, and as a result thereof such
Receivable (or a portion thereof) ceases to be an Eligible Receivable on the
date on which such breach occurs (each event referred to in clauses (i), (ii),
(iii), (iv) and (v) of this Section 2.06 shall be referred to herein as an
"Ineligibility Event" and any Receivable (or portion thereof) as to which an
Ineligibility Event applies shall be referred to herein as an "Ineligible
Receivable"), then the Seller agrees to pay to the Company, upon the request of
the Company or the Seller obtaining knowledge thereof, an amount (the
"Adjustment Amount") equal to the Principal Amount of such Receivable (or
portion thereof) (whether the Company paid the related Purchase Price in cash or
otherwise) less Collections received by the Company in respect of such
Receivable; provided that in no event shall an Ineligibility Event arise solely
from any Receivable becoming a Defaulted Receivable or any other default by an
Obligor with respect to any Receivable. Such payment shall be made on or prior
to the 30th day after the day the Company requests payment or the Seller obtains
knowledge thereof (except that if such day
<PAGE>
13
is not a Business Day, then such payment shall be made on the Business Day
immediately succeeding such day) (unless such breach or incorrectness shall have
been cured or waived on or before such day); provided that in the event that (x)
an Early Termination has occurred and is continuing or (y) the Company shall be
required to make a payment in respect of such Receivable pursuant to Section
2.05 of the Pooling Agreement and the Company has insufficient funds to make
such payment, the Seller shall make such payment immediately. Any payment by the
Seller pursuant to this Section 2.06 is referred to as a "Seller Repurchase
Payment". If, on or prior to such 30th day (or the Business Day immediately
succeeding such 30th day, as applicable), the Seller shall make a Seller
Repurchase Payment in respect of any such Ineligible Receivable, then the
Company shall have no further remedy against the Seller in respect of the
Ineligibility Event with respect to such Receivable. Simultaneously with any
Seller Repurchase Payment with respect to any Receivable, such Receivable and
the Receivable Assets with respect thereto shall immediately and automatically
be sold, assigned, transferred and conveyed by the Company to the Seller without
any further action by the Company or any other Person.
SECTION 2.07 Certain Charges. Each of the Seller and the
Company agrees that late charge revenue, reversals of discounts, other fees and
charges and other similar items, whenever created, accrued in respect of
Purchased Receivables shall be the property of the Company notwithstanding the
occurrence of an Early Termination and all Collections with respect thereto
shall continue to be allocated and treated as Collections in respect of
Purchased Receivables.
SECTION 2.08 Certain Allocations. The Seller hereby agrees
that, following the occurrence of an Early Termination, all Collections and
other proceeds received in respect of Receivables generated by the Seller shall
be applied, first, to pay the outstanding Principal Amount of Purchased
Receivables (as of the date of such Early Termination) of the Obligor to whom
such Collections are attributable until such Purchased Receivables are paid in
full and, second, to the Seller to pay Receivables of such Obligor not sold to
the Company; provided, however, that notwithstanding the foregoing, if the
Seller can attribute a Collection to a specific Obligor and a specific
Receivable, then such Collection shall be applied to pay such Receivable of such
Obligor; and the Company and the Servicer shall take such action as the Seller
may reasonably request, at the expense of the Seller, to assure that any
Receivable not sold to the Company, the Related Property and Collections with
respect thereto do not remain commingled with other Collections hereunder and
are immediately paid to the Seller.
SECTION 2.09 Further Assurances. From time to time at the
request of the Seller, the Company shall deliver to the Seller such documents,
assignments, releases and instruments of termination as the Seller may
reasonably request to evidence the reconveyance by the Company to the Seller of
a Receivable pursuant to the terms of Section 2.01(b) or 2.06, provided that
<PAGE>
14
the Company shall have been paid all amounts due thereunder; and the Company and
the Servicer shall take such action as the Seller may reasonably request, at the
expense of the Seller, to assure that any receivable not sold to the Company,
the Related Property and Collections with respect thereto do not remain
commingled with other Collections hereunder and are immediately paid to the
Seller.
SECTION 2.10 GMT/PPAP Rejection Period. Notwithstanding
anything to the contrary contained herein, during any GMT/PPAP Rejection Period,
no Tooling Receivable shall be sold, assigned, transferred or otherwise conveyed
hereunder; provided that immediately upon the cessation of any GMT/PPAP
Rejection Period all existing Tooling Receivables relating to the GMT 800
Program shall immediately be sold hereunder.
ARTICLE III
Conditions to Purchase and Sale
SECTION 3.01 Conditions Precedent to the Company's Purchase of
Receivables on the Effective Date. The obligation of the Company to purchase the
Receivables and the other Receivable Assets hereunder on the Effective Date from
the Seller is subject to the conditions precedent, which may be waived by the
Company, that (a) each of the Sale Documents shall be in full force and effect
and (b) the conditions set forth below shall have been satisfied on or before
the Effective Date:
(i) the Company shall have received copies of duly adopted
resolutions of the Board of Directors of the Seller, as in effect on
such Effective Date, authorizing this Agreement, the documents to be
delivered by the Seller hereunder and the transactions contemplated
hereby, certified by the Secretary or Assistant Secretary of the
Seller;
(ii) the Company shall have received duly executed certificates
of the Secretary or an Assistant Secretary of the Seller, dated the
Effective Date, and in form and substance reasonably satisfactory to
the Company, certifying the names and true signatures of the officers
authorized on behalf of the Seller to sign this Agreement and any
instruments or documents in connection with this Agreement (on which
certificates the Company may conclusively rely until such time as the
Company shall receive from the Seller a revised certificate with
respect to the Seller meeting the requirements of this subsection
(ii));
(iii) the Seller shall have made available for filing and
recordation, at its own expense, UCC-1 financing statements with
respect to the Receivables and other Receivable Assets in such manner
and in such jurisdictions as are necessary to perfect the Company's
ownership interest thereof under the UCC; and all other action
necessary, in the reasonable judgment of the Company, to perfect under
the UCC (to the
<PAGE>
15
extent applicable) the Company's ownership of the Receivables and
other Receivable Assets shall have been duly taken;
(iv) the Seller shall have delivered or transmitted to the
Company, with respect to the Receivables originated by it, a computer
tape, diskette or data transmission reasonably acceptable to the
Company showing, as of a date no later than the Cut-Off Date, at least
the information specified in Schedule 1 as to all Receivables to be
transferred by the Seller to the Company on such Effective Date;
(v) the Company shall have received reports of UCC-1 and other
searches of the Seller with respect to the Receivables and the other
Receivable Assets reflecting the absence of Liens thereon, except for
Liens created in connection with the sale by the Seller to the Company,
and by the Company to the Trust, of such Receivables and other
Receivable Assets.
(vi) the Company shall be satisfied that the Seller's systems,
procedures and record keeping relating to the Purchased Receivables
originated by the Seller are sufficient and satisfactory in order to
permit the purchase and administration of such Purchased Receivables in
accordance with the terms and intent of this Agreement; and
(vii) the Company shall have received such other approvals,
opinions or documents as the Company may reasonably request.
SECTION 3.02 Conditions Precedent to All the Company's
Purchases of Receivables. The obligation of the Company to purchase any
Receivable and the other related Receivable Assets on each date (including the
Effective Date) shall be subject to the further conditions precedent, which may
be waived by the Company, that, on and as of the related Payment Date, the
following statements shall be true (and the acceptance by the Seller of the
Purchase Price for such Receivable on such Payment Date shall constitute a
representation and warranty by the Seller that on such Payment Date the
statements in clauses (i) and (ii) below are true):
(i) the representations and warranties of the Seller contained
in Sections 4.01 and 4.02 shall be true and correct in all material
respects on and as of such Payment Date as though made on and as of
such date, except insofar as such representations and warranties are
expressly made only as of another date (in which case they shall be
true and correct in all material respects as of such other date);
(ii) after giving effect to such purchase, no (A) Early
Termination or (B) Potential Purchase Termination Event with respect to
a Purchase Termination Event set forth in clause (d)(i) or (ii) of
Section 7.01 shall have occurred and be continuing; and
<PAGE>
16
(iii) the Company shall have received such other approvals, opinions
or documents as the Company may reasonably request;
provided, however, that the failure of the Seller to satisfy any of the
foregoing conditions shall not prevent the Seller from subsequently selling
Receivables originated by it upon satisfaction of all such conditions.
SECTION 3.03 Conditions Precedent to the Seller's Obligations on
the Effective Date. The obligations of the Seller on the Effective Date shall be
subject to the conditions precedent, which may be waived by the Seller, that the
Seller shall have received on or before the Effective Date the following, each
dated such Effective Date and in form and substance satisfactory to the Seller:
(i) a copy of duly adopted resolutions of the Board of Directors
of the Company authorizing this Agreement, the documents to be
delivered by the Company hereunder and the transactions contemplated
hereby, certified by the Secretary or Assistant Secretary of the
Company; and
(ii) a duly executed certificate of the Secretary or Assistant
Secretary of the Company certifying the names and true signatures of
the officers authorized on its behalf to sign this Agreement and the
other documents to be delivered by it hereunder.
SECTION 3.04 Conditions Precedent to All the Seller's
Obligations. The obligation of the Seller to sell any Receivable on any date
(including on the Effective Date) shall be subject to the further conditions
precedent, which may be waived by the Seller, that, on the related Payment Date,
the following statement shall be true (and the payment by the Company of the
Purchase Price for such Receivable on such date shall constitute a
representation and warranty by the Company on such Payment Date that the
statement in clause (ii) below is true): after giving effect to such purchase,
(i) no Purchase Termination Event set forth in paragraph (d) of Section 7.01
hereof, and (ii) no Early Amortization Event set forth in paragraph (a) of
Section 7.01 of the Pooling Agreement (as in effect on the date hereof and
without giving effect to any amendment or supplement to, or modification or
waiver of, or departure from, such paragraph unless, in each case, the Seller
shall have consented thereto) shall have occurred and be continuing.
<PAGE>
ARTICLE IV
Representations and Warranties
SECTION 4.01 Representations and Warranties of the Seller
Relating to Itself. The Seller represents and warrants as to itself on the
Effective Date and each Payment Date as follows:
(a) Organization; Powers. It (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has all requisite power and authority, to
own its property and assets and to carry on its business as now conducted and as
proposed to be conducted, (iii) is qualified to do business in, and is in good
standing in, every jurisdiction where the nature of its business so requires,
except where the failure so to qualify could not reasonably be expected to
result in a Material Adverse Effect and (iv) has the corporate power and
authority to execute, deliver and perform its obligations under each of the
Transaction Documents and each other agreement or instrument contemplated hereby
or thereby to which it is or will be a party.
(b) Authorization. The execution, delivery and performance
by the Seller of each of the Transaction Documents to which the Seller is a
party and the other transactions contemplated hereby and thereby (collectively,
the "Transactions") (i) have been duly authorized by all requisite corporate
and, if required, stockholder action and (ii) will not (A) violate (1) any
Requirement of Law or the certificate or articles of incorporation or other
constitutive document or by-laws of any Subsidiary or (2) any provision of any
Contractual Obligation to which it or any Subsidiary is a party or by which any
of them or any of their property is or may be bound, (B) be in conflict with,
result in a breach of or constitute (alone or with notice or lapse of time or
both) a default under, or give rise to any right to accelerate or to require the
prepayment, repurchase or redemption of any obligation under any such
Contractual Obligation except where any such conflict, violation, breach or
default referred to in clause (A) or (B), individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect or (C) result
in the creation or imposition of any Lien upon or with respect to any property
or assets now owned or hereafter acquired by it or any Subsidiary (other than
any Lien created hereunder or contemplated or permitted hereby).
(c) Enforceability. This Agreement has been duly executed
and delivered by the Seller and constitutes, and each other Transaction Document
to which the Seller is a party when executed and delivered by the Seller will
constitute, a legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with its respective terms, subject (a) as to
enforcement of remedies, to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally, from time to time in effect and (b) to general principles of equity
<PAGE>
18
(whether enforcement is sought by a proceeding in equity or at law).
(d) Governmental Approvals. No action, consent or approval
of, registration or filing with or any other action by any Governmental
Authority is or will be required in connection with the Transactions, except for
(i) the filing of Uniform Commercial Code financing statements, (ii) such as
have been made or obtained and are in full force and effect and (iii) such
actions, consents, approvals and filings the failure of which to obtain or make
could not reasonably be expected to result in a Material Adverse Effect.
(e) Litigation; Compliance with Laws. (i) There are no
actions, suits or proceedings at law or in equity or by or before any
Governmental Authority now pending or, to the knowledge of the Seller,
threatened against or affecting the Seller or any Subsidiary or any business,
property or rights of any such Person (A) that involve any Transaction Document
or the Transactions or (B) as to which there is a reasonable possibility of an
adverse determination and that, if adversely determined, could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect.
(ii) Neither it nor any Subsidiary is in default with
respect to any judgment, writ, injunction, decree or order of any Governmental
Authority, where such violation or default could reasonably be expected to
result in a Material Adverse Effect.
(f) Agreements. (i) Neither it nor any Subsidiary is a party
to any agreement or instrument or subject to any corporate restriction that has
resulted or could reasonably be expected to result in a Material Adverse Effect.
(ii) Neither it nor any Subsidiary is in default in any
manner under any provision of any indenture or other agreement or instrument
evidencing Indebtedness or any other material agreement or instrument (including
the GM Agreements) to which it is a party or by which it or any of its
properties or assets are bound, where such default could reasonably be expected
to result in a Material Adverse Effect.
(iii) As of the Effective Date, neither it nor any Subsidiary
is a party to any contract with GM relating to Receivables other than the GM
Agreements. Each of the GM Agreements (other than Lifetime Program Contracts) is
in full force and effect in accordance with its terms except as could not
reasonably be expected to have a Material Adverse Effect.
(g) Federal Reserve Regulations. (i) Neither it nor any
Subsidiary is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying Margin
Stock.
(ii) No part of the proceeds from the sale of Receivables
hereunder will be used, whether directly or
<PAGE>
indirectly, and whether immediately, incidentally or ultimately, (A) to purchase
or carry Margin Stock or to extend credit to others for the purpose of
purchasing or carrying Margin Stock or to refund indebtedness originally
incurred for such purpose, or (B) for any purpose which entails a violation of,
or which is inconsistent with, the provisions of the Regulations of the Board,
including Regulation G, U or X.
(h) Investment Company Act. It is not an "investment company"
as defined in, or subject to regulation under, the Investment Company Act of
1940.
(i) Tax Returns. It and each Subsidiary has filed or caused
to be filed all federal, state and other material tax returns and has paid or
caused to be paid all taxes due and payable by it and all assessments received
by it, in each case to the extent that nonpayment could reasonably be expected
to result in a Material Adverse Effect.
(j) Employee Benefit Plans. Except to the extent failure to
comply could not reasonably be expected to result in a Material Adverse Effect,
the Seller and its ERISA Affiliates are in compliance in all material respects
with the applicable provisions of ERISA and the Code and the regulations and
published interpretations thereunder. No Reportable Event has occurred or is
reasonably expected to occur that, when taken together with all other such
Reportable Events, could reasonably be expected to result in a Material Adverse
Effect.
(k) Indebtedness to Company. Immediately prior to
consummation of the transactions contemplated hereby on such Effective Date, it
had no outstanding Indebtedness to the Company other than amounts permitted by
this Agreement.
(l) Lockboxes. Set forth in Schedule 2 is a complete and
accurate description as of the Effective Date of each Lockbox Account currently
maintained by the Seller. Each of the Lockbox Agreements to which the Seller is
a Party is the legal, valid and binding obligation of the Seller, enforceable
against the Seller in accordance with its terms.
(m) Chief Executive Office. The offices at which the Seller
keeps its records concerning the Receivables originated by it either (x) are
located as set forth on Schedule 3 hereto or (y) the Seller has notified the
Company of the location thereof in accordance with Section 5.06. The chief
executive office of the Seller is listed opposite its name on Schedule 3 and is
the place where the Seller is "located" for the purposes of Section 9-103(3)(d)
of the UCC as in effect in the State of New York. As of the Effective Date, the
state and county where the chief executive office of the Seller is "located" for
the purposes of 9-103(3)(d) of the UCC as in effect in the State of New York has
not changed in the past four months.
(n) Bulk Sales Act. No transaction contemplated hereby with
respect to the Seller requires compliance with, or
<PAGE>
20
will be subject to avoidance under, any bulk sales act or similar law.
(o) Names. The legal name of the Seller is as set forth in
this Agreement. It has no trade names, fictitious names, assumed names or "doing
business as" names except as set forth on Schedule 4.
(p) Solvency. No Insolvency Event with respect to the Seller
has occurred and the sale of the Receivables by it to the Company has not been
made in contemplation of the occurrence thereof. Both prior to and after giving
effect to the transactions occurring on the Effective Date and after giving
effect to each subsequent transaction contemplated hereunder (i) the fair value
of the assets of the Seller at a fair valuation will exceed the debts and
liabilities, subordinated, contingent or otherwise, of the Seller; (ii) the
present fair salable value of the property of the Seller will be greater than
the amount that will be required to pay the probable liability of the Seller on
its debts and other liabilities, subordinated, contingent or otherwise, as such
debts and other liabilities become absolute and matured; (iii) the Seller will
be able to pay its debts and liabilities, subordinated, contingent or otherwise,
as such debts and liabilities become absolute and matured; and (iv) the Seller
will not have unreasonably small capital with which to conduct the business in
which it is engaged as such business is now conducted and is proposed to be
conducted. For all purposes of clauses (i) through (iv) above, the amount of
contingent liabilities at any time shall be computed as the amount that, in the
light of all the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured liability.
The Seller does not intend to, nor does it believe that it will, incur debts
beyond its ability to pay such debts as they mature, taking into account the
timing of and amounts of cash to be received by it and the timing of the amounts
of cash to be payable on or in respect of its Indebtedness.
(q) No Purchase Termination Event. As of the Effective Date,
no Purchase Termination Event or Potential Purchase Termination Event with
respect to the Seller has occurred and is continuing.
(r) No Fraudulent Transfer. The Seller is not entering into
this Agreement with the intent (whether actual or constructive) to hinder,
delay, or defraud its present or future creditors and is receiving reasonably
equivalent value and fair consideration for the Receivables originated by it
being transferred hereunder.
(s) Collection Procedures. The Seller has in place
procedures pursuant to the Transaction Documents which are either necessary or
advisable to ensure the timely collection of Receivables originated by it.
<PAGE>
21
(t) Filings. On or prior to the date that is 10 days after
the Effective Date, all filings and other acts (including but not limited to all
filings and other acts necessary or advisable under the UCC) shall have been
made or performed such that the Company has on such date a first priority
perfected ownership or security interest in respect of all Receivables.
SECTION 4.02 Representations and Warranties of the Seller
Relating to the Receivables. The Seller hereby represents and warrants to
the Company on each Payment Date that with respect to the Receivables originated
by it being paid for as of such date:
(a) Receivables Description. As of the Cut-Off Date, the
computer tape, diskette or data transmission delivered or transmitted
pursuant to Section 2.01(e) sets forth in all material respects an
accurate and complete listing of all Receivables sold to the Company as
of the Cut-Off Date and the information contained therein in accordance
with Schedule 1 with respect to each such Receivable is true and
correct as of the Cut-Off Date. As of the Cut-Off Date, the aggregate
amount of Receivables owned by the Seller is accurately set forth on
such computer tape, diskette or data transmission.
(b) No Liens. Each Receivable existing on the Effective Date
or, in the case of Receivables sold to the Company after the Effective
Date, on the date that each such Receivable shall have been sold to the
Company, has been conveyed to the Company free and clear of any Liens,
except for Permitted Liens specified in clauses (i), (iii) or (iv) of
the definition thereof.
(c) Eligible Receivable. On the Effective Date, each
Receivable that is represented to be an Eligible Receivable sold to the
Company on such date is an Eligible Receivable on the Effective Date
and, in the case of Receivables sold to the Company after the Effective
Date, each such Receivable that is represented to be an Eligible
Receivable sold to the Company on such later date is an Eligible
Receivable on such later date.
SECTION 4.03 Representations and Warranties of the Company.
The Company represents and warrants as to itself as follows:
(a) Organization; Powers. The Company (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has all requisite power and authority to
own its property and assets and to carry on its business as now conducted and as
proposed to be conducted, (iii) is qualified to do business in, and is in good
standing in, every jurisdiction where the nature of its business so requires,
except where the failure so to qualify would not have a Material Adverse Effect
and (iv) has the corporate power and authority to execute, deliver and perform
its
<PAGE>
22
obligations under each of the Transaction Documents and each other agreement
or instrument contemplated hereby or thereby to which it is or will be a party.
(b) Authorization. The execution, delivery and performance
by the Company of each of the Transactions (i) have been duly authorized by all
requisite corporate and, if required, stockholder action and (ii) will not (A)
violate (1) any Requirement of Law or (2) any provision of any Transaction
Document or any other material Contractual Obligation to which the Company is a
party or by which it or any of its property is or may be bound, (B) be in
conflict with, result in a breach of or constitute (alone or with notice or
lapse of time or both) a default under, or give rise to any right to accelerate
or to require the prepayment, repurchase or redemption of any obligation under
any Transaction Document or any other material Contractual Obligation or (C)
result in the creation or imposition of any Lien upon or with respect to any
property or assets now owned or hereafter acquired by the Company (other than
any Lien created hereunder or contemplated or permitted hereby).
(c) Enforceability. This Agreement has been duly executed
and delivered by the Company and constitutes, and each other Transaction
Document to which the Company is a party when executed and delivered by the
Company will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its respective terms, subject
(a) as to enforcement of remedies, to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights generally, from time to time in effect and (b) to general
principles of equity whether enforcement is sought by a proceeding in equity or
at law.
(d) Accounting Treatment. The Company will not prepare any
financial statements that shall account for the transactions contemplated
hereby, in a manner that is inconsistent with the Company's ownership interest
in the Receivables.
ARTICLE V
Affirmative Covenants
The Seller hereby agrees that, so long as there are any
amounts outstanding with respect to Purchased Receivables originated by it
previously sold by the Seller to the Company or until an Early Termination,
whichever is later, the Seller shall:
SECTION 5.01 Certificates; Other Information. Furnish to the
Company:
(a) not later than 120 days after the end of each fiscal
year and not later than 90 days after the end of each of the first
three fiscal quarters of each fiscal year, a certificate of a
Responsible Officer of the Seller stating
<PAGE>
23
that, to the knowledge of such Responsible Officer (after due inquiry),
the Seller during such period has observed or performed in all material
respects all of its covenants and other agreements, and satisfied in
all material respects every condition, contained in the Sale Documents
to which it is a party to be observed, performed or satisfied by it,
and that such Responsible Officer has obtained no knowledge of any
Purchase Termination Event or Potential Purchase Termination Event
except as specified in such certificate; and
(b) promptly, such additional financial and other
information as the Company may from time to time reasonably request.
SECTION 5.02 Compliance with Law and Policies. (i) Comply in
all material respects with the Requirements of Law and Contractual Obligations
applicable to it.
(ii) Perform its obligations in all material respects in
accordance and compliance with the Policies, as amended from time to time in
accordance with the Transaction Documents, in regard to the Receivables
originated by it and the other Receivable Assets.
SECTION 5.03 Preservation of Corporate Existence. (i) Preserve
and maintain its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation and (ii) qualify and remain qualified in good
standing as a foreign corporation in each jurisdiction where the nature of its
business so requires, except where the failure so to qualify would not,
individually or in the aggregate with other such failures, have a Material
Adverse Effect.
SECTION 5.04 Separate Corporate Existence.
(i) Maintain its deposit account or accounts, separate from
those of the Company and ensure that its funds will not be diverted to the
Company, nor will such funds be commingled with the funds of the Company;
(ii) To the extent that it shares any officers or other
employees with the Company, the salaries of and the expenses related to
providing benefits to such officers and other employees shall be fairly
allocated among it and the Company, and it and the Company shall bear their fair
shares of the salary and benefit costs associated with all such common officers
and employees;
(iii) To the extent that it jointly contracts with the
Company to do business with vendors or service providers or to share overhead
expenses, the costs incurred in so doing shall be allocated fairly between it
and the Company, and it and the Company shall bear their fair shares of such
costs. To the extent that it contracts or does business with vendors or service
providers where the goods and services provided are partially for
<PAGE>
24
the benefit of the Company, the costs incurred in so doing shall be fairly
allocated between it and the Company in proportion to the benefit of the goods
or services each is provided, and it and the Company shall bear their fair
shares of such costs. All material transactions between it and the Company,
whether currently existing or hereafter entered into, shall be only on an arm's
length basis, it being understood and agreed that the transactions contemplated
in the Transaction Documents meet the requirements of this clause (iii);
(iv) Maintain office space separate from the office space of
the Company (but which may be located at the same address as the Company). To
the extent that it and the Company have offices in the same location, there
shall be a fair and appropriate allocation of overhead costs between them, and
each shall bear its fair share of such expenses;
(v) Not assume or guarantee any of the liabilities of the
Company;
(vi) Include in notes to its consolidated financial statements
a note substantially to the effect of Schedule 6 hereto; and
(vii) Take, or refrain from taking, as the case may be, all
other actions that are necessary to be taken or not to be taken in order (x) to
ensure that the assumptions and factual recitations set forth in the Specified
Bankruptcy Opinion Provisions remain true and correct with respect to it (and,
to the extent within its control, to ensure that the assumptions and factual
recitations set forth in the Specified Bankruptcy Opinion Provisions remain true
and correct with respect to the Company) and (y) to comply with those procedures
described in such provisions that are applicable to it.
SECTION 5.05 Maintaining Records; Access to Properties and
Inspections. Maintain all financial records in accordance with GAAP and permit
any persons designated by the Company to visit and inspect its financial records
and properties at reasonable times, upon reasonable prior notice to it, and as
often as reasonably requested and to make extracts from and copies of such
financial records, and permit any persons designated by the Company upon
reasonable prior notice to discuss the affairs, finances and condition of the
Seller with the officers thereof and independent accountants therefor (subject
to reasonable requirements of confidentiality, including requirements imposed by
law or by contract).
SECTION 5.06 Location of Records. Keep its chief place of
business and chief executive office, and the offices where it keeps the records
concerning the Purchased Receivables (and all original documents relating
thereto), at the locations referred to for it on Schedule 3 hereto or upon 30
days' prior written notice to the Company, at such other locations in a
jurisdiction where all action required by Section 5.14 shall have been taken and
completed and be in full force and effect;
<PAGE>
25
provided, however, that the Rating Agency shall be notified of any such changes
in location and such location shall not be changed to a state which is within
the Tenth Circuit unless it delivers an opinion of counsel reasonably acceptable
to the Rating Agencies to the effect that Octagon Gas Systems, Inc. v. Rimmer,
995 F.2d 948 (10th Cir. 1993), is no longer controlling precedent in the Tenth
Circuit.
SECTION 5.07 Computer Files. At its own cost and expense,
retain the ledger used by it as a master record of the Obligors and retain
copies of all documents relating to each Obligor as custodian and agent for the
Company and other Persons with interests in the Purchased Receivables and mark
the computer tape or other physical records of the Purchased Receivables to the
effect that interests in the Purchased Receivables existing with respect to the
Obligors listed thereon have been sold to the Company and that the Company has
sold an interest therein and, subsidiarily, has granted a security interest
therein.
SECTION 5.08 Payment of and Compliance with Obligations. Pay,
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all its obligations of whatever nature, except
where the amount or validity thereof is currently being contested in good faith
by appropriate proceedings and reserves in conformity with GAAP with respect
thereto have been provided on its books or except where the failure to so pay,
discharge or otherwise satisfy such obligations would not have a Material
Adverse Effect in respect of the Seller and would not subject any of its
properties to a Lien which is not a Permitted Lien. The Seller shall defend the
right, title and interest of the Company in, to and under the Receivables
originated by it and the other Receivable Assets, whether now existing or
hereafter created, against all claims of third parties claiming through the
Seller. The Seller will duly fulfill all obligations on its part to be fulfilled
under or in connection with each Receivable originated by it and will do nothing
to impair the rights of the Company in such Receivable.
SECTION 5.09 Collections. Instruct each Obligor to make
payments in respect of its Receivables to a Lockbox or a Lockbox Account or by
wire transfer to a Lockbox Account or the Collection Account and to comply in
all material respects with procedures with respect to Collections reasonably
specified from time to time by the Company. In the event that any payments in
respect of any such Receivables are made directly to the Seller (including,
without limitation, any employees thereof or independent contractors employed
thereby), the Seller shall, within two Business Days of receipt thereof, deliver
(which may be via regular mail) or deposit such amounts to a Lockbox, a Lockbox
Account or the Collection Account and, prior to forwarding such amounts, the
Seller shall hold such payments in trust as custodian for the Company and the
Trustee.
<PAGE>
26
SECTION 5.10 Furnishing Copies, Etc. Furnish to the Company:
(a) within five Business Days of the Company's request, a
certificate of the chief financial officer of the Seller or of the
Servicer, on behalf of the Seller, certifying, as of the date thereof,
to the knowledge of such officer, that no Purchase Termination Event
has occurred and is continuing or if one has so occurred, specifying
the nature and extent thereof and any corrective action taken or
proposed to be taken with respect thereto;
(b) promptly after a Responsible Officer of the Seller
obtains knowledge of the occurrence of any Purchase Termination Event
or Potential Purchase Termination Event, written notice thereof
specifying the nature and extent thereof and the corrective action (if
any) proposed to be taken with respect thereto;
(c) promptly following request therefor, such other
information, documents, records or reports regarding or with respect to
the Purchased Receivables of the Seller, as the Company may from time
to time reasonably request; and
(d) promptly upon determining that any Purchased Receivable
originated by it designated as an Eligible Receivable on the applicable
Daily Report or Monthly Settlement Statement was not an Eligible
Receivable as of the date provided therefor, written notice of such
determination.
SECTION 5.11 Obligations with Respect to Obligors and
Receivables. Take all actions on its part reasonably necessary to maintain in
full force and effect its rights under all contracts relating to the Purchased
Receivables originated by it.
SECTION 5.12 Responsibilities of the Seller. Notwithstanding
anything herein to the contrary, the Seller shall perform or cause to be
performed in all material respects all its obligations under the Policies
related to the Purchased Receivables to the same extent as if such Purchased
Receivables had not been transferred to the Company hereunder.
SECTION 5.13 Assessments. Promptly pay and discharge all
taxes, assessments, levies and other governmental charges imposed upon it except
such taxes, assessments, levies and charges which are being contested in good
faith and for which the Seller has set aside on its books adequate reserves.
SECTION 5.14 Further Action. In addition to the foregoing:
(a) The Seller agrees that from time to time, at its
expense, it will promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary in
the Seller's reasonable judgment or that
<PAGE>
27
the Company may reasonably request, in order to more fully effect the
purposes of this Agreement and the transfer of the Receivables
hereunder, to protect or more fully evidence the Company's right, title
and interest in the Purchased Receivables, or to enable the Company to
exercise or enforce any of its rights in respect thereof. Without
limiting the generality of the foregoing, the Seller will upon the
request of the Company (i) execute and file such financing or
continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or, in the opinion of the
Company, advisable and (ii) obtain the agreement of any Person having
a Lien on any Receivables owned by the Seller (other than any Lien
created or imposed hereunder or under the Pooling Agreement or any
Permitted Lien) to release such Lien upon the purchase of any such
Receivables by the Company.
(b) The Seller hereby irrevocably authorizes the Company to
file one or more financing or continuation statements (and other
similar instruments), and amendments thereto, relative to all or any
part of the Purchased Receivables and the other Receivable Assets sold
or to be sold by the Seller without the signature of the Seller to the
extent permitted by applicable law.
(c) If the Seller fails to perform any of its agreements or
obligations under this Agreement, the Company may (but shall not be
required to) perform, or cause performance of, such agreements or
obligations, and the expenses of the Company incurred in connection
therewith shall be payable by the Seller as provided in Section 9.02.
The Company agrees promptly to notify the Seller after any such
performance; provided, however, that the failure to give such notice
shall not affect the validity of any such performance.
SECTION 5.15 Sale of Receivables. Sell Receivables solely in
accordance with the terms of this Agreement.
SECTION 5.16 GMT/PPAP Rejection Period. (i) Immediately notify
the Company and the Servicer if in connection with any Supplier Quality
Assurance review relating to the GMT 800 Program, any officer of the Seller
receives notice from GM that such review is unsatisfactory in any material
respect, (ii) keep the Company and the Servicer reasonably informed of the
corrective actions being taken by Seller and (iii) promptly notify the Company
and the Servicer of the commencement and termination of any GMT/PPAP Rejection
Period.
ARTICLE VI
Negative Covenants
The Seller hereby agrees that, so long as there are any
amounts outstanding with respect to Purchased Receivables
<PAGE>
28
originated by it previously sold by the Seller to the Company or until an Early
Termination with respect to the Seller, whichever is later, the Seller shall
not, directly or indirectly:
SECTION 6.01 Limitations on Transfers of Receivables, Etc. At
any time sell, transfer or otherwise dispose of any of the Receivables or other
Receivable Assets pursuant to:
(i) any Lien Creation except for Permitted Liens; or
(ii) any Investment.
SECTION 6.02 Extension or Amendment of Receivables. Extend,
make any Dilution Adjustment to, rescind, cancel, amend or otherwise modify, or
attempt or purport to extend, amend or otherwise modify, the terms of any
Purchased Receivables, or otherwise take any action to cause, or which would
permit, a Receivable that was designated as an Eligible Receivable on the
Payment Date relating to such Receivable to cease to be an Eligible Receivable,
except in any such case (a) in accordance with the terms of the Policies, (b) as
required by any Requirement of Law or (c) in the case of Dilution Adjustments,
upon making a Seller Dilution Adjustment Payment pursuant to Section 2.05.
SECTION 6.03 Change in Payment Instructions to Obligors.
Instruct any Obligor of any Purchased Receivables to make any payments with
respect to any Receivables other than, in accordance with Section 5.09, to a
Lockbox, a Lockbox Account or the Collection Account; provided, however, that,
in accordance with Section 2.03 of the Servicing Agreement, (i) it may terminate
any Lockbox Agreements or Lockbox Accounts and (ii) it may execute additional
Lockbox Agreements or Lockbox Accounts and instruct Obligors to make payments in
respect of any Receivables to such additional accounts; provided, however, upon
the satisfaction of the Rating Agency Condition (or, if no Outstanding Series
has been rated by a Rating Agency, with the consent of the Agent) the Seller may
enter into any amendments or modifications of a Lockbox Agreement that the
Seller reasonably deems necessary to conform such Lockbox Agreement to the cash
management system of the Company or the Seller.
SECTION 6.04 Change in Name. Change its name, use an
additional name, or change its identity or corporate structure in any manner
which would or might make any financing statement or continuation statement (or
other similar instrument) relating to this Agreement seriously misleading within
the meaning of Section 9-402(7) of the UCC, or impair the perfection of the
Company's interest in any Receivable under any other similar law, without 30
days' prior written notice to the Company.
SECTION 6.05 Policies. Make any change or modification (or
permit any change or modification to be made) to the Policies that is materially
adverse to the interests of the Company or its assigns (including the Trustee
and the Investor Certificateholders), except (i) if such changes or
modifications
<PAGE>
29
are necessary under any Requirement of Law, (ii) if such changes or
modifications would not reasonably be likely to have a Material Adverse Effect
with respect to the Company, or (iii) if the Rating Agency Condition is
satisfied with respect thereto.
SECTION 6.06 Modification of Ledger. Delete or otherwise
modify the marking on the ledger referred to in Section 2.01(e).
SECTION 6.07 Accounting for Purchases. Prepare any financial
statements which shall account for the transactions contemplated hereby (other
than capital contributions and the Seller Note contemplated hereby) in any
manner other than as a sale of the Purchased Receivables by the Seller to the
Company or in any other respect account for or treat the transactions
contemplated hereby (including for financial accounting purposes, except as
required by law) (other than capital contributions and the Seller Note
contemplated hereby) in any manner other than as sales of the Purchased
Receivables originated by the Seller to the Company.
SECTION 6.08 Instruments. Subject to the delivery requirements
set forth in Section 2.01(b) of the Pooling Agreement, take any action to cause
any Receivable not evidenced by an "instrument" (as defined in the UCC as in
effect in the State of New York or other similar statute or legislation) upon
origination to become evidenced by an instrument, except in connection with the
enforcement or collection of an overdue Receivable.
SECTION 6.09 Ineligible Receivables. Without the prior written
approval of the Company, take any action to cause, or which would permit, a
Receivable that was designated as an Eligible Receivable on the Payment Date
relating to such Receivable to cease to be an Eligible Receivable, except as
otherwise expressly provided by this Agreement; provided that in no event shall
an Eligible Receivable becoming a Defaulted Receivable constitute a breach of
this Section 6.09.
SECTION 6.10 Business of the Seller. Fail to maintain and
operate the business currently conducted by the Seller and business activities
reasonably incidental or related thereto in substantially the manner in which it
is presently conducted and operated if such failure would materially adversely
affect the interests of the Company under the Transaction Documents.
SECTION 6.11 Limitation on Fundamental Changes. Enter into
any merger, consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution), or make any material change
in its present method of conducting business, or convey, sell, lease, assign,
transfer or otherwise dispose of, all or substantially all of its property,
business or assets other than the assignments and transfers contemplated hereby.
<PAGE>
39
SECTION 6.12 Amendment of GM Agreements. Amend, supplement,
modify or waive any of the provisions of the GM Agreements relating to the
Receivables or consent or agree to suffer to exist or permit any such amendment,
supplement, modification or waiver or exercise any consent rights granted to it
thereunder unless such amendment, supplement, modification or waiver or such
exercise of consent rights (a) could not reasonably be expected to have a
Material Adverse Effect with respect to the Seller or (b) has been consented to
in writing by the Company.
ARTICLE VII
Purchase Termination Events
SECTION 7.01 Purchase Termination Events. If any of the
following events (herein called "Purchase Termination Events") shall have
occurred and be continuing:
(a) the Seller shall fail (i) to pay any amount due pursuant
to Section 2.06 in accordance with the provisions thereof and such
failure shall continue unremedied for a period of five Business Days
from the earlier of (A) the date any Responsible Officer of the Seller
obtains knowledge of such failure and (B) the date the Seller receives
notice of such failure from the Company, the Servicer or the Trustee or
(ii) to pay any other amount required to be paid by the Seller
hereunder within five Business Days of the date when due; or
(b) the Seller shall fail to observe or perform in any
material respect any covenant or agreement applicable to it contained
herein (other than as specified in paragraph (a) of this Section 7.01);
provided that no such failure shall constitute a Purchase Termination
Event under this paragraph (b) unless such failure shall continue
unremedied for a period of 30 consecutive days from the date the Seller
receives notice of such failure from the Company, the Servicer or the
Trustee; or
(c) any representation, warranty, certification or statement
made or deemed made by the Seller in this Agreement or in any
statement, record, certificate, financial statement or other document
delivered pursuant to this Agreement shall prove to have been incorrect
in any material respect when made or deemed made; provided that no such
event shall constitute a Purchase Termination Event unless such event
shall continue unremedied for a period of 30 days from the earlier of
(A) the date any Responsible Officer of the Seller obtains knowledge
thereof and (B) the date the Seller receives notice of the
incorrectness of such representation or warranty from the Company, the
Servicer or the Trustee; provided, further, that a Purchase Termination
Event shall not be deemed to have occurred under this paragraph (c)
based upon a breach of any representation or
<PAGE>
31
warranty set forth in Section 4.02 if the Seller shall have complied
with the provisions of Section 2.06 in respect thereof; or
(d) (i) a court having jurisdiction in the premises shall
enter a decree or order for relief in respect of the Seller in an
involuntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect
(the Bankruptcy Code and all other such applicable laws being
collectively, "Applicable Insolvency Laws"), which decree or order is
not stayed or any other similar relief shall be granted under any
applicable federal or state law now or hereafter in effect and shall
not be stayed; (ii)(A) an involuntary case is commenced against the
Seller under any Applicable Insolvency Law now or hereafter in effect,
a decree or order of a court having jurisdiction in the premises for
the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over the Seller, or
over all or a substantial part of the property of the Seller, shall
have been entered, an interim receiver, trustee or other custodian of
the Seller for all or a substantial part of the property of the Seller
is involuntarily appointed, a warrant of attachment, execution or
similar process is issued against any substantial part of the property
of the Seller, and (B) any event referred to in clause (ii)(A) above
continues for 60 days unless dismissed, bonded or discharged; (iii) the
Seller shall at its request have a decree or an order for relief
entered with respect to it or commence a voluntary case under any
Applicable Insolvency Law now or hereafter in effect, or shall consent
to the entry of a decree or an order for relief in an involuntary case,
or to the conversion of an involuntary case to a voluntary case, under
any such Applicable Insolvency Law, consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or
a substantial part of its property; (iv) the making by the Seller of
any general assignment for the benefit of creditors; or (v) the Board
of Directors of the Seller authorizes action to approve any of the
foregoing; or
(e) there shall have occurred (i) an Early Amortization
Event set forth in Section 7.01 of the Pooling Agreement or (ii) the
Amortization Period with respect to all Outstanding Series shall have
occurred and be continuing; or
(f) the Seller has been terminated as Servicer following a
Servicer Default with respect to the Seller under the Servicing
Agreement; or
(g) a notice of Lien shall have been filed by the PBGC
against the Seller under Section 412(n) of the Code or Section 302(f)
of ERISA for a failure to make a required installment or other payment
to a plan to which Section 412(n) of the Code or Section 302(f) of
ERISA
<PAGE>
32
applies and such notice could reasonably be expected to have a
Material Adverse Effect with respect to the Seller unless there shall
have been delivered to the Trustee and the Rating Agencies proof of
release of such Lien; or
(h) any Lien in an amount equal to or greater than
$1,000,000 has been asserted against or imposed on the Receivables
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Section 9607(l), or any equivalent or
comparable state law, relating to or arising from the costs of,
response to, or investigation, remediation or monitoring of, any
environmental contamination resulting from the current or past
operations of the Seller, unless such Lien is being contested in
compliance with the standard set forth in Section 5.13; or
(i) a federal tax notice of Lien, in an amount equal to or
greater than $2,000,000, shall have been filed against the Seller,
unless such Lien is being contested in compliance with the standard set
forth in Section 5.13 or there shall have been delivered to the Trustee
and the Rating Agencies proof of release of such Lien; or
(j) any "Event of Default", as such term is defined in
paragraph (b), (c) or (d) (but only with respect to Article VI of the
Credit Agreement in the case of paragraph (d)) of Article VII of the
Credit Agreement, after giving effect to any grace period applicable
thereto under the Credit Agreement, shall have occurred and be
continuing;
then, (i) in the case of any Purchase Termination Event described in paragraph
(d), (e) or (g) above, the obligation of the Company to purchase Receivables
shall thereupon automatically terminate without further notice of any kind,
which is hereby waived by the Seller and (ii) in the case of any other Purchase
Termination Event, so long as such Purchase Termination Event shall be
continuing, the Company may terminate its obligation to purchase Receivables
from the Seller by written notice to the Seller (any termination pursuant to
clause (i) or (ii) of this Article VII is herein called an "Early Termination");
provided, however, that in the event of an involuntary petition or proceeding as
described in paragraphs (d)(i) and (d)(ii) above, the Company shall not purchase
Receivables from the Seller until such time, if any, as such involuntary
petition or proceeding has been dismissed, provided that such dismissal shall
have occurred within 60 days of the filing of such petition or the commencement
of such proceeding.
SECTION 7.02 Remedies. (a)If an Early Termination has occurred
and is continuing:
(i) the Company (and its assignees) shall have all of the
rights and remedies provided to a secured creditor or a purchaser of
accounts under the UCC by applicable law in respect thereto.
<PAGE>
(ii) If required by the terms of Section 9-504 or 9-505 of
the UCC (or analogous provisions of any other similar law applicable to
the Receivables), the Company (and its assignees) may offer to sell any
Purchased Receivable to any Person, together, at its option, with all
other Receivables created by the same Obligor. Any Purchased Receivable
sold hereunder (other than pursuant to the Pooling Agreement) shall
cease to be a Receivable for all purposes under this Agreement as of
the effective date of such sale;
(b) In the absence of a Purchase Termination Event under
Section 7.01(d) or (e)(i), it is understood and agreed that the Company will not
exercise the rights granted to it pursuant to Section 2.01(f) in its own
capacity.
ARTICLE VIII
Seller Note
SECTION 8.01 Seller Note. On the Effective Date, the Company
shall issue to the Seller a subordinated note substantially in the form of
Exhibit A (as amended, supplemented or otherwise modified from time to time, the
"Seller Note"). The Company may incur Indebtedness evidenced by the Seller Note
on any date only (i) if such date is a Payment Date; (ii) in payment to the
Seller of all or a portion of the Purchase Price (net of such deductions as
provided in Section 2.03(d)) for Receivables and other Receivable Assets
required to be paid for by the Company to the Seller on such Payment Date in
accordance with Section 2.02; (iii) to the extent that cash was not available to
pay such Purchase Price (net of such deductions) in accordance with subsections
2.03(b)(i), 2.03(b)(ii) and 2.03(b)(iii) (as applicable); and (iv) subject, in
any event, to Section 8.03. The aggregate principal amount of the Seller Note at
any time shall be equal to the difference between (i) the sum of the aggregate
principal amount on the issuance thereof and each addition to the principal
amount of such Seller Note pursuant to Section 2.03 as of such time and (ii) the
aggregate amount of all payments made in respect of the principal of such Seller
Note as of such time. All payments made in respect of the Seller Note shall be
allocated, first, to pay accrued and unpaid interest thereon, and second, to pay
the outstanding principal amount thereof. Interest on the principal amount of
the Seller Note (as such principal amount may have been increased pursuant to
the following proviso) shall accrue at the Reference Rate in effect from time to
time plus 1.50% from and including the Effective Date and shall be paid on each
Distribution Date with respect to amounts accrued and not paid as of the last
day of the preceding Settlement Period and the maturity date thereof; provided,
however, that, to the maximum extent permitted by law, accrued interest on the
Seller Note which is not so paid shall be added, at the request of the Seller,
to the principal amount of the Seller Note. The principal amount of the Seller
Note (as such principal amount may have been increased pursuant to the proviso
to the preceding sentence) shall be payable on the maturity date
<PAGE>
34
of the Seller Note (unless sooner prepaid pursuant to the terms thereof and of
the other Transaction Documents). Default in the payment of principal or
interest under the Seller Note shall not constitute a default or event of
default or a Purchase Termination Event hereunder, a Servicer Default under the
Servicing Agreement or an Early Amortization Event under the Pooling Agreement
or any Supplement thereto.
SECTION 8.02 Restrictions on Transfer of Seller Note. Neither
the Seller Note, nor any right of the Seller to receive payments thereunder,
shall be assigned, transferred, exchanged, pledged, hypothecated, participated
or otherwise conveyed, except as provided in the Credit Agreement and the
security documents related thereto.
SECTION 8.03 Aggregate Amount. Anything herein to the contrary
notwithstanding, the Company may not make any payment of any Purchase Price in
the form of Indebtedness of the Company under the Seller Note unless (i) at the
time of such payment and after giving effect thereto, the fair market value of
the Company's assets, including any beneficial interests in or indebtedness of a
trust and all Receivables and Receivable Assets the Company owns, is greater
than the amount of its liabilities, including its liabilities on the Seller Note
and all interest and other fees due and payable under the Pooling Agreement and
the other Transaction Documents plus $12,000,000 and (ii) the Seller reasonably
believes that the Seller Note will be paid in the ordinary course of business of
the Company, and in the absence of notice to the contrary, the Seller shall be
deemed to have such reasonable belief. In addition, and without limiting the
foregoing, the aggregate principal amount of Indebtedness evidenced by the
Seller Note outstanding on any Payment Date (after giving effect to all
additions thereto and repayments thereof on or before such Payment Date) may not
exceed 25% of the outstanding balance of the Receivables on such Payment Date;
provided, however, such limitation shall not apply for the period from March 5,
1999 until June 1, 1999 or, subject to obtaining the prior consent of the Rating
Agency, during any two-month period occurring in each calendar year, commencing
with the calendar year 2000. The principal amount of Indebtedness evidenced by
the Seller Note incurred on any Payment Date shall not, in any event, be greater
than the excess, if any, of (x) the Purchase Price for Receivables and other
Receivable Assets required to be paid for by the Company on such Payment Date
pursuant to Section 2.03 over (y) the portion of such Purchase Price paid in
cash pursuant to sub-sections 2.03(b)(i), 2.03(b)(ii) and 2.03(b)(iii).
ARTICLE IX
Miscellaneous
SECTION 9.01 Payments. Each cash payment to be made by either
the Company or the Seller hereunder shall be made on the required payment date
and in immediately available funds at
<PAGE>
35
the office of the payee set forth below its signature hereto or to such other
office as may be specified by either party in a notice to the other party
hereto.
SECTION 9.02 Costs and Expenses. The Seller agrees (a) to pay
or reimburse the Company for all its costs and expenses incurred in connection
with the enforcement or preservation of any rights against the Seller under this
Agreement and the other Sale Documents, including, without limitation, the
reasonable fees and disbursements of counsel to the Company, (b) to pay,
indemnify, and hold the Company harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay
caused by the Seller in paying, stamp, excise and other similar taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or any amendment, supplement or modification of, or
any waiver or consent under or in respect of, this Agreement and any such other
documents, and (c) to pay, indemnify, and hold the Company harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which would not have been imposed on, incurred by or asserted
against the Company but for its having acquired the Receivables hereunder (all
such other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements being herein called
"Indemnified Liabilities"); provided, however, that such indemnity shall not be
available to the extent that such Indemnified Liabilities result from the gross
negligence or wilful misconduct of the Company; and provided, further, that the
Seller shall have no obligation under this Section 9.02 to the Company with
respect to Indemnified Liabilities arising from (i) any action taken, or omitted
to be taken, by a Servicer that is not an Affiliate of the Seller, (ii) any
action taken by the Trustee or the Company in collecting from an Obligor or
(iii) a delay in payment, or a default, by an Obligor with respect to any
Purchased Receivable (other than arising out of (x) any discharge, claim, offset
or defense (other than discharge in bankruptcy of the Obligor or otherwise in
respect of Charged-Off Receivables) of the Obligor to the payment of any
Purchased Receivable (including, without limitation, a defense based on such
Purchased Receivable not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms) or any other claim
resulting from the sale of the merchandise or services related to any such
Purchased Receivable or the furnishing or failure to furnish such merchandise or
services, (y) a failure by the Seller to perform its duties or obligations under
this Agreement or (z) the sale of any Purchased Receivable that is designated on
the applicable Daily Report to be an Eligible Receivable and is determined to
have been at the date of such sale an Ineligible Receivable). The agreements in
this Section 9.02 shall survive the collection of all Receivables, the
termination of this Agreement and the payment of all amounts payable hereunder.
<PAGE>
36
SECTION 9.03 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Seller and the Company and their
respective successors (whether by merger, consolidation or otherwise) and
assigns. The Seller agrees that it will not assign or transfer all or any
portion of its rights or obligations hereunder without the prior written consent
of the Company. The Seller acknowledges that the Company shall assign all of its
rights hereunder to the Trustee. The Seller consents to such assignment and
agrees that the Trustee, to the extent provided in the Pooling Agreement, shall
be entitled to enforce the terms of this Agreement and the rights (including,
without limitation, the right to grant or withhold any consent or waiver) of the
Company directly against the Seller, whether or not a Purchase Termination
Event, a Potential Purchase Termination Event, an Early Amortization Event or a
Potential Early Amortization Event has occurred. The seller further agrees that,
in respect of its obligations hereunder, it will act at the direction of and in
accordance with all requests and instructions from the Trustee until all amounts
due to the Investor Certificateholders are paid in full. The Trustee, on behalf
of the Investor Certificateholders, shall have the rights of a third-party
beneficiary under this Agreement.
SECTION 9.04 Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.05 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Company, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exhaustive of any rights,
remedies, powers and privileges provided by law.
SECTION 9.06 Amendments and Waivers. Neither this Agreement
nor any terms hereof may be amended, supplemented or modified except in a
writing signed by the Company and the Seller. Any amendment, supplement or
modification shall not be effective until the Rating Agency Condition has been
satisfied.
SECTION 9.07 Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 9.08 Notices. All notices, requests and demands to or
upon the respective parties hereto to be effective shall be in writing
(including by telecopy), and, unless other-
<PAGE>
37
wise expressly provided herein, shall be deemed to have been duly given or made
when delivered by hand, or three days after being deposited in the mail, postage
prepaid, or, in the case of telecopy notice, when received, addressed as follows
in the case of the Company and the Seller, or to such other address as may be
hereafter notified by the respective parties hereto:
The Company: AAM Receivables Corp.
1840 Holbrook Avenue, Suite 2A
Detroit, MI 48212
Attention: Mark Umlauf
Telecopier: (313) 873-5472
The Seller: American Axle & Manufacturing, Inc.
1840 Holbrook Avenue
Detroit, MI 48212
Attention: Gary Witosky
Telecopier: (313) 974-2229
in each case, with a copy to
Trustee: The Chase Manhattan Bank, as Trustee
450 W. 33rd Street, 14th Floor
New York, New York 10001
Attention: Structured Finance
Services, AAM Master Trust
Telecopier: (212) 946-3916
SECTION 9.09 Counterparts. This Agreement may be executed by
one or more of the parties to this Agreement on any number of separate
counterparts (including by telecopy), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. A set of the
copies of this Agreement signed by all the parties shall be lodged with the
Company.
SECTION 9.10 Waivers of Jury Trial. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER SALE
DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER SALE DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 9.10.
SECTION 9.11 Jurisdiction; Consent to Service of Process. (a)
EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND
ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT OR
FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN NEW YORK CITY, AND ANY
APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR
<PAGE>
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER SALE
DOCUMENTS OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW
YORK STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF
THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT
THE COMPANY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO
THIS AGREEMENT OR THE OTHER SALE DOCUMENTS AGAINST THE SELLER OR ITS PROPERTIES
IN THE COURTS OF ANY JURISDICTION.
(b) EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT THEY MAY LEGALLY AND EFFECTIVELY DO SO, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER
SALE DOCUMENTS IN ANY NEW YORK STATE OR FEDERAL COURT. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT.
(c) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9.08. NOTHING
IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 9.12 Integration. This Agreement and the other
Transaction Documents contain a final and complete integration of all prior
expressions by the parties hereto with respect to the subject matter hereof and
thereof and shall together constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and thereof, superseding all
prior oral or written understandings.
SECTION 9.13 No Bankruptcy Petition. The Seller, by entering
into this Agreement, and any present or future holder of the Seller Note, by its
acceptance thereof, covenants and agrees that, prior to the date which is one
year and one day after the date of termination of this Agreement pursuant to
Section 9.14, it will not institute against, or join any other Person in
instituting against, the Company any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any Applicable
Insolvency Laws.
SECTION 9.14 Termination. This Agreement will terminate at
such time as (a) the commitment of the Company to purchase Receivables from the
Seller hereunder shall have terminated and (b) all Receivables purchased
hereunder have been collected, and the proceeds thereof turned over to the
Company and all other amounts owing to the Company hereunder shall have been
paid in full or, if Receivables sold hereunder have not been
<PAGE>
collected, such Receivables have become Defaulted Receivables and the Company
shall have completed its collection efforts in respect thereto; provided,
however, that the indemnities of the Seller to the Company set forth in this
Agreement shall survive such termination and provided, further that, to the
extent any amounts remain due and owing to the Company hereunder, the Company
shall remain entitled to receive any collections on Receivables sold hereunder
which have become Defaulted Receivables after it shall have completed its
collection efforts in respect thereof.
SECTION 9.15 Construction of Agreement. (a) The Seller hereby
grants to the Company a security interest in all of the Seller's right, title
and interest in, to and under the Receivables and other Receivable Assets now
existing and hereafter created, all monies due or to become due and all amounts
received with respect thereto and all "proceeds" thereof (including Recoveries),
to secure all of the Seller's obligations hereunder.
(b) This Agreement shall constitute a security agreement
under applicable law.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
all as of the day and year first above written.
AMERICAN AXLE & MANUFACTURING, INC.,
as Seller and Servicer
by
---------------------------------
Name:
Title:
AAM RECEIVABLES CORP.
by
----------------------------------
Name:
Title:
<PAGE>
1
Exhibit A to the
Receivables Sale Agreement
[FORM OF
SELLER NOTE]
New York, New York
__________, 1997
AAM Receivables Corp., a Delaware corporation (the "Company"),
hereby promises to pay to the order of American Axle & Manufacturing, Inc., a
Delaware corporation, in its capacity as Seller under the Receivables Sale
Agreement described below the principal amount of this Seller Note, determined
as described below, together with interest thereon at a rate per annum equal
to the Reference Rate in effect from time to time plus 1.50% (provided that
the portion of the outstanding principal amount of the Seller Note in excess
of an amount equal to 25% of the outstanding balance of the Receivables at any
time shall bear interest during each calendar month at a rate per annum equal
to One-Month LIBOR in effect on the first day of each calendar month plus
1.50% per annum) in lawful money of the United States of America. Capitalized
terms used herein but not defined herein shall have the meanings assigned to
such terms in the Receivables Sale Agreement, dated as of October 29, 1997, as
amended and restated as of March 25, 1999, between the Company and American
Axle & Manufacturing, Inc., as seller (in such capacity, the "Seller") and as
servicer (in such capacity, the "Servicer") (as amended, supplemented or
otherwise modified from time to time in accordance with its terms, the
"Receivables Sale Agreement") and in the Pooling Agreement, dated as of
October 29, 1997, as amended and restated as of March 25, 1999, among the
Company, the Servicer, and The Chase Manhattan Bank, a New York banking
corporation, as Trustee (as amended, supplemented or otherwise modified from
time to time in accordance with its terms, the "Pooling Agreement"). This
Seller Note is the Seller Note referred to in the Receivables Sale Agreement
and is subject to the terms and conditions thereof.
1. Principal Amount. The aggregate principal amount of this
Seller Note at any time shall be calculated in accordance with Section 8.01 of
the Receivables Sale Agreement and shall be recorded by the Servicer (the
authority to so record such amounts being hereby granted to the Servicer) on
the schedule annexed to and constituting a part of this Seller Note.
2. Payments of Principal and Interest. (a) Principal on this
Seller Note may be prepaid at any time. Principal not prepaid shall be due and
payable on the Trust Termination Date (as defined in the Pooling Agreement).
<PAGE>
2
(b) Payments of interest on this Seller Note shall be paid on
each Distribution Date (with respect to interest accrued and not paid as of
the preceding Distribution Date (or, in the case of the first Distribution
Date, as of the date on which this Seller Note is issued)) and on the Trust
Termination Date by depositing such payment in such account of the Seller as
the Seller may designate in writing; provided, however, that accrued interest
on this Seller Note which is not so paid may (to the maximum extent permitted
by law) be added to the principal amount of this Seller Note as indicated on
the schedule annexed to and constituting a part of this Seller Note.
Notwithstanding the foregoing, no payments of interest or principal may be
made under this Seller Note at the times and to the extent prohibited under
the Subordination Provisions and Certain Termination Events described in
Sections 3 and 6 below.
3. Subordination Provisions. The Company covenants and agrees,
and the Seller, by its acceptance of this Seller Note, likewise covenants and
agrees, that the payment of all obligations of the Company to the Seller under
this Seller Note from or with the proceeds (such proceeds being the
"Proceeds") of Receivables (as defined in the Pooling Agreement) or Related
Property (as defined in the Pooling Agreement)(and any extensions, renewals,
financing, refundings and replacements of all or any part of such obligations)
(the "Seller Subordinated Debt") are hereby expressly subordinated in right of
payment to the payment and performance of the obligations of the Company to
the Trustee for the benefit of the Holders (as defined in the Pooling
Agreement) howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent, now or hereafter existing, or due or to
become due (the "Senior Obligations") to the extent and in the manner set
forth in this paragraph including each of the following subparts:
(a) Insolvency Events; Priority of Senior
Obligations; Payments Made Directly to the Trustee. In the
event of any bankruptcy, dissolution, winding up,
liquidation, readjustment, reorganization or other similar
event relating to the Company, whether voluntary or
involuntary, partial or complete, and whether in bankruptcy,
insolvency, receivership or other similar proceedings, or
upon an assignment for the benefit of creditors, or any other
marshalling of the assets and liabilities of the Company
(each an "Insolvency Event") or any sale of all or
substantially all the assets of the Company (except pursuant
to the Pooling Agreement and any Supplement thereto),
(i) the Senior Obligations shall first be
paid and performed in full and in cash before the
Seller shall be entitled to receive and to retain
any payment or distribution from or with the
Proceeds in respect of the Seller Subordinated Debt,
whether of principal, interest or otherwise; and
(ii) any payment or distribution from or
with the Proceeds of any kind (including cash or
property arising
<PAGE>
3
from Proceeds which may be payable or deliverable
by reason of the payment of any other
indebtedness of the Company being subordinated to
the payment of the Seller Subordinated Debt) in
respect of the Seller Subordinated Debt that
otherwise would be payable or deliverable with
respect to the Seller Subordinated Debt directly or
indirectly, by set-off or in any other manner to the
Seller, shall be paid or delivered by the Person
making such payment or delivery (whether a trustee
in bankruptcy, a receiver, custodian, liquidating
trustee or otherwise) directly to the Trustee on
behalf of the Holders for application to (in the
case of cash) or as collateral for (in the case of
noncash property or securities) the payment of the
Senior Obligations until the Senior Obligations
shall have been paid in full in cash.
(b) Payments Received by Seller. In the event that
the Seller receives any payment or other distribution of any
kind or character arising from Proceeds from the Company or
from any other source whatsoever in respect of the Seller
Subordinated Debt after the commencement of an Insolvency
Event, such payment or other distribution shall be deemed to
be property of the Holders and shall be received and held by
the Seller in trust for the Trustee on behalf of the Holders
and shall be turned over by the Seller to the Trustee for the
benefit of the Holders forthwith, until all Senior
Obligations have been paid and performed in full and in cash.
(c) Application of Payments. All payments and
distributions arising from Proceeds received by the Trustee
in respect of the Seller Subordinated Debt, to the extent
received in or converted into cash, may be applied by the
Trustee for the benefit of the Holders (i) first to the
payment of any and all reasonable expenses (including
reasonable attorneys' fees and legal expenses) paid or
incurred by the Trustee or any Holder in enforcing these
Subordination Provisions, or in endeavoring to collect or
realize upon the Seller Subordinated Debt, and (ii) any
balance remaining therefrom shall be applied by the Trustee
toward the payment of the Senior Obligations in a manner
determined by the Trustee to be in accordance with the
Pooling Agreement.
(d) Seller's Rights of Subrogation. The Seller agrees
that no payment or distribution to Holders pursuant to these
Subordination Provisions shall entitle the Seller to exercise
any right of subrogation in respect thereof until the Senior
Obligations shall have been paid in full in cash. The Seller
agrees that these Subordination Provisions herein shall not
be affected by any action, or failure to act, by any holder
of Senior Obligations which results, or may result, in
affecting, impairing or extinguishing any right of
reimbursement or subrogation or other right or remedy of the
Seller.
<PAGE>
4
(e) Company's Obligations Absolute. The provisions of
this paragraph are intended solely for the purpose of
defining the relative rights with respect to Proceeds of the
Seller, on the one hand, and the Holders, on the other hand.
Nothing contained in these provisions or elsewhere in this
Seller Note is intended to or shall impair, as between the
Company, its creditors (other than the Trustee) and the
Seller, the Company's obligation, which is unconditional and
absolute, to pay the Seller Subordinated Debt as and when the
same shall become due and payable in accordance with the
terms hereof and of the Receivables Sale Agreement or to
affect the relative rights of the Seller and creditors of the
Company (other than the Certificateholders); provided that
any payments made by the Company pursuant to this subsection
shall be made solely from funds available to the Company
which are not otherwise needed to be applied to the payment
of any amounts by the Company pursuant to any Pooling and
Servicing Agreements, and the Seller shall make no claim
against the Company for payment in contravention of this
proviso.
(f) Avoided Payments. If, at any time, any payment
(in whole or in part) made with respect to any Senior
Obligations is rescinded or must be restored or returned by a
Holder or the Trustee on behalf of the Holders, the
provisions of this paragraph shall continue to be effective
or shall be reinstated, as the case may be, as though such
payment had not been made.
(g) Subordination Not Affected by Certain Actions of
Holders or the Trustee. As between the Seller, on the one
hand, and the Holders and the Trustee, on the other hand,
each of the Holders or the Trustee may, from time to time, at
its sole discretion, without notice to the Seller, and
without waiving any of its rights under these Subordination
Provisions, take any or all of the following actions: (i)
retain or obtain an interest in any property to secure any of
the Senior Obligations; (ii) extend or renew for one or more
periods (whether or not longer than the original period),
alter, increase or exchange any of the Senior Obligations, or
release or compromise any obligation of any nature with
respect to any of the Senior Obligations; (iii) amend,
supplement, amend and restate, or otherwise modify any
Transaction Document; and (iv) release its security interest
in, or surrender, release or permit any substitution or
exchange for all or any part of any rights or property
securing any of the Senior Obligations.
(h) Waiver of Notice. By its acceptance hereof, the
Seller hereby waives: (i) notice of acceptance of the
provisions of this paragraph by any of the Holders or the
Trustee; (ii) notice of the existence, creation, non-payment
or non-performance of all or any of the Senior Obligations;
and (iii) all diligence in enforcement, collection or
protection of, or realization upon, the Senior Obligations or
any security therefor.
<PAGE>
5
4. Restrictions on Assignment. Neither this Seller Note, nor
any right of the Seller to receive payments hereunder, shall be assigned,
transferred, exchanged, pledged, hypothecated, participated or otherwise
conveyed, except as provided in the Credit Agreement and in the security
documents related thereto.
5. No Bankruptcy Petition. The Seller covenants and agrees
that, prior to the date which is one year and one day after the date of
termination of the Receivables Sale Agreement pursuant to Section 9.13 thereof,
it will not institute against, or join any other Person in instituting against,
the Company any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any federal or state
bankruptcy or similar law.
6. Certain Termination Events. During the continuance of any
Early Amortization Event set forth in paragraphs (a) or (b) of Section 7.01 of
the Pooling Agreement, until all Senior Obligations have been paid in full:
(a) the Company shall cease making any payments to
the Seller under this Seller Note;
(b) the Trustee (on behalf of the Holders) may
demand, sue for, collect and receive every payment or
distribution of any kind made in respect of the Seller
Subordinated Debt and file claims and proofs of claim and
take such other action (including enforcing any security
interest or other lien securing payment of the Seller
Subordinated Debt) as the Trustee (on behalf of the Holders)
may deem necessary for the exercise or enforcement of any of
the rights or interests of Holders; provided that in the
event the Trustee takes such action, it shall apply all
proceeds first to the payment of costs under this Seller
Note, then to the payment of the Senior Obligations and any
surplus proceeds remaining thereafter to be paid over to
whosoever may be lawfully entitled thereto; and
(c) the Seller shall promptly take such action as the
Trustee (on behalf of the Holders) may request (i) to file
appropriate claims or proofs of claim in respect of the
Seller Subordinated Debt; (ii) to execute and deliver to the
Trustee (on behalf of the Holders) such powers of attorney,
assignments, or other instruments as the Trustee may request
in order to enable it to enforce any and all claims with
respect to, and any security interests and other liens
securing payment of, the Seller Subordinated Debt, and (iii)
to collect and receive any and all payments or distributions
which may be payable or deliverable upon or with respect to
the Seller Subordinated Debt for account of the Trustee (on
behalf of the Holders).
7. The Company covenants and agrees that, at any time that the
outstanding principal amount of this Seller Note is greater than zero, it shall
not declare or pay any dividend on, or make any payment on account of, or set
apart assets for a sinking
<PAGE>
6
or other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of, any shares of any class of capital stock of the Company,
whether now or hereafter outstanding, or make any other distribution in respect
thereof.
THIS SELLER NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ANY
CONFLICT OF LAW PRINCIPLES.
AAM RECEIVABLES CORP.,
by
---------------------------
Name:
Title:
<PAGE>
Schedule 1 to
Seller Note
Subordinated Loans and Payments of Principal(1)
Amount of Unpaid
Amount of Principal Principal Notation
Date Loans Repaid Balance Made by
- -------- --------- --------- --------- --------
- -------- --------- --------- --------- --------
- -------- --------- --------- --------- --------
- -------- --------- --------- --------- --------
- -------- --------- --------- --------- --------
- -------- --------- --------- --------- --------
- -------- --------- --------- --------- --------
- -------- --------- --------- --------- --------
- -------- --------- --------- --------- --------
- -------- --------- --------- --------- --------
- -------- --------- --------- --------- --------
- -------- --------- --------- --------- --------
- -------- --------- --------- --------- --------
- -------- --------- --------- --------- --------
- -------- --------- --------- --------- --------
- -------- --------- --------- --------- --------
- -------- --------- --------- --------- --------
- -------- --------- --------- --------- --------
- -------- --------- --------- --------- --------
- -------- --------- --------- --------- --------
- -------- --------- --------- --------- --------
- --------
(1) The grid below may be maintained electronically by the Seller, rather than
in written form.
<PAGE>
Schedule 1 to the
Receivables Sale Agreement
Receivables
American Axle & Manufacturing, Inc. aged trial balance as of October 29,1997 on
computer diskette.
<PAGE>
Schedule 2 to the
Receivables Sale Agreement
Lockboxes
Lockbox Account
Name Bank Name Number Number
- ---- --------- ------ ------
American Axle Mellon Bank 360254 091-8591
& Manufacturing, P.O. Box 360254
Inc. Pittsburgh, PA 15251-6254
<PAGE>
Schedule 3 to the
Receivables Sale Agreement
Chief Executive Office
Jurisdiction of Location of Chief Office Where
Seller Incorporation Executive Office Records are kept
- ------ ------------- ---------------- ----------------
American Axle & 1840 Holbrook Ave.
Manufacturing, Inc. Delaware Detroit, MI 48212 Finance Dept.
Other Locations where Records
Concerning Receivables are Located
A. Detroit Gear & Axle and Detroit Forge
1840 Holbrook Avenue
Detroit, Michigan 48212
B. Buffalo Gear & Axle
1001 East Delavan Avenue
Buffalo, New York 14215
C. Tonawanda Forge
2390 Kenmore
Tonawanda, New York 14150
D. Three Rivers Plant
One Manufacturing Drive
Three Rivers, Michigan 49093
E. Engineering, Sales & Marketing
Technical Center
2965 Technology Drive
Rochester Hills, Michigan 48309
<PAGE>
Schedule 4 to the
Receivables Sale Agreement
Names
Seller Trade Names
------ -----------
American Axle & Manufacturing, Inc. AAM*
The corporation is frequently referred to as "AAM" and, for this reason, it is
claimed as a trade name. The corporation does not have any "doing business as"
names or "assumed names".
<PAGE>
Schedule 5 to the
Receivables Sale Agreement
Discounted Percentage
All terms defined or referenced in the Receivables Sale
Agreement, the Pooling Agreement or a Supplement and not otherwise defined or
referenced herein are used herein as therein defined or referenced.
The Discounted Percentage applicable to the Receivables
purchased on any date from the Seller shall equal (a) during the initial Accrual
Period, 99.25% and (b) thereafter, the percentage obtained from the following
formula:
100% - (A + B + C + D)
all determined by the Company as of the Related Payment Date,
Where
A = Adjusted Loss Reserve Percentage, which as of such Payment
Date will equal the ratio obtained by dividing (a)
Charged-Off Receivables (net of recoveries in respect of
Charged-Off Receivables) during the six-fiscal month period
immediately preceding the Settlement Report Date most
recently preceding such Payment Date by (b) two times the
aggregate amount of Collections during the three-fiscal month
period immediately preceding the Settlement Report Date most
recent to such Payment Date.
B = Adjusted Carrying Cost Reserve Percentage, which as of such
Payment Date will equal the amount obtained by dividing (a)
the product of (i) 1.5, (ii) the average of the Days Sales
Outstanding for the three Settlement Report Dates most recent
to such Payment Date and (iii) the Reference Rate as of the
Settlement Report Date most recent to such Payment Date by
(b) 365.
C = The Servicing Fee Percentage divided by 360.
D = Processing Expense Reserve Percentage, which will equal
1/20 of 1% and reflects the cost of the Company's overhead,
including costs of processing the purchase of Receivables and
other normal operation costs and a reasonable profit margin.
None of the elements of the above-referenced formula, in
respect of any purchase of Receivables, will be adjusted following the related
Payment Date.
With respect to each calculation set forth above with respect
to a Settlement Report Date, such calculation as calculated on such Settlement
Report Date and included in the applicable Monthly Settlement Statement shall
remain in effect
<PAGE>
2
from and including the related Settlement Report Date to but excluding the
following Settlement Report Date.
<PAGE>
3
Schedule 6 to the
Receivables Sale Agreement
FORM OF CONSOLIDATED FINANCIAL STATEMENT FOOTNOTE--TO BE INCLUDED
IN CONSOLIDATED FINANCIALS
American Axle & Manufacturing, Inc. (the "Seller") established a
receivables financing facility (the "Receivables Facility") through AAM
Receivables Corp. ("ARC"), a wholly-owned, bankruptcy-remote subsidiary of
American Axle & Manufacturing, Inc. Pursuant to the Receivables Facility, the
Seller sells certain customer trade receivables created from time to time to ARC
which, in turn, transfers all of such receivables to a trust, which issues
variable funding certificates (the "VFC Certificates") representing an undivided
interest in the receivables pool to certain purchasers. Under the VFC
Certificates, certain purchasers provide a revolving financing commitment,
subject to the terms and conditions of the Receivables Facility, of up to $153
million through October 2003. These receivables are not available to the
Company's general creditors.
<PAGE>
EXECUTION COPY
================================================================================
SERVICING AGREEMENT
Dated as of October 29, 1997,
as amended and restated as of March 25, 1999,
Among
AAM RECEIVABLES CORP.,
AMERICAN AXLE & MANUFACTURING, INC.
as Servicer,
and
THE CHASE MANHATTAN BANK,
as Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Definitions
SECTION 1.01 Definitions. .......................................2
SECTION 1.02 Other Definitional Provisions. .....................2
ARTICLE II
Administration and Servicing of Receivables
SECTION 2.01. Appointment of Servicer ............................3
SECTION 2.02. Servicing Procedures ...............................3
SECTION 2.03. Collections ........................................5
SECTION 2.04. Reconciliation of Deposits .........................7
SECTION 2.05. Servicing Compensation .............................7
ARTICLE III
Representations and Warranties of the Servicer
SECTION 3.01. Organization; Powers ...............................8
SECTION 3.02. Authorization; No Conflict .........................9
SECTION 3.03. Enforceability .....................................9
SECTION 3.04. Governmental Approvals .............................9
SECTION 3.05. Litigation; Compliance with Laws ...................9
SECTION 3.06. Agreements ........................................10
SECTION 3.07. No Servicer Default ...............................10
SECTION 3.08. Servicing Ability .................................10
SECTION 3.09. Location of Records ...............................10
SECTION 3.10. Addressing the Year 2000 Problem. .................10
ARTICLE IV
Covenants of the Servicer
SECTION 4.01. Delivery of Daily Reports .........................11
SECTION 4.02. Delivery of Monthly Settlement Statement ..........11
SECTION 4.03. Delivery of Annual Servicer's Certificates ........12
SECTION 4.04. Delivery of Independent Public Accountants'
Servicing Reports .................................12
SECTION 4.05. Extension, Amendment and Adjustment of
Receivables; Amendment of Policies.................13
SECTION 4.06. Protection of Holders' Rights .....................13
SECTION 4.07. Security Interest .................................14
SECTION 4.08. Location of Records ...............................14
SECTION 4.09. Visitation Rights .................................14
SECTION 4.10. Lockbox Agreement; Lockbox Accounts ...............15
i
<PAGE>
SECTION 4.11. Delivery of Financial Statements ..................15
SECTION 4.12. Notices ...........................................17
SECTION 4.13. Year 2000 .........................................17
SECTION 4.14. FASIT Restrictions. ...............................17
ARTICLE V
Other Matters Relating to the Servicer
SECTION 5.01. Merger, Consolidation, etc. .......................18
SECTION 5.02. Indemnification of the Trust and the
Trustee ...........................................19
SECTION 5.03. Servicer Not to Resign ............................20
SECTION 5.04. Access to Certain Documentation and
Information Regarding the Receivables .............20
ARTICLE VI
Servicer Defaults;
Servicer Termination
SECTION 6.01. Servicer Defaults .................................21
SECTION 6.02. Trustee To Act; Appointment of Successor ..........25
SECTION 6.03. Waiver of Past Defaults ...........................26
ARTICLE VII
Miscellaneous Provisions
SECTION 7.01. Amendment .........................................26
SECTION 7.02. Termination .......................................26
SECTION 7.03. Governing Law .....................................27
SECTION 7.04. Notices ...........................................27
SECTION 7.05. Counterparts ......................................27
SECTION 7.06. Third-Party Beneficiaries .........................27
SECTION 7.07. Merger and Integration ............................27
SECTION 7.08. Headings ..........................................28
SECTION 7.09. No Set-Off ........................................28
SECTION 7.10. No Bankruptcy Petition ............................28
Exhibit A Form of Annual Servicer's Certificate
Exhibit B Form of Agreed Upon Procedures
ii
<PAGE>
SERVICING AGREEMENT, dated as of October 29,
1997, as amended and restated as of March 25, 1999
(this "Agreement"), among AAM RECEIVABLES CORP., a
Delaware corporation (the "Company"), AMERICAN AXLE &
MANUFACTURING, INC., a Delaware corporation ("AAMI",
in its capacity as Seller under the Receivables Sale
Agreement referred to below, the "Seller"), as
servicer (the "Servicer"), and THE CHASE MANHATTAN
BANK, not in its individual capacity, but solely as
trustee (in such capacity, the "Trustee").
W I T N E S S E T H:
WHEREAS, the Company and the Seller have entered into a
Receivables Sale Agreement, dated as of October 29, 1997, as amended and
restated as of March 25, 1999 (as amended, supplemented or otherwise modified
from time to time thereafter, the "Receivables Sale Agreement");
WHEREAS, pursuant to the Receivables Sale Agreement, the
Seller sells to the Company, and the Company purchases from the Seller, all the
Seller's right, title and interest in, to and under the Receivables and other
Receivable Assets (as defined in the Receivables Sale Agreement);
WHEREAS, the Company in turn has transferred the Receivables
now existing or hereafter created and the rights of the Company in, to and under
all Related Property related thereto to a master trust pursuant to a Pooling
Agreement, dated as of October 29, 1997, as amended and restated as of March 25,
1999 (as amended, supplemented or otherwise modified from time to time, the
"Pooling Agreement"), among the Company, the Servicer and the Trustee;
WHEREAS, the parties entered into the Servicing Agreement,
dated as of October 29, 1997 (the "Existing Servicing Agreement"), pursuant to
which AAMI agreed to act as Servicer in connection with the Pooling Agreement;
and
WHEREAS, the parties hereto wish to amend and restate the
Existing Servicing Agreement in its entirety.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, and other good and valuable consideration,
the receipt and sufficiency of which are hereby expressly acknowledged, the
parties hereto agree that the
<PAGE>
2
Existing Servicing Agreement shall be and hereby is amended and restated in its
entirety as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Definitions. Unless otherwise defined herein,
capitalized terms that are used herein shall have the meanings assigned to such
terms in the Pooling Agreement and each Supplement thereto.
SECTION 1.02. Other Definitional Provisions. (a) All terms
defined in this Agreement (directly or by incorporation by reference pursuant to
Section 1.01) shall have the defined meanings when used in any certificates or
other document made or delivered pursuant hereto unless otherwise defined
therein.
(b) As used herein and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined
herein (directly or by incorporation by reference pursuant to Section 1.01) and
accounting terms partly defined herein (directly or by incorporation by
reference pursuant to Section 1.01), to the extent not defined, shall have the
respective meanings given to them under GAAP. To the extent that the definitions
of accounting terms herein are inconsistent with the meanings of such terms
under GAAP, the definitions contained herein shall control.
(c) The words "hereof", "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references contained in this Agreement are
references to Sections, subsections, Schedules and Exhibits in or to this
Agreement unless otherwise specified.
(d) The definitions contained herein are applicable to the
singular as well as the plural forms of such terms and to the masculine, the
feminine and the neuter genders of such terms.
(e) Where reference is made in this Agreement to the
principal amount of Receivables, such reference shall, unless explicitly stated
otherwise, be deemed a reference to the Principal Amount of such Receivables.
(f) Any reference herein or in any other Transaction
Document to a provision of the Internal Revenue Code or ERISA shall be deemed to
be also a reference to any successor provision thereto.
<PAGE>
3
(g) Any reference herein to a Schedule or Exhibit to this
Agreement shall be deemed to be a reference to such Schedule or Exhibit as it
may be amended, modified or supplemented from time to time to the extent that
such Schedule or Exhibit may be amended, modified or supplemented (or any term
or provision of any Transaction Document may be amended that would have the
effect of amending, modifying or supplementing information contained in such
Schedule or Exhibit) in compliance with the terms of the Transaction Documents.
(h) Any reference in this Agreement to any representation,
warranty or covenant "deemed" to have been made is intended to encompass only
representations, warranties or covenants that are expressly stated to be
repeated on or as of dates following the execution and delivery of this
Agreement, and no such reference shall be interpreted as a reference to any
implicit, inferred, tacit or otherwise unexpressed representation, warranty or
covenant.
(i) The words "include", "includes" or "including" shall be
interpreted as if followed, in each case, by the phrase "without limitation".
ARTICLE II
Administration and Servicing of Receivables
-------------------------------------------
SECTION 2.01. Appointment of Servicer. The Company hereby
appoints AAMI to act as, and AAMI hereby accepts its appointment and agrees to
act as, Servicer under the Pooling and Servicing Agreements, and the Investor
Certificateholders, by their acceptance of the Investor Certificates, consent
to AAMI acting as Servicer. The Servicer shall have responsibility for the
management of the servicing and receipt of collections in respect of the
Receivables and will have the authority to make any management decisions
relating to the Receivables to the extent such authority is granted to the
Servicer under any Pooling and Servicing Agreement. The Company, the Trustee
and the Holders shall treat AAMI as the Servicer and may conclusively rely on
the instructions, notices and reports of AAMI as Servicer for so long as AAMI
is the Servicer.
SECTION 2.02. Servicing Procedures. (a) The Servicer shall
manage the servicing and administration of the Receivables, the collection of
payments due under the Receivables and charging off of any Receivables as
uncollectible, all in accordance with its Policies and the terms of the Pooling
and Servicing Agreements. The Servicer shall have full power and authority,
acting alone or through any party properly designated by it hereunder, to do any
and all things in connection with such servicing and administration that it may
deem necessary or
<PAGE>
4
desirable, but subject to the terms of this Agreement and the other Transaction
Documents. Without limiting the generality of the foregoing and subject to
Section 6.01, the Servicer or its designee is hereby authorized and empowered
(i) to execute and deliver, on behalf of the Trust for the benefit of the
Holders, any and all instruments of satisfaction or cancellation, or of partial
or full release or discharge, and all other comparable instruments, and, after
the delinquency of any Receivable and to the extent permitted under and in
compliance with applicable Requirements of Law, to commence enforcement
proceedings with respect to such Receivable and (ii) to make any filings,
reports, notices, applications, registrations with, and to seek any consents or
authorizations from, the Securities and Exchange Commission and any state
securities authority on behalf of the Trust as may be necessary or advisable to
comply with any federal or state securities or reporting requirements or laws.
(b) Without limiting the generality of the foregoing and
subject to Section 6.01, the Servicer or its designee is hereby authorized and
empowered to give written direction to the Trustee with respect to withdrawals
from, and payments to, the Collection Account in accordance with the Daily
Report and as otherwise specified in the Pooling and Servicing Agreements.
(c) The Servicer shall, at its cost and expense and as agent
for the Company and the Trust, use its best efforts to collect, consistent with
its past practices, as and when the same becomes due, the amount owing on each
Receivable. The Servicer shall not make any material change in its
administrative, servicing and collection systems that deviates from its
Policies, except as expressly permitted by the terms of any applicable Pooling
and Servicing Agreement and after giving written notice to the Trustee. In the
event of default under any Receivable, the Servicer shall have the power and
authority, on behalf of the Company and the Trust, for the benefit of the
Holders, to take such action in respect of such Receivable as the Servicer may
deem advisable. In the enforcement or collection of any Receivable, the Servicer
shall be entitled to sue thereon in (i) its own name or (ii) if, but only if,
the Company consents in writing (which consent shall not be unreasonably
withheld), as agent for the Company. In no event shall the Servicer be entitled
to take any action that would make the Company, the Trustee, any Agent or any
Holder a party to any litigation without the express prior written consent of
such Person.
(d) Without limiting the generality of the foregoing and
subject to Section 6.01, the Servicer is hereby authorized and empowered to
delegate any or all of its servicing, collection, enforcement and administrative
duties hereunder with respect to the Receivables to a Person who agrees to
conduct such duties in accordance with its Policies; provided, however, that the
Servicer shall give prior written notice to the Company, the
<PAGE>
5
Trustee, each Agent and the Rating Agencies of any such delegation relating to a
material duty prior to such delegation being effective, the Servicer shall have
received notice that the Rating Agency Condition shall be satisfied after giving
effect to such delegation and the consent of the Company, the Trustee and each
Agent to such delegation shall have been obtained. No delegation of duties by
the Servicer permitted hereunder shall relieve the Servicer of its liability and
responsibility with respect to such duties.
(e) Except as provided in any Pooling and Servicing
Agreement, neither the Servicer nor any Successor Servicer shall be obligated to
use separate servicing procedures, offices, employees or accounts for servicing
the Receivables transferred to the Company (and, subsequently, to the Trust)
from the procedures, offices, employees and accounts used by the Servicer or
such Successor Servicer, as the case may be, in connection with servicing other
receivables.
(f) The Servicer shall comply with and perform its servicing
obligations with respect to the Receivables in accordance with the contracts, if
any, relating to the Receivables and its Policies except insofar as any failure
to so comply or perform would not have a Material Adverse Effect with respect to
the Servicer.
(g) The Servicer shall not take any action to cause any
Receivable not evidenced by any "instrument" (as defined in the UCC as in effect
in the State of New York) upon origination to become evidenced by an instrument
and the Servicer shall not take any action to cause any interest in any
Receivable to be evidenced by any title documents in bearer form, except in
connection with its enforcement or collection of a Defaulted Receivable, in
which event the Servicer shall deliver such instrument or title documents to the
Trustee as soon as reasonably practicable, but in no event more than five days
after execution thereof; provided that any origination of Receivables by the
Servicer, in its capacity as the Seller, in compliance with applicable Pooling
and Servicing Agreements shall not constitute a breach of this subsection
2.02(h).
SECTION 2.03. Colections. (a) The Servicer shall have
instructed all Obligors to make all payments in respect of the Receivables to a
Lockbox or a Lockbox Account. Each of the Company and the Servicer represents,
warrants and agrees that all Collections shall be collected, processed and
deposited by it pursuant to, and in accordance with the terms of, the Pooling
and Servicing Agreements and Lockbox Agreements. Without limiting the generality
of the foregoing, the Servicer shall comply with the provisions of subsection
3.01(d) of the Pooling Agreement as to remittance of funds available in any
Lockbox Account. In the event that any payments in respect of any Receivable are
made
<PAGE>
6
directly to the Servicer (including any employees thereof or independent
contractors employed thereby), the Servicer shall, within two Business Days of
receipt thereof, deliver (which may be via regular mail) or deposit such amounts
to a Lockbox, a Lockbox Account or the Collection Account and, prior to
forwarding such amounts, the Servicer shall hold such payments in trust as
custodian for the Company and the Trustee.
(b) Each Lockbox Agreement shall provide that the Lockbox
Processor thereunder is irrevocably directed, and such Lockbox Processor
irrevocably agrees, (i) to deposit funds received in the Lockbox directly into
the Lockbox Account and (ii) to transfer all available funds on deposit in the
Lockbox Account within one Business Day of the Business Day Received to the
Trustee for deposit in the Collection Account. Each Lockbox Agreement shall be
substantially in the form specified in the Pooling Agreement, subject to
modifications thereof as provided in the Pooling Agreement and applicable
Supplements. Prior to any resignation of the Lockbox Processor or termination of
the Lockbox Processor by the Company or the Trustee with respect to any
Receivables, the Servicer hereby agrees to obtain a replacement Lockbox
Processor. The Servicer may enter into any amendments or modifications of a
Lockbox Agreement that the Servicer reasonably deems necessary to conform such
Lockbox Agreement to the cash management system of the Company or the Servicer
and that are reasonably acceptable to the Trustee and each Agent.
(c) The Trustee shall administer amounts on deposit in the
Collection Account in accordance with the terms of the Pooling and Servicing
Agreements. Each of the Company and the Servicer acknowledges and agrees that
(i) it shall not have any right to withdraw any funds on deposit in the
Collection Account or any Lockbox Account and (ii) all amounts deposited in the
Collection Account or any Lockbox Account shall be under the sole dominion and
control of the Trustee (subject to the Servicer's rights to direct the
application of any such amounts as provided by the terms of any Pooling and
Servicing Agreement or to the extent funds are deposited in error (as certified
to the Trustee in writing by the Servicer)).
(d) As soon as practicable, but in any event not later than
the Business Day following the date that the Servicer identifies any of the
collected funds received in the Collection Account as funds that do not
constitute Collections on account of the Receivables, such moneys that do not
constitute such Collections shall be remitted to the Servicer and then by the
Servicer to the Seller.
(e) Unless otherwise required by law or unless an Obligor
designates that a payment be applied to a specific
<PAGE>
7
Receivable, all Collections received from an Obligor shall be applied to the
oldest Receivables of such Obligor.
SECTION 2.04 Reconciliation of deposits. If in respect of
Collections on account of a Receivable the Servicer deposits into the Lockbox
Account or the Collection Account (a) a check that is not honored for any reason
or (b) an amount that is less than or more than the actual amount of such
Collections, the Servicer shall, in lieu of making a reconciling withdrawal or
deposit, as the case may be, adjust the amount subsequently deposited into such
Lockbox Account or the Collection Account to reflect such dishonored check or
mistake. Any Receivable in respect of which a dishonored check is received shall
be deemed not to have been paid; provided, that no adjustments made pursuant to
this Section 2.04 shall change any amount previously reported pursuant to
Section 4.02.
SECTION 2.05. Servicing Compensation. (a) As full
compensation for the Servicer's servicing activities hereunder and
reimbursement for its expenses as set forth in subsection 2.05(b), the Servicer
shall be entitled to receive on each Distribution Date, for the preceding
Settlement Period prior to the termination of the Trust pursuant to Section
9.01 of the Pooling Agreement, a servicing fee (the "Servicing Fee"). The
Servicing Fee shall be an amount equal to (i) the product of (A) the Servicing
Fee Percentage and (B) the average aggregate Principal Amount of the
Receivables in the Trust for such Settlement Period and (C) the number of days
in such Settlement Period, divided by (ii) 360. Except as otherwise set forth
in the related Supplement, the share of the Servicing Fee allocable to each
Outstanding Series for any Settlement Period shall be an amount equal to the
product of (i) the Servicing Fee for such Settlement Period and (ii) a fraction
(expressed as a percentage) (A) the numerator of which is the daily average
Invested Amount for such Settlement Period with respect to such Outstanding
Series and (B) the denominator of which is the daily average Aggregate Invested
Amount for such Settlement Period (with respect to any such Series, the
"Monthly Servicing Fee"). The Servicing Fee shall be payable to the Servicer
solely pursuant to the terms of, and to the extent amounts are available for
payment under, Article III of the Pooling Agreement.
(b) The Company hereby authorizes the Servicer to pay
amounts due to the Trustee pursuant to Section 8.05(a) of the Pooling Agreement
and the reasonable fees and disbursements of independent accountants, and all
other reasonable fees and expenses of the Trust (including counsel fees, if any)
not expressly stated herein to be for the account of the Holders; provided,
however, that in no event shall the Servicer or the Trustee be liable for any
federal, state or local income or franchise tax, or any interest or penalties
with respect thereto, assessed on the Trust or the Holders except in accordance
with
<PAGE>
8
Section 5.02 and as otherwise expressly provided herein and provided further
that the Company shall promptly reimburse the Servicer upon request for any
amounts paid by the Servicer pursuant to this Section 2.05(b). It is understood
and agreed that the Servicer shall not be obligated to make any such payment if,
in the reasonable judgment of the Servicer, the Company will be unable to meet
its reimbursement obligations pursuant to the further proviso in the immediately
preceding sentence. Notwithstanding anything to the contrary herein or in any
other Pooling and Servicing Agreement, in the event that the Servicer fails to
pay any amount due to the Trustee pursuant to Section 8.05(a) of the Pooling
Agreement, or following the commencement and continuation of an Early
Amortization Period, the Trustee shall be entitled, in addition to any other
rights it may have under law and under the Pooling Agreement, to receive
directly such amounts owing to it under the Pooling and Servicing Agreements
from, and in the same order of priority as, the Servicing Fee before payment to
the Servicer of any portion thereof; provided, that in the event the Servicer
shall have elected to waive its rights to payment of its portion of the
Servicing Fee, the Trustee shall nonetheless be entitled to receive such amounts
from payments that would ordinarily be applied to the payment of the Servicing
Fee, in the same order of priority as though such portion of the Servicing Fee
were payable. The Servicer shall be required to pay expenses for its own
account, and shall not be entitled to any payment therefor other than its
portion of the Servicing Fee. Nothing contained herein shall be construed to
limit the obligation of the Servicer or the Company to pay any amounts due the
Trustee pursuant to Section 8.05(a) of the Pooling Agreement.
ARTICLE III
Representations and Warranties of the Servicer
----------------------------------------------
As of (a) the date hereof and (b) each Issuance Date, the
Servicer hereby makes the following representations and warranties to each of
the other parties hereto:
SECTION 3.01. Organization; Powers. The Servicer (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization, (ii) has all requisite power and
authority to own its property and assets, to lease the properties it operates as
lessee and to carry on its business as now conducted and as proposed to be
conducted, (iii) is qualified to do business in, and is in good standing in,
every jurisdiction in which the servicing of Receivables as required by this
Agreement requires such qualification except in the case of clauses (ii) and
(iii) to the extent that a failure to have such power and authority or to
qualify could not reasonably be expected to result in a Material
<PAGE>
9
Adverse Effect with respect to the Servicer and (iv) has the corporate power and
authority to execute, deliver and perform its obligations under each Transaction
Document to which it is or will be a party.
SECTION 3.02. Authorization; No Conflict. The execution,
delivery and performance by the Servicer of each of the Transaction Documents
to which it is a party and the other transactions contemplated hereby and
thereby (collectively, the "Transactions") (i) have been duly authorized by all
requisite corporate action and (ii) will not (A) violate (1) any Requirement of
Law or (2) any provision of any Contractual Obligation to which the Servicer is
a party or by which any of them or any of their property is or may be bound,
(B) be in conflict with, result in a breach of or constitute (alone or with
notice or lapse of time or both) a default under, or give rise to any right to
accelerate or to require the prepayment, repurchase or redemption of any
obligation under any such Contractual Obligation, except where any such
conflict, violation, breach or default referred to in clause (A) or (B),
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect with respect to the Servicer, or (C) result in the
creation or imposition of any Lien (other than Permitted Liens) upon or with
respect to any property or assets now owned or hereafter acquired by the
Servicer or any Subsidiary.
SECTION 3.03. Enforceability. This Agreement has been duly
executed and delivered by the Servicer and constitutes, and each other
Transaction Document to which it is a party when executed and delivered by it
will constitute, its legal, valid and binding obligation enforceable against it
in accordance with such document's terms, subject (a) as to enforcement of
remedies, to applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the enforcement of creditors' rights generally,
from time to time in effect and (b) to general principles of equity (whether
enforcement is sought by a proceeding in equity or at law).
SECTION 3.04. Governmental Approvals. No action, consent or
approval of, registration or filing with or any other action by any
Governmental Authority is or will be required in connection with the
Transactions, except for (i) the filing of Uniform Commercial Code financing
statements, (ii) those that may be required under state securities or "blue
sky" laws in connection with the offering or sale of Investor Certificates and
(iii) such as have been made or obtained and are in full force and effect.
SECTION 3.05. Litigation; Compliance with Laws. (i) There
are no actions, suits or proceedings at law or in equity or by or before any
Governmental Authority now pending or, to its knowledge, threatened against or
affecting the Servicer or any
<PAGE>
10
Subsidiary or any business, property or rights of any such Person (A) that
involve any Transaction Document or the Transactions or (B) as to which there is
a reasonable possibility of an adverse determination and that, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect with respect to the Servicer.
(ii) Neither the Servicer nor any Subsidiary is in default
with respect to any judgment, writ, injunction, decree or order of any
Governmental Authority, where such violation or default could reasonably be
expected to result in a Material Adverse Effect with respect to the Servicer.
SECTION 3.06. Agreements. (i) The Servicer is not a party to
any agreement or instrument or subject to any corporate restriction that has
resulted or could reasonably be expected to result in a Material Adverse Effect
with respect to the Servicer.
(ii) The Servicer is not in default in any manner under any
provision of any Contractual Obligation to which it is a party or by which it or
any of its properties or assets are bound, where such default could reasonably
be expected to result in a Material Adverse Effect with respect to the Servicer.
SECTION 3.07. No Servicer Default. No Servicer Default or
Potential Servicer Default has occurred and is continuing.
SECTION 3.08 Servicing Ability. As of the related Issuance
Date, there has not been since the date of this Agreement any material adverse
change in the Servicer's ability to perform its obligations as Servicer under
any Transaction Document to which it is a party.
SECTION 3.09. Location of Records. The office at which the
Servicer keeps its records concerning any Receivables either (i) is located at
the address set forth for it on Schedule 1 to the Receivables Sale Agreement or
(ii) has been notified to the Company and the Trustee in accordance with the
provisions of Section 4.08. The chief executive office of the Servicer is
located at such location and such office is the place where it is "located" for
the purposes of Section 9-103(3)(d) of the UCC as in effect in the State of New
York.
SECTION 3.10. Addressing the Year 2000 Problem. The Servicer
has reviewed its operations and major commercial counterparties with a view to
assessing whether its businesses will, in the receipt, transmission, processing,
manipulation, storage, retrieval, retransmission or other utilization of data,
be vulnerable to a Year 2000 Problem. Based on such review, the Servicer has no
reason to believe that a Material Adverse Effect will occur resulting from a
Year 2000 Problem.
<PAGE>
ARTICLE IV
Covenants of the Servicer
-------------------------
11
SECTION 4.01. Daily of Daily Reports. Unless otherwise
specified in the Supplement with respect to any Series, for each Business Day
(the "Reported Day") and with respect to each Outstanding Series, the Servicer
shall submit to the Company, the Trustee and the relevant Agent, if any, no
later than 1:30 p.m., New York City time, on the next Business Day following
each Reported Day, a written report substantially in the form attached to the
related Supplement for each such Series (the "Daily Report") setting forth for
the Reported Day total Collections on the Receivables, the amount of
Collections attributable to previously identified Ineligible Receivables for
which an Adjustment Payment and a Seller Adjustment Payment have been made
pursuant to the Pooling Agreement and the Receivables Sale Agreement,
respectively (which are payable by the Seller in accordance with subsection
2.06(a) of the Receivables Sale Agreement), the amount of Receivables
originated, the amount of Ineligible Receivables (if any) identified on the
Reported Day, and such other information as the Company, the Trustee or such
Agent may reasonably request. The Daily Report may be delivered in an
electronic format mutually agreed upon by the Servicer and the Trustee, or
pending such agreement, by facsimile. By delivery of a Daily Report, the
Servicer shall be deemed to have made a representation and warranty that all
information set forth therein is true and correct in all material respects.
SECTION 4.02. Delivery of Monthly Setlement Statement. Unless
otherwise specified in the Supplement with respect to any Outstanding Series,
the Servicer hereby covenants and agrees that it shall deliver to the Company,
the Trustee, the relevant Agent, if any, and each Rating Agency by 11:00 a.m.,
New York City time, on each Settlement Report Date, a certificate of a
Responsible Officer of the Servicer substantially in the form attached to the
related Supplement for each such Outstanding Series (a "Monthly Settlement
Statement") setting forth, as of the last day of the Settlement Period most
recently ended and for such Settlement Period, (a) the information described in
the form of such Monthly Settlement Statement with such changes as may be
agreed to by the Servicer, the Company, the Trustee and the relevant Agent, if
any, subject to satisfaction of the Rating Agency Condition (unless a
Responsible Officer of the Servicer certifies that such changes could not
reasonably be expected to have a materially adverse effect on the interests of
the Trust or the Investor Certificateholders for the applicable Series under
the Transaction Documents) and (b) such other information as the Trustee or the
relevant Agent, if any, may reasonably request. Such certificate shall include
a certification by a Responsible Officer of the Servicer that, to such
Responsible Officer's knowledge, the information contained therein is true and
correct
<PAGE>
12
in all material respects and the Servicer has performed all of its respective
obligations in all material respects under each Transaction Document to which it
is a party throughout such preceding Settlement Period (or, if there has been a
default in the performance of any such obligation, specifying each such default
known to such Responsible Officer and the nature and status thereof). A copy of
each Monthly Settlement Statement may be obtained by any Holder by a request in
writing to the Trustee addressed to the Corporate Trust Office.
SECTION 4.03.Delivery of Annual Servicer's Certificates. The
Servicer agrees that it shall deliver to the Company, the Trustee, each Agent
and each Rating Agency, a certificate of a Responsible Officer of the Servicer
substantially in the form of Exhibit A hereto, certifying that:
(a) a review of its activities during the preceding calendar
year (or in the case of the first such certificate issued after the
Initial Closing Date, during the period from such date) and of its
performance under each Transaction Document was made under the
supervision of such Responsible Officer;
(b) to such Responsible Officer's knowledge, based on such
review, it has performed its obligations in all material respects under
each Transaction Document throughout the period covered by such
certificate (or, if there has been a material default in the
performance of any such obligation, specifying each such default known
to such Responsible Officer and the nature and status thereof); and
(c) each Daily Report and Monthly Settlement Statement
delivered during such period was accurate and correct in all material
respects, except as specified in such certificate or as corrected in
any Daily Report subsequently delivered during such period.
Such certificate shall be delivered by the Servicer within 90 days after the end
of each calendar year commencing with the year ending December 31, 1999. A copy
of each such certificate may be obtained by any Holder by a request in writing
to the Trustee addressed to the Corporate Trust Office.
SECTION 4.04. Delivery of Independent Public Accountants'
Servicing Reports. The Servicer shall cause Independent Public Accountants to
furnish to the Company, the Trustee, each Agent and each Rating Agency within
120 days following the last day of each of its fiscal years (commencing with
the fiscal year ending on or about December 31, 1998), a letter to the effect
that such firm has performed certain agreed-upon procedures (as set forth in
Exhibit B hereto) relating to it and its performance hereunder during the
preceding
<PAGE>
13
fiscal year and describing such accountants' findings with respect to such
procedures; provided, however, that with respect to the 1998 fiscal year, such
letter shall be furnished prior to June 30, 1999. A copy of such report may be
obtained by any Holder by a request in writing to the Trustee addressed to the
Corporate Trust Office.
SECTION 4.05. Extension, Amendment and Adjustment of
Receivables; Amendment of Policies. (a) The Servicer hereby covenants and agrees
with the Company and the Trustee that it shall not extend, rescind, cancel,
amend or otherwise modify, or attempt or purport to extend, rescind, cancel,
amend or otherwise modify, the terms of, or grant any Dilution Adjustment to,
any Receivable, or otherwise take any action that is intended to cause or permit
an Eligible Receivable to cease to be an Eligible Receivable, except in any such
case (i) in accordance with the terms of its Policies, (ii) as required by any
Requirement of Law or (iii) in the case of any Dilution Adjustments (whether or
not permitted by clause (i) or (ii)), upon the payment by or on behalf of the
Seller of a Seller Adjustment Payment pursuant to Section 2.05 of the
Receivables Sale Agreement; provided that in no event shall an Eligible
Receivable becoming a Defaulted Receivable constitute a breach of this Section
4.05. Any Dilution Adjustment authorized to be made pursuant to the preceding
sentence shall result in the reduction, on the Business Day on which such
Dilution Adjustment arises or is identified, in the aggregate Principal Amount
of Receivables used to calculate the Aggregate Receivables Amount and if as a
result of such a reduction the Aggregate Target Receivables Amount exceeds the
Aggregate Receivables Amount, the Company (in addition to the obligations of the
Seller under the Receivables Sale Agreement in respect of such Dilution
Adjustment) shall be required to pay into the Series Principal Collection
Sub-subaccount with respect to each Outstanding Series in immediately available
funds, within one Business Day of such determination, the pro rata share for
such Series of the amount (the "Cash Dilution Payment") by which the Aggregate
Target Receivables Amount exceeds the Aggregate Receivables Amount.
(b) The Servicer shall not change or modify its Policies in
any material respect, except (i) if such change or modification is necessary
under any Requirement of Law, (ii) if such change or modification would not
reasonably be expected to have a Material Adverse Effect with respect to the
Servicer or (iii) if the Rating Agency Condition is satisfied with respect
thereto. The Servicer shall provide notice to the Company, the Trustee, each
Agent and each Rating Agency of any change or modification of its Policies.
SECTION 4.06. Protection of Holders' Rights. The Servicer
hereby agrees with the Company and the Trustee that it shall take no action,
nor intentionally omit to take any action,
<PAGE>
14
that could reasonably be expected to materially and adversely impair the
rights, remedies or interests of the Holders under the Transaction Documents in
respect of the Receivables or any Related Property nor shall it reschedule,
revise or defer payments due on any Receivable except in accordance with its
Policies or Section 4.05 above.
SECTION 4.07. Security Interest. The Servicer hereby
covenants and agrees that it shall not sell, pledge, assign or transfer to any
other Person, or grant, create, incur, assume or suffer to exist any Lien on,
any Receivable sold and assigned to the Company or the Trust, whether now
existing or hereafter created, or any interest therein, and the Servicer shall
defend the right, title and interest of the Company and the Trust in, to and
under any Receivable sold and assigned to the Company or the Trust, whether now
existing or hereafter created, against all claims of third parties claiming
through or under the Servicer or the Company; provided, however, that nothing in
this Section 4.07 shall prevent or be deemed to prohibit the Servicer from
suffering to exist upon any of the Receivables any Permitted Liens. The
foregoing covenant is in addition to any rights to require the Seller to
repurchase any Ineligible Receivable.
SECTION 4.08. Location of Records. The Servicer hereby
covenants and agrees that it (a) shall not move its chief executive office or
any of the offices where it keeps its records with respect to any Receivables
outside of the location specified in respect thereof on Schedule 1 to the
Receivables Sale Agreement, in any such case, without giving 30 days prior
written notice to the Company, the Trustee, each Agent and the Rating Agencies
and (b) shall promptly take all actions (including any filings under the UCC)
required or reasonably necessary in order to continue the valid and enforceable
interest of the Company and the Trust in all Receivables.
SECTION 4.09. Visitation Rights. (a) The Servicer shall, at
any reasonable time during normal business hours on any Business Day and from
time to time, upon reasonable prior notice, and as often as may reasonably be
requested, subject to its security and confidentiality requirements, (i) permit
the Company, the Trustee, any Agent or any of their respective agents or
representatives, (A) to examine and make copies of and abstracts from its
records, books of account and documents (including computer tapes and disks)
relating to the Receivables and (B) following the termination of its appointment
as Servicer to be present at its offices and properties to administer and
control the Collection of the Receivables and to allow the Trustee access to
documents, instruments and other records (including the documents, instruments
and other records required to be transferred to a successor pursuant to Section
6.01 upon a Service Transfer, equipment and personnel that are necessary to
enable a Successor Servicer to continue servicing operations in
<PAGE>
15
accordance with the terms of the Transaction Documents and (ii) permit the
Company, the Trustee, any Agent or any of their respective agents or
representatives to visit its properties to discuss its affairs, finances and
accounts relating to the Receivables or its performance hereunder or under any
of the other Transaction Documents to which it is a party with any of its
officers or directors and with its Independent Public Accountants; provided,
that the Company, the Trustee or the Agent, as the case may be, shall notify it
prior to any contact with such accountants and shall give it the opportunity to
participate in such discussions.
(b) The Servicer shall provide the Trustee with such other
information as the Trustee may reasonably request in connection with the
fulfillment of the Trustee's obligations under any Pooling and Servicing
Agreement.
SECTION 4.10. Lock Agreement; Lockbox Accounts. The Servicer
shall (a) maintain, and keep in full force and effect, each Lockbox Agreement to
which it is a party, except to the extent otherwise permitted under the terms of
the Transaction Documents, and (b) take all reasonable actions necessary to
ensure that each related Lockbox Account shall be free and clear of, and defend
each such Lockbox Account against, any writ, order, stay, judgment, warrant of
attachment or execution or similar process.
SECTION 4.11. Delivery of Financial Statements. The Servicer
shall furnish to the Company, the Trustee, each Agent and the Rating Agencies:
(i) within 120 days after the end of fiscal 1999 and within
90 days after the end of each subsequent fiscal year, the Relevant
Entity's consolidated balance sheet and related statements of
operations, cash flows and stockholders' equity showing the
consolidated financial condition of the Relevant Entity and its
consolidated subsidiaries as of the close of such fiscal year and the
consolidated results of its operations and the operations of such
subsidiaries during such year, all audited by Deloitte & Touche or
other independent public accountants of recognized national standing
acceptable to the Administrative Agent(as defined in the Credit
Agreement) and accompanied by an opinion of such accountants (which
shall not be qualified in any material respect) to the effect that such
consolidated financial statements fairly present the financial
condition and results of operations of the Relevant Entity and its
consolidated subsidiaries on a consolidated basis in accordance with
GAAP.
(ii) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year, the Relevant
<PAGE>
16
Entity's consolidated balance sheet and related statements of
operations, cash flows and stockholders' equity showing the
consolidated financial condition of the Relevant Entity and its
consolidated subsidiaries as of the close of such fiscal quarter and
the consolidated results of their operations during such fiscal quarter
and the then-elapsed portion of the fiscal year, all certified by a
Financial Officer (as defined in the Credit Agreement) of the Relevant
Entity as fairly presenting the consolidated financial condition and
results of operations of the Relevant Entity and its consolidated
subsidiaries on a consolidated basis in accordance with GAAP (except
for the absence of footnotes) subject to normal year-end audit
adjustments;
(iii) concurrently with any delivery of financial statements
under sub-paragraph (i) or (ii) above, a certificate of the Financial
Officer certifying such statements;
(iv) promptly after the same become publicly available,
copies of all periodic and other publicly available reports, proxy
statements and, to the extent provided by the Servicer under the Credit
Agreement, other materials filed by the Servicer or any Subsidiary
thereof with the Securities and Exchange Commission, or any
Governmental Authority succeeding to any or all of the functions of
said Commission, or with any national securities exchange, or
distributed to its shareholders generally, as the case may be;
(v) if, as a result of any change in accounting principles
and policies from those as in effect on the date of this Agreement, the
consolidated financial statements of the Relevant Entity delivered
pursuant to paragraph (i) or (ii) above will differ in any material
respect from the consolidated financial statement that would have been
delivered pursuant to such clauses had no such change in accounting
principles and policies been made, then, together with the first
delivery of financial statements pursuant to paragraph (i) and (ii)
above following such change, a schedule prepared by a Financial Officer
(as defined in the Credit Agreement) on behalf of the Relevant Entity
reconciling such changes to what the financial statements would have
been without such changes;
(vi) within 90 days after the beginning of each fiscal year,
a copy of an operating and capital expenditure budget for such fiscal
year;
(vii) promptly following the creation or acquisition of any
Subsidiary, a certificate from a Responsible Officer,
<PAGE>
17
identifying such new Subsidiary and the ownership interest of the
Servicer therein;
(viii) simultaneously with the delivery of any financial
statements pursuant to paragraph (i) or (ii) above, a balance sheet and
related statements of operations, cash flows and stockholder's equity
for each unconsolidated Subsidiary for the applicable period;
(ix) promptly, a copy of all reports submitted in connection
with any material interim or special audit made by independent
accountants of the books of the Relevant Entity or any Subsidiary; and
(x) promptly, from time to time, such other information
regarding the operations, business affairs and financial condition of
the Relevant Entity, or any Subsidiary thereof, or compliance with the
terms of any Transaction Document, or such consolidating financial
statements in each case as the Agent or any Holder may reasonably
request.
For purposes of paragraphs (i),(ii), (v), (ix) and (x) above, the
"Relevant Entity" shall be American Axle & Manufacturing Holdings, Inc.
("Holdings") so long as Holdings has no significant assets other than
its investment in American Axle & Manufacturing, Inc. However, if
Holdings has significant assets other than its investment in American
Axle & Manufacturing, Inc., such "Relevant Entity" shall be American
Axle & Manufacturing, Inc.
SECTION 4.12. Notices. The Servicer shall furnish to the
Company, the Trustee, each Agent and each Rating Agency, promptly upon obtaining
knowledge of the occurrence of any Purchase Termination Event, Potential
Purchase Termination Event, Early Amortization Event, Potential Early
Amortization Event or Servicer Default, written notice thereof.
SECTION 4.13. Year 2000. The Servicer shall take all action
necessary to assure that its computer based systems are able to effectively
process data including dates on and after January 1, 2000. At the request of
the Trustee the Servicer shall provide the Trustee with assurance reasonably
acceptable to the Trustee of the Servicer's year 2000 capability.
SECTION 4.14. FASIT Restrictions. (a) The Servicer, shall not
take any action or fail to take any action or cause the Trust to take any
action or fail to take any action if the Servicer knows or should have known
that, such action or failure, as the case may be, could (i) cause the Trust not
to be classified as a FASIT or (ii) result in the imposition of a tax on the
holder of the FASIT Ownership Interest including, but not limited to, the tax
on prohibited transactions as defined in
<PAGE>
18
Section 860L(e) of the Code, unless the Servicer has received a Tax Opinion to
the effect that the contemplated action will not endanger such FASIT status or
result in the imposition of such a tax.
(b) To the extent the Trust's books and records are maintained
by the Servicer in the normal course of business, the Servicer shall, for United
States federal income tax purposes, maintain such books and records on an
accrual basis. Such books and records must be sufficient concerning the nature
and amount of the Trust's Assets to show that the Trust qualifies as a FASIT.
(c) The Servicer shall not enter into any arrangement by which
the FASIT will receive a fee or other compensation for services.
(d) The Servicer shall provide on a timely basis to the
Company and the Trustee or their respective designees such information with
respect to the Trust Assets as is in its possession, which the Servicer has
received or prepared by virtue of its role as Servicer hereunder, that is
reasonably requested by the Company or the Trustee to enable it to perform its
obligations with respect to the creation and maintenance of the Trust as a
FASIT.
(e) The Servicer shall not sell or dispose of, or permit the
sale, or other disposition of, any of the Trust Assets, except Charged-Off
Receivables or as expressly permitted under Section 7.02 of the Pooling
Agreement.
(f) The Servicer shall not permit the Trust to acquire any
Trust Assets that are not "Permitted Assets".
ARTICLE V
Other Matters Relating to the Servicer
--------------------------------------
SECTION 5.01. Merger, Consolidation, etc. The Servicer shall
neither enter into any merger, consolidation or amalgamation, nor liquidate,
wind up or dissolve itself (or suffer any liquidation or dissolution), nor make
any material change in its present method of conducting business, nor convey,
sell, transfer, lease, assign or otherwise dispose of, all or substantially all
of its property, business or assets other than the assignments and transfers
contemplated hereby; provided that the Servicer may merge into or consolidate
with any other corporation or convey, sell or transfer its property, business or
assets substantially as an entirety to another Person, if:
<PAGE>
19
(a) the corporation into which it is merged or the
corporation formed by such consolidation or the Person that acquires by
conveyance, sale or transfer its property, business or assets
substantially as an entirety shall be a corporation organized and
existing under the laws of the United States of America or any state or
the District of Columbia, and, if it is not the surviving entity, such
corporation shall assume, without the execution or filing of any paper
or any further act on the part of any of the parties hereto, the
performance of every one of its covenants and obligations hereunder;
and
(b) it has delivered to the Trustee an officer's certificate
executed by a Vice President or other senior officer and an Opinion of
Counsel addressed to the Trust and the Trustee each stating that such
consolidation, merger, conveyance or transfer complies with this
Section 5.01 and an officer's certificate executed by a Vice President
or other senior officer stating that all conditions precedent herein
provided for relating to such transaction have been complied with.
SECTION 5.02. Indemnification of the Trust and the Trustee.
(a) The Servicer hereby agrees to indemnify and hold harmless the Company, the
Trustee for the benefit of the Holders and the Trustee and their respective
directors, officers, agents and employees (each of the foregoing, an
"Indemnified Person") from and against any loss, liability, expense, damage or
injury suffered or sustained by reason of any acts, omissions or alleged acts
or omissions of the Servicer arising out of, or relating to, its activities
pursuant to any Pooling and Servicing Agreement to which it is a party,
including but not limited to any judgment, award, settlement, reasonable
attorneys' fees and other reasonable costs or expenses incurred in connection
with the defense of any actual or threatened action, proceeding or claim;
provided that the Servicer shall not indemnify any Indemnified Person for any
liability, cost or expense of such Indemnified Person (i) arising solely from a
default by an Obligor with respect to any Receivable (except that
indemnification shall be made to the extent that such default arises out of its
failure to perform its duties or obligations under this Agreement), or (ii) to
the extent that such liability, cost or expense arises from the gross
negligence, bad faith or wilful misconduct of such Indemnified Person (or any
of its respective directors, officers, agents or employees). The provisions of
this indemnity shall run directly to, and be enforceable by, an injured party
and shall survive the termination of the Agreement or the resignation of the
Servicer.
(b) In addition to and without giving effect to any
limitations set forth in subsection (a) above, the Servicer shall indemnify and
hold harmless each Indemnified Person from and
<PAGE>
20
against any loss, liability, expense, damage or injury suffered or sustained by
reason of a breach by the Servicer of any covenant contained in subsections
2.02(f) or 2.02(g) or Sections 4.05, 4.06 or 4.07 that materially and adversely
affects the interest of the Company or the Holders under the Transaction
Documents with respect to any Receivable (an "Indemnification Event"), in an
amount equal to the outstanding Principal Amount at such time of such
Receivable; provided that the Servicer shall not indemnify any Indemnified
Person for any liability, cost or expense of such Indemnified Person (i) arising
solely from a default by an Obligor with respect to any Receivable (except that
indemnification shall be made to the extent that such default arises out of its
failure to perform its duties or obligations under this Agreement or its gross
negligence or willful misconduct), or (ii) to the extent that such liability,
cost or expense arises from the gross negligence, bad faith or wilful misconduct
of such Indemnified Person (or any of its respective directors, officers, agents
or employees). Payment shall occur on or prior to the 30th Business Day after
the day such Indemnification Event becomes known to the Servicer unless such
Indemnification Event shall have been cured on or before such day. The
obligation of the Servicer to indemnify the Trustee for the benefit of the
Holders for any such Receivables shall constitute the sole remedy respecting any
breach of the covenants set forth in subsections 2.02(g) or (h) or Sections
4.05, 4.06 or 4.07 with respect to such Receivables available to Holders.
SECTION 5.03. Servicer Not to Resign. The Servicer shall not
resign from the obligations and duties hereby imposed on it except (a) upon
determination that (i) the performance of its duties hereunder is no longer
permissible under applicable law, and (ii) there is no reasonable course of
action that it could take to make the performance of its duties hereunder
permissible under applicable law or (b) if the Servicer is terminated as
Servicer pursuant to Section 6.01. Any such determination permitting the
resignation of the Servicer shall be evidenced as to clause (a)(i) above by an
Opinion of Counsel to such effect delivered to the Company, the Trustee and each
Agent. No such resignation shall become effective until a Successor Servicer or
the Trustee shall have assumed the responsibilities and obligations of the
Servicer in accordance with Section 6.02. The Trustee, the Company, each Agent
and each Rating Agency shall be notified of such resignation by the resigning
Person.
SECTION 5.04. Access to Certain Documentation and Information
Regarding the Receivables. The Servicer shall hold in trust for the Company
and the Trustee at the office of the Servicer such computer programs, books of
account and other records as are reasonably necessary to enable the Trustee to
determine at any time the status of the Receivables and all collections and
payments in respect thereof (including, without limitation, an ability to
recreate records evidencing the
<PAGE>
21
Receivables in the event of the destruction of the originals thereof).
ARTICLE VI
Servicer Defaults;
------------------
Servicer Termination
--------------------
SECTION 6.01. Servicer Defaults. If any one of the following
events (a "Servicer Default") shall occur and be continuing with respect to the
Servicer:
(a) failure by the Servicer to deliver, within two Business
Days of the earlier date set forth below in clause (i) or (ii), any
Daily Report or, within three Business Days of the earlier date set
forth below in clause (i) or (ii), any Monthly Settlement Statement, in
either case, conforming in all material respects to the requirement of
Section 4.01 or 4.02, as the case may be, in each case, after the
earlier to occur of (i) the date upon which a Responsible Officer of
the Servicer obtains knowledge of such failure or (ii) the date on
which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Company or the
Trustee, or to the Company, the Servicer and the Trustee from holders
of Investor Certificates evidencing 25% or more of the Aggregate
Invested Amount or by any Agent;
(b) failure by the Servicer to pay any amount required to be
paid by it under any Pooling and Servicing Agreement on or before the
date occurring five Business Days after the earlier to occur of (i) the
date upon which a Responsible Officer of the Servicer obtains knowledge
of such failure or (ii) the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to
the Servicer by the Company or the Trustee, or to the Company, the
Servicer and the Trustee by holders of Investor Certificates evidencing
25% or more of the Aggregate Invested Amount or by any Agent;
(c) failure on the part of the Servicer duly to observe or
to perform in any material respect any other of its covenants or
agreements set forth in any Pooling and Servicing Agreement, which
failure has a material adverse effect on the holders of any Outstanding
Series and which material adverse effect continues unremedied for 30
days after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Company and the
Servicer by the Trustee, or to the Company, the Servicer and the
Trustee by holders of Investor Certificates evidencing 25% or more of
the Aggregate
<PAGE>
21
Invested Amount or by any Agent; provided, that no Servicer Default
shall be deemed to occur under this subsection with respect to a
failure on the part of the Servicer if the Servicer shall have complied
with the provisions of Section 5.02(b) with respect thereto;
(d) any representation, warranty or certification made by
the Servicer in any Pooling and Servicing Agreement or in any
certificate delivered pursuant thereto shall prove to have been
incorrect in any material respect when made or deemed made, which
incorrectness has a material adverse effect on the holders of any
Outstanding Series and which material adverse effect continues
unremedied for 30 days after the date on which written notice thereof,
requiring the same to be remedied, shall have been given to the Company
and the Servicer by the Trustee, or to the Company, the Servicer and
the Trustee by holders of Investor Certificates evidencing 25% or more
of the Aggregate Invested Amount or by any Agent; provided, that no
Servicer Default shall be deemed to occur under this subsection with
respect to a failure on the part of the Servicer if the Servicer shall
have complied with the provisions of Section 5.02(b) with respect
thereto;
(e) (i) a court having jurisdiction in the premises shall
enter a decree or order for relief in respect of the Servicer in an
involuntary case under any Applicable Insolvency Law, which decree or
order is not stayed, or any other similar relief shall be granted
under any applicable federal or state law and shall not be stayed;
(ii) an involuntary case is commenced against the Servicer under any
Applicable Insolvency Law, a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having
similar powers over the Servicer, or over all or a substantial part of
the property of the Servicer shall have been entered, an interim
receiver, trustee or other custodian of the Servicer for all or a
substantial part of the property of the Servicer is involuntarily
appointed or a warrant of attachment, execution or similar process is
issued against any substantial part of the property of the Servicer,
and the continuance of any such events in this clause (ii) for 60 days
unless dismissed, bonded or discharged; (iii) the Servicer shall at
its request have a decree or an order for relief entered with respect
to it, commence a voluntary case under the Bankruptcy Code or any
Applicable Insolvency Law, consent to the entry of a decree or an
order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or consent
to the appointment of or taking possession by a receiver, trustee or
other custodian of all or a substantial part of
<PAGE>
22
its property; (iv) the making by the Servicer of any general
assignment for the benefit of creditors; (v) the inability or failure
of the Servicer generally to pay its debts as such debts become due;
or (vi) the Board of Directors of the Servicer adopts any resolution
or otherwise authorizes action to approve any of the foregoing; or
(f) one or more judgments for the payment of money (to the
extent not bonded or covered by insurance to the reasonable
satisfaction of the Agent) shall be rendered against the Servicer (i)
in an aggregate amount greater than $10,000,000 or (ii) that,
individually or in the aggregate, have resulted or could reasonably be
expected to result in a Material Adverse Effect with respect to the
Servicer and the same shall remain undischarged for a period of 30
consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to
levy upon assets or properties of the Servicer to enforce such judgment
or judgments;
then, in the event of any Servicer Default, so long as the Servicer Default
shall not have been remedied or waived, the Company (with the consent of the
Trustee) may, the Company at the direction of the Trustee shall, and the Company
and the Trustee shall, at the written direction of the holders of Investor
Certificates evidencing more than 50% of the Aggregate Invested Amount voting as
a single class, by notice then given in writing to the Servicer and each Rating
Agency (a "Termination Notice"), terminate all or any part of the rights and
obligations of the Servicer as Servicer under the Pooling and Servicing
Agreements. Notwithstanding anything to the contrary in this Section 6.01, a
delay in or failure of performance referred to under clause (b) above for a
period of 10 Business Days after the applicable grace period or a delay in or
failure of performance referred to under clauses (a), (c) or (d) above for a
period of 30 Business Days after the applicable grace period shall not
constitute a Servicer Default, if such delay or failure could not have been
prevented by the exercise of reasonable diligence by the Servicer and such delay
or failure was caused by a Force Majeure Delay. After receipt by the Servicer of
a Termination Notice, and on the date that a Successor Servicer shall have been
appointed by the Company and the Trustee pursuant to Section 6.02, all authority
and power of the Servicer under any Pooling and Servicing Agreement to the
extent specified in such Termination Notice shall pass to and be vested in a
Successor Servicer (a "Service Transfer"), as the case may be; and, without
limitation, the Trustee is hereby directed, authorized and empowered (upon the
failure of the Servicer to cooperate) to execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, all documents and other instruments
upon the failure of the Servicer to execute or to deliver such documents or
instruments, and to do and to accomplish all other acts or things necessary or
<PAGE>
24
appropriate to effect the purposes of such Service Transfer and the Trustee
shall incur no liability in connection with effecting such Service Transfer. The
Servicer agrees to cooperate with the Company and the Trustee and such Successor
Servicer in effecting the termination of the responsibilities and rights of the
Servicer to conduct its duties hereunder, including, without limitation, the
transfer to such Successor Servicer of all authority of the Servicer to service
the Receivables provided for under the Pooling and Servicing Agreements
(including, without limitation, all authority over all Collections that shall on
the date of transfer be held by the Servicer for deposit, or that have been
deposited by the Servicer, in the Collection Account, or that shall thereafter
be received with respect to the Receivables), and in assisting the Successor
Servicer. Upon a Service Transfer, the terminated Servicer shall (x) promptly
assemble all of its documents, instruments and other records (including credit
files, licenses (to the extent transferable), rights, copies of all relevant
computer programs and any necessary licenses (to the extent transferable) for
the use thereof, related material, computer tapes, disks, cassettes and data)
that (i) evidence or record Receivables sold and assigned to the Trust and (ii)
are otherwise necessary to enable a Successor Servicer to coordinate servicing
of all such Receivables and to prepare and deliver Daily Reports and Monthly
Settlement Statements, with or without the participation of the terminated
Servicer, (y) promptly deliver or license (to the extent transferable) the use
of all of the foregoing documents, instruments and other records to such
Successor Servicer at a place designated by such Successor Servicer and (z)
provide the Successor Servicer with access to its facilities, equipment,
personnel, systems and leasehold agreements to assist the Successor Servicer in
performing its obligations hereunder. In recognition of the terminated
Servicer's need to have access to any such documents, instruments and other
records that may be transferred to a Successor Servicer hereunder, whether as a
result of its continuing responsibility as a servicer of accounts receivable
that are not sold and assigned to the Trust or otherwise, such Successor
Servicer shall provide to the terminated Servicer reasonable access to such
documents, instruments and other records transferred by the terminated Servicer
to it in connection with any activity arising in the ordinary course of the
terminated Servicer's business; provided that the terminated Servicer shall not
disrupt or otherwise interfere with the Successor Servicer's use of and access
to such documents, instruments and other records. To the extent that compliance
with this Section 6.01 shall require the terminated Servicer to disclose to the
Successor Servicer information of any kind that the terminated Servicer
reasonably deems to be confidential, the Successor Servicer shall be required to
enter into such customary licensing and confidentiality agreements as the
terminated Servicer shall reasonably deem necessary to protect its interests.
All costs and expenses incurred by the
<PAGE>
25
terminated Servicer, the Successor Servicer and the Trustee in connection with
any Service Transfer shall be for the account of the terminated Servicer, as the
case may be, and to the extent any costs or expenses incurred by the Trustee are
not so paid, the Trustee shall be entitled to be paid such items from amounts
that would otherwise be distributable to the Company under Article III of the
Pooling Agreement.
SECTION 6.02. Trustee To Act; Appointment of Successor. (a)
On and after (i) the receipt by the Servicer of a Termination Notice pursuant
to Section 6.01 or (ii) the date on which the Servicer notifies the Trustee,
the Company and each Rating Agency in writing of its resignation pursuant to
Section 5.03 (the "Resignation Notice"), the Servicer shall continue to perform
all servicing functions under the Pooling and Servicing Agreements until the
earlier of (i) the date on which a Successor Servicer accepts its appointment
and (ii) 60 days after the delivery of such Termination Notice or Resignation
Notice, as the case may be. The Trustee and the Company, or the Company (with
the consent of the Trustee) shall, as promptly as reasonably possible after the
receipt of a Termination Notice or Resignation Notice, as the case may be, in
accordance with the preceding sentence, appoint an Eligible Successor Servicer
as Successor Servicer (the "Successor Servicer"). The Successor Servicer shall
accept its appointment by a written assumption in a form acceptable to the
Trustee and the Company.
(b) In the event that a Successor Servicer has not been
appointed or has not accepted its appointment at the time when the Servicer
ceases to act as Servicer, the Trustee without further action shall be appointed
Successor Servicer; provided, that the Trustee shall only be responsible for the
duties and liabilities of such Successor Servicer that are consistent with an
orderly collection and liquidation of the Receivables and other Trust Assets in
the manner contemplated for such liquidations in Section 7.02 of the Pooling
Agreement. The Trustee shall not be liable for any action taken or not taken in
effecting such liquidations of Receivables so long as such liquidations are
conducted in a commercially reasonable manner and on commercially reasonable
terms. The Trustee may delegate any of its servicing obligations to an affiliate
or agent in accordance with subsection 2.02(d). Notwithstanding the above, the
Trustee shall, if the Trustee is legally unable so to act, petition a court of
competent jurisdiction to appoint any Person qualifying as an Eligible Successor
Servicer as the Successor Servicer hereunder. The Servicer shall immediately
give notice to each Rating Agency of the appointment of a Successor Servicer.
(c) Upon its appointment, the Successor Servicer shall be
the successor in all respects to the Servicer with respect to servicing
functions under the Pooling and Servicing Agreements (with such changes as are
agreed to between such Successor
<PAGE>
26
Servicer and either the Company (with the consent of the Rating Agencies) or the
Company and the Trustee) and shall be subject to all the responsibilities,
duties and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and all references in any Pooling and Servicing Agreement to
the Servicer shall be deemed to refer to such Successor Servicer. The Successor
Servicer shall not be liable for, and the replaced Servicer shall indemnify the
Successor Servicer against, costs incurred by the Successor Servicer as a result
of any acts or omissions of such replaced Servicer or any events or occurrences
occurring prior to the Successor Servicer's acceptance of its appointment. Any
Successor Servicer shall manage the servicing and administration of the
Receivables in accordance with the Policies of the replaced Servicer and the
terms of the Pooling and Servicing Agreements.
SECTION 6.03. Waiver of Past Defaults. Holders of Investor
Certificates evidencing more than 50% of the Aggregate Invested Amount may
waive any continuing default by the Servicer or the Company in the performance
of its respective obligations hereunder and its consequences, except a default
in the failure to make any required deposits or payments in respect of any
Series of Investor Certificates, which shall require a waiver by the holders of
all of the affected Investor Certificates. Upon any such waiver of a past
default, such default shall cease to exist, and any default arising therefrom
shall be deemed to have been remedied for every purpose of the Pooling and
Servicing Agreements. No such waiver shall extend to any subsequent or other
default or impair any right consequent thereon except to the extent expressly
so waived. Either the Company or the Servicer shall provide notice to each
Rating Agency of any such waiver.
ARTICLE VII
Miscellaneous Provisions
------------------------
SECTION 7.01. Amendment. This Agreement may only be amended,
supplemented or otherwise modified from time to time if such amendment,
supplement or modification is effected in accordance with the provisions of
Section 10.01 of the Pooling Agreement.
SECTION 7.02. Termination. (a) The respective obligations
and responsibilities of the parties hereto shall terminate on the Trust
Termination Date (unless such obligations or responsibilities are expressly
stated to survive the termination of this Agreement).
(b) All authority and power granted to the Servicer under
any Pooling and Servicing Agreement shall automatically
<PAGE>
27
cease and terminate on the Trust Termination Date, and shall pass to and be
vested in the Company and, without limitation, the Company is hereby authorized
and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, all documents and other instruments, and to do
and accomplish all other acts or things necessary or appropriate to effect the
purposes of such transfer of rights from and after the Trust Termination Date.
The Servicer shall cooperate with the Company in effecting the termination of
its responsibilities and rights to conduct servicing of the Receivables. The
Servicer shall transfer all of its records relating to the Receivables to the
Company in such form as the Company may reasonably request and shall transfer
all other records, correspondence and documents to the Company in the manner and
at such times as the Company shall reasonably request. To the extent that
compliance with this subsection 7.02(b) shall require the Servicer to disclose
to the Company information of any kind that the Servicer deems to be
confidential, the Company shall be required to enter into such customary
licensing and confidentiality agreements as the Servicer shall reasonably deem
necessary to protect its interests.
SECTION 7.03. Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7.04. Notices. All notices, requests and demands to or
upon the respective parties hereto to be effective shall be in writing
(including by telecopy), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered by hand, or three days
after being deposited in the mail, postage prepaid, or, in the case of telecopy
notice, when received, addressed as set forth in Section 10.05 of the Pooling
Agreement or Section 9.09 of the Receivables Sale Agreement, or to such other
address as may be hereafter notified by the respective parties hereto.
SECTION 7.05. Counterparts. This Agreement may be executed in
two or more counterparts (and by different parties on separate counterparts),
each of which shall be an original, but all of which together shall constitute
one and the same instrument. Delivery of an executed counterpart of a signature
page to this Agreement by facsimile transmission shall be effective as delivery
of a manually executed counterpart of this Agreement.
SECTION 7.06. Third-Party Beneficiaries. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and the Holders
and their respective successors and permitted assigns. Except as provided in
this Article VII, no other person shall have any right or obligation hereunder.
<PAGE>
SECTION 7.07. Merger and Integration. Except as specifically
stated otherwise herein, this Agreement and the other Transaction Documents set
forth the entire understanding of the parties relating to the subject matter
hereof, and all prior understandings, written or oral, are superseded by this
Agreement and the other Transaction Documents. This Agreement may not be
modified, amended, waived, or supplemented except as provided herein.
SECTION 7.08. Headings. The headings herein are for purposes
of reference only and shall not otherwise affect the meaning or interpretation
of any provision hereof.
SECTION 7.09. No Set-Off. Except as expressly provided in
this Agreement, the Servicer agrees that it shall have no right of set-off or
banker's lien against, and no right to otherwise deduct from, any funds held in
the Collection Account for any amount owed to it by the Company, the Trust, the
Trustee or any Certificateholder.
SECTION 7.10. No Bankruptcy Petition. The Servicer hereby
covenants and agrees that, prior to the date which is one year and one day after
the Trust Termination Date, it shall not institute against, or join any other
Person in instituting against, the Company any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any Federal or state bankruptcy or similar law.
IN WITNESS WHEREOF, the Company, the Servicer and the Trustee
have caused this Agreement to be duly executed by their respective officers as
of the day and year first above written.
AAM RECEIVABLES CORP.,
by
---------------------------
Name:
Title:
AMERICAN AXLE & MANUFACTURING, INC.,
as Servicer,
by
--------------------------
Name:
Title:
<PAGE>
THE CHASE MANHATTAN BANK, not
in its individual capacity but
solely as Trustee,
by
--------------------------
Name:
Title:
<PAGE>
EXHIBIT A TO
SERVICING AGREEMENT
-------------------
FORM OF ANNUAL SERVICER'S CERTIFICATE
(As required to be delivered within 90 days after the end
of each calendar year of the Servicer
pursuant to Section 4.03 of the
Servicing Agreement referred to below)
[NAME OF SERVICER]
-----------------------------------------
AAM MASTER TRUST
-----------------------------------------
The undersigned, a duly authorized representative of [NAME OF
SERVICER] (the "Servicer"), as Servicer pursuant to (a) the Pooling Agreement,
dated as of October 29, 1997, as amended and restated as of March 25, 1999 (as
amended, supplemented or otherwise modified from time to time, the "Pooling
Agreement"), by and among AAM Receivables Corp. (the "Company"), American Axle &
Manufacturing Inc., as Servicer and The Chase Manhattan Bank, as Trustee (the
"Trustee") and (b) the Servicing Agreement, dated as of October 29, 1997, as
amended and restated as of March 25, 1999 (as amended, supplemented or otherwise
modified from time to time, the "Servicing Agreement"; the Pooling Agreement and
the Servicing Agreement, collectively, the "Pooling and Servicing Agreements"),
by and among the Company, the Servicer and the Trustee, do hereby certify that:
1. [NAME OF SERVICER] is, as of the date hereof, the Servicer
under the Pooling and Servicing Agreements.
2. The undersigned is duly authorized pursuant to the Pooling
and Servicing Agreements to execute and deliver this Certificate to the Trustee.
3. A review of the activities of the Company and the Servicer
during the calendar year ended , and of its performance under each Transaction
Document was conducted under my supervision.
4. Based on such review, to my knowledge, each of the Company
and the Servicer has performed in all material respects all its obligations
under each Transaction Document and no material default in the performance of
such
<PAGE>
2
obligations has occurred or is continuing except as set forth in paragraph
5 below.
5. The following is a description of all material defaults in
the performance of the Servicer or the Company under the provisions of the
Transaction Documents known to us to have been made during the calendar year
ended , , which sets forth in detail (i) the nature of each such
default, (ii) the action taken by the Servicer and/or the Company, if any, to
remedy each such default and (iii) the current status of each default:
[If applicable, insert "None."]
6. The following is a description of each material inaccuracy
known to us to exist in any Daily Report and/or Monthly Settlement Statement
during the calendar year ended , :
Capitalized terms used in this certificate have the meanings
ascribed to them in the Pooling and Servicing Agreements.
IN WITNESS WHEREOF, the undersigned has duly executed this
Certificate this___ day of __________, 199_ .
By:
----------------------
Name:
Title:
<PAGE>
EXHIBIT B TO
SERVICING AGREEMENT
-------------------
FORM OF AGREED-UPON PROCEDURES
To the Board of Directors of AAM Receivables Corp., the
Trustee, the Agent, the Rating Agencies and the Certificateholders:
At your request, we have performed the procedures enumerated
below with respect to the receivables of AAM Receivables Corp., (the "Company")
that are serviced by American Axle & Manufacturing, Inc. (the "Servicer") for
the period from , 199 to , 20__ as set forth in the accompanying Monthly
Settlement Statements (the "Statements") and in the five accompanying Daily
Reports (which were selected on a random basis from the above-referenced period)
(the "Daily Reports"). Capitalized terms used herein and not defined herein
shall have the meanings assigned to such terms in the Pooling Agreement, dated
as of October 29, 1997, as amended and restated as of March 25, 1999, among the
Company, the Servicer and The Chase Manhattan Bank, as Trustee, as amended,
supplemented or otherwise modified to the date hereof. These procedures, which
were specified by you, were performed solely to assist you, and this report is
solely for your information and should not be used by those who did not
participate in determining the procedures. The procedures and findings are as
follows:
A. We obtained all Statements for the period from , 199 through
, 20__ (the "Fiscal Period") and performed the following:
-- We recalculated the mathematical accuracy of
the statements.
-- With respect to Receivables, we agreed the
amounts appearing as principal amounts,
amounts outstanding with respect to each
Receivable and the amount of interest paid
by Obligors with respect to each Receivable
as a result of late payment to either
schedules prepared by the Servicer or to
reports generated by the Servicer's systems.
B. For a selection of three Statements (one of which was the Statement for
the last Settlement Period of the Fiscal Period), we performed the
following procedures:
<PAGE>
2
With respect to the amount appearing as Collections on such
Statements:
-- Obtained a daily listing of Collections for
that Settlement Period and agreed the total
on the Statements to a cumulative total of
the daily listing of Collections for that
period.
-- Agreed a random sample of 10% (but at least
10) of the daily collections appearing on
the daily listing of cash Collections to the
bank statements of AAM Master Trust (the
"Trust").
-- Agreed the total amount of cash Collections
allocated to the Series Collection
Subaccount of each Outstanding Series during
that Settlement Period to the Trust's bank
statements.
-- Agreed the total amount of cash Collections
allocated to the Series Principal Collection
Sub-subaccount and Series Non-Principal
Collection Sub-subaccount of each
Outstanding Series during that Settlement
Period to the Trust's bank statement.
-- Agreed the aggregate amount of Recoveries
received during that Settlement Period to
the Servicer's system-generated reports.
-- For each Obligor the amount of whose
Receivables is greater than 2.5% of the
aggregate amount of all Receivables, agreed
the aggregate amount of Receivables with
respect to such Obligor to the Seller's
system-generated reports.
With respect to the amount appearing as Defaulted Receivables:
-- Agreed the total Defaulted Receivables to
the Servicer's system-generated reports.
-- From a random sample of 10% (but at least
10) of Defaulted Receivables during the
month, agreed the default amount to the
Obligor's file in the Servicer's system.
With respect to the amount appearing as Adjustment Amounts:
<PAGE>
3
-- Agreed the Adjustment Amount to a schedule
prepared by the Servicer.
With respect to the amount appearing as Eligible Receivables:
-- Recalculated the mathematical accuracy of
the Company's schedule of Eligible
Receivables.
-- Agreed the amounts appearing in this
schedule to a Statement generated by the
Servicer's system.
With respect to the amounts appearing as Invested Percentages
applicable during that Settlement Period:
-- Agreed amounts to schedules provided by the
Servicer.
C. With respect to each of the Daily Reports, agreed amounts to
the system-generated reports provided by each Originator for
such day.
D. Agreed the calculation used in computing the aggregate
Servicing Fee to the Agreement and agreed amounts appearing in
the schedule of Servicing Fee prepared by the Servicer to the
Statements.
Because the above procedures do not constitute an audit made in
accordance with generally accepted auditing standards, we do not express an
opinion on any of the elements referred to above. Had we performed additional
procedures or had we made an audit of the financial statements of the Company in
accordance with generally accepted auditing standards, (other) matters might
have come to our attention that would have been reported to you. This report
relates only to the elements specified above and does not extend to any
financial statements of the Company taken as a whole.
This report is solely for your information and is not to be used,
referred to or distributed for any other purpose.
<PAGE>
Exhibit 12--Statement of Computation of Ratio of Earnings to Fixed Charges
American Axle & Manufacturing Holdings, Inc.
<TABLE>
<CAPTION>
(unaudited)
(in thousands except for ratios)
10 MOS
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense, including amortization of debt issuance costs 44,784 8,956 340 1,566 1,371
Estimated interest portion of rents 4,667 3,233 1,467 60 0
Capitalized interest 3,788 217 0 0 0
Preferred stock dividends 0 12,000 17,915 13,642 0
Gross-up of preferred stock dividend as if it were pre-tax 0 6,750 10,077 7,674 0
-------------------------------------------------
Total fixed charges as defined 53,239 31,156 29,799 22,942 1,371
Earnings:
Income from continuing operations before income tax expense 5,602 94,197 98,324 117,971 77,821
Total fixed charges as defined 53,239 31,156 29,799 22,942 1,371
Fixed charges not deducted in the determination of income from
continuing operations before income tax expense (3,788) (18,967) (27,992) (21,316) 0
-------------------------------------------------
Total earnings as defined 55,053 106,386 100,131 119,597 79,192
Ratio of earnings to fixed charges 1.03 3.41 3.36 5.21 57.76
=================================================
</TABLE>
<PAGE>
EXHIBIT 21.01
<TABLE>
<CAPTION>
SUBSIDIARIES OF THE ISSUER AND THE GUARANTOR
- ----------------------------------------------------------------------------------- -------------------------- ------------------
OWNED BY
SUBSIDIARY ORGANIZED UNDER LAWS OF IMMEDIATE PARENT (1)
- ----------------------------------------------------------------------------------- -------------------------- ------------------
<S> <C> <C>
American Axle & Manufacturing Holdings, Inc. Delaware
- ----------------------------------------------------------------------------------- -------------------------- ------------------
American Axle & Manufacturing, Inc. Delaware 100
- ----------------------------------------------------------------------------------- -------------------------- ------------------
AAM Receivables Corp. Delaware 100
- ----------------------------------------------------------------------------------- -------------------------- ------------------
American Axle International Sales, Ltd. U.S. Virgin Islands 100
- ----------------------------------------------------------------------------------- -------------------------- ------------------
Colfor Manufacturing, Inc. Delaware 100
- ----------------------------------------------------------------------------------- -------------------------- ------------------
Valley Forge Inc. Ohio 100
- ----------------------------------------------------------------------------------- -------------------------- ------------------
MSP Industries Corporation Michigan 100
- ----------------------------------------------------------------------------------- -------------------------- ------------------
MSP Team, LLC Michigan 100
- ----------------------------------------------------------------------------------- -------------------------- ------------------
MSP International Sales Corporation U.S. Virgin Islands 100
- ----------------------------------------------------------------------------------- -------------------------- ------------------
MSP Holdings BV Netherlands 100
- ----------------------------------------------------------------------------------- -------------------------- ------------------
MSP Investments Ltd United Kingdom 100
- ----------------------------------------------------------------------------------- -------------------------- ------------------
Precision Forming Limited United Kingdom 50(4)
- ----------------------------------------------------------------------------------- -------------------------- ------------------
American Axle & Manufacturing de Mexico Holdings Mexico 99.99 (3)
S. de R.L. de C.V.
- ----------------------------------------------------------------------------------- -------------------------- ------------------
Guanajuato Gear & Axle de Mexico S. de R.L. de C.V. Mexico 99.99 (3)
- ----------------------------------------------------------------------------------- -------------------------- ------------------
American Axle & Manufacturing de Mexico S.A. de C.V. Mexico 99.99 (2)
- ----------------------------------------------------------------------------------- -------------------------- ------------------
AAM International Holdings, Inc. Delaware 100
- ----------------------------------------------------------------------------------- -------------------------- ------------------
Albion Automotive (Holdings) Limited Scotland 100
- ----------------------------------------------------------------------------------- -------------------------- ------------------
Albion Automotive Limited Scotland 100
- ----------------------------------------------------------------------------------- -------------------------- ------------------
Farrington Components Limited England 100
- ----------------------------------------------------------------------------------- -------------------------- ------------------
- ----------------------------------------------------------------------------------- -------------------------- ------------------
</TABLE>
(1) All subsidiaries set forth herein are reported in our financial statements
through consolidations.
(2) Remaining shares owned by AAM International Holdings, Inc.
(3) Remaining certificates of interest owned by AAM International Holdings.
(4) Remaining 50% owned by John Stokes & Sons Ltd.
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated May 15, 1998, (except as to the Note 16 thereto, as to
which the date is January 22, 1999) in the Registration Statement on Form S-4
and related Prospectus of American Axle & Manufacturing, Inc. for the
registration of $300,000,000 9 3/4% senior subordinated notes.
/s/ Ernst & Young LLP
Detroit, Michigan
April 19, 1999
<PAGE>
Consent of Independent Auditors
We consent to the use in this Registration Statement of American Axle &
Manufacturing, Inc. on Form S-4 of our report dated February 5, 1999,
appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
Detroit, Michigan
April 19, 1999
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305 (b) (2)
IBJ WHITEHALL BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(State of Incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
Stephen Giurlando, Vice President
IBJ Whitehall Bank & Trust Company
One State Street
New York, New York 10004
(212) 858-2000
(Name, Address and Telephone Number of Agent for Service)
American Axle & Manufacturing Holdings, Inc.
American Axle & Manufacturing, Inc.
(Exact name of obligor as specified in its charter)
Delaware 38-3161171
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1840 Holbrook Avenue
Detroit, Michigan 48212
(Address of principal executive office) (Zip code)
9 3/4% Senior Subordinated Notes due 2009
(Title of Indenture Securities)
<PAGE>
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
New York State Banking Department,
Two Rector Street,
New York, New York
Federal Deposit Insurance Corporation,
Washington, D.C.
Federal Reserve Bank of New
York Second District,
33 Liberty Street, New York, New York
(b) Whether it is authorized to exercise corporate trust
powers.
Yes
Item 2. Affiliations with the Obligors.
If the obligors are an affiliate of the trustee,
describe each such affiliation.
The obligors are not an affiliate of the trustee.
Item 13. Defaults by the Obligors.
(a) State whether there is or has been a default with
respect to the securities under this indenture.
Explain the nature of any such default.
None
<PAGE>
(b) If the trustee is a trustee under another indenture under
which any other securities, or certificates of interest or
participation in any other securities, of the obligors are
outstanding, or is trustee for more than one outstanding
series of securities under the indenture, state whether
there has been a default under any such indenture or series,
identify the indenture or series affected, and explain the
nature of any such default.
None
List of exhibits.
List below all exhibits filed as part of this
statement of eligibility.
*1. A copy of the Charter of IBJ Whitehall Bank & Trust Company as
amended to date. (See Exhibit 1A to Form T-1, Securities and
Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the trustee to
Commence Business (Included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise
corporate trust powers, as amended to date (See Exhibit 4 to
Form T-1, Securities and Exchange Commission File
No. 22-19146).
*4. A copy of the existing By-Laws of the trustee, as amended
to date (See Exhibit 4 to Form T-1, Securities and Exchange
Commission File No. 22-19146).
5. Not Applicable
6. The consent of United States institutional trustee required
by Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a
reference to the copy of the Exhibit heretofore filed with the
Securities and Exchange Commission, to which there have been no
amendments or changes.
<PAGE>
NOTE
In answering any item in this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligors and its
directors or officers, the trustee has relied upon information
furnished to it by the obligors.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Item 2, the
answer to said Item is based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an
amendment to this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items
1, 2 and 16 of this form since to the best knowledge of the trustee as
indicated in Item 13, the obligors are not in default under any
indenture under which the applicant is trustee.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture
Act of 1939, the trustee, IBJ Whitehall Bank & Trust Company, a
corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City
of New York, and State of New York, on the 26th day of March, 1999.
IBJ WHITEHALL BANK & TRUST COMPANY
By: /s/ Stephen J. Giurlando
----------------------------------------
Stephen J. Giurlando
Vice President
<PAGE>
Exhibit 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust
Indenture Act of 1939, as amended, in connection with the issue by American Axle
& Manufacturing Holdings, Inc., and American Axle Manufacturing, Inc., of it's
9 3/4% Senior Subordinated Notes due 2009, we hereby consent that reports of
examinations by Federal, State, Territorial, or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
IBJ WHITEHALL BANK & TRUST COMPANY
By: /s/Stephen J. Giurlando
---------------------------------------
Stephen J. Giurlando
Vice President
Dated: March 26, 1999
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
of New York, New York
And Foreign and Domestic Subsidiaries
Report as of December 31, 1998
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
--------------
<S> <C> <C>
ASSETS
1. Cash and balance due from depository institutions:
a. Non-interest-bearing balances and currency and coin $ 26,852
b. Interest-bearing balances $ 17,489
2. Securities:
a. Held-to-maturity securities $ -0-
b. Available-for-sale securities $ 207,069
3. Federal funds sold and securities purchased under agreements
to resell in domestic offices of the bank and of its Edge and
Agreement subsidiaries and in IBFs
Federal Funds sold and Securities purchased under agreements to resell $ 80,389
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income $ 2,033,599
b. LESS: Allowance for loan and lease losses $ 62,853
c. LESS: Allocated transfer risk reserve $ -0-
d. Loans and leases, net of unearned income, allowance, and reserve $ 1,970,746
5. Trading assets held in trading accounts $ 848
6. Premises and fixed assets (including capitalized leases) $ 1,583
7. Other real estate owned $ -0-
8. Investments in unconsolidated subsidiaries and associated companies $ -0-
9. Customers' liability to this bank on acceptances outstanding $ 340
10. Intangible assets $ 11,840
11. Other assets $ 66,691
12. TOTAL ASSETS $ 2,383,847
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices $ 804,562
(1) Noninterest-bearing $ 168,822
(2) Interest-bearing $ 635,740
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs $ 885,076
(1) Noninterest-bearing $ 16,554
(2) Interest-bearing $ 868,522
14. Federal funds purchased and securities sold under agreements to repurchase
in domestic offices of the bank and of its Edge and Agreement subsidiaries,
and in IBFs:
Federal Funds purchased and Securities sold under agreements to repurchase $ 225,000
15. a. Demand notes issued to the U.S. Treasury $ 674
b. Trading Liabilities $ 560
16. Other borrowed money:
a. With a remaining maturity of one year or less $ 38,002
b. With a remaining maturity of more than one year $ 1,375
c. With a remaining maturity of more than three years $ 1,550
17. Not applicable.
18. Bank's liability on acceptances executed and outstanding $ 340
19. Subordinated notes and debentures $ 100,000
20. Other liabilities $ 74,502
21. TOTAL LIABILITIES $ 2,131,641
22. Limited-life preferred stock and related surplus $ N/A
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus $ -0-
24. Common stock $ 28,958
25. Surplus (exclude all surplus related to preferred stock) $ 210,319
26. a. Undivided profits and capital reserves $ 11,655
b. Net unrealized gains (losses) on available-for-sale securities $ 1,274
27. Cumulative foreign currency translation adjustments $ -0-
28. TOTAL EQUITY CAPITAL $ 252,206
29. TOTAL LIABILITIES AND EQUITY CAPITAL $ 2,383,847
</TABLE>
<PAGE>
LETTER OF TRANSMITTAL
for
9 3/4% Senior Subordinated Notes due 2009
of
AMERICAN AXLE & MANUFACTURING, INC.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00
P.M. , NEW YORK CITY TIME, ON _________________ (THE "EXPIRATION
DATE") UNLESS EXTENDED BY WILLIS CORROON CORPORATION.
The Exchange Agent is:
IBJ Whitehall Bank & Trust Company
By Registered or Certified Mail: By Hand Delivery:
IBJ Whitehall Bank & Trust Company IBJ Whitehall Bank & Trust Company
P.O. Box 84 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Securities Processing Window,
Attn: Reorganization Operations Department Subcellar One, (SC-1)
By Overnight Delivery: By Facsimile:
IBJ Whitehall Bank & Trust Company IBJ Whitehall Bank & Trust Company
One State Street Facsimile No. (212) 858-2611
New York, New York 10004 Attn: Reorganization Operations
Attn: Securities Processing Window, Department
Subcellar One, (SC-1)
Delivery of this Letter of Transmittal to an address other
than as set forth above or transmission via a facsimile transmission to a number
other than as set forth above will not constitute a valid delivery.
The undersigned acknowledges receipt of the Prospectus
dated __ __, 1999 (the "Prospectus") of American Axle & Manufacturing, Inc. (the
"Company"), and this Letter of Transmittal (the "Letter of Transmittal"), which
together describe the Company's offer (the "Exchange Offer") to exchange its 9
3/4% Senior Subordinated Notes due 2009, which have been registered under the
Securities Act of 1933, as amended (the "Securities Act") (the "Exchange Notes")
for each of its outstanding 9 3/4% Senior Subordinated Notes due 2009 (the
"Outstanding Notes" and, together with the Exchange Notes, the "Notes") from the
holders thereof.
The terms of the Exchange Notes are identical in all material
respects (including principal amount, interest rate and maturity) to the terms
of the Outstanding Notes for which they may be exchanged pursuant to the
Exchange Offer, except that the Exchange Notes are freely transferable by
holders thereof (except as provided herein or in the Prospectus).
<PAGE>
2
Capitalized terms used but not defined herein shall have the
same meaning given them in the Prospectus.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
The undersigned has checked the appropriate boxes below and
signed this Letter of Transmittal to indicate the action the undersigned desires
to take with respect to the Exchange Offer.
<PAGE>
3
PLEASE READ THE ENTIRE
LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
List below the Outstanding Notes to which this Letter of
Transmittal relates. If the space provided below is inadequate, the certificate
numbers and aggregate principal amounts should be listed on a separate signed
schedule affixed hereto.
DESCRIPTION OF OUTSTANDING NOTES TENDERED HEREWITH
<TABLE>
<CAPTION>
Aggregate
Principal Amount
Name(s) and Address(es) of Registered Holder(s) Certificate Represented by Principal
(Please fill in) Number(s)* Outstanding Notes* Amount Tendered**
<S> <C> <C> <C>
- ---------------------------------------------------- -------------------- -------------------- ---------------------
- ---------------------------------------------------- -------------------- -------------------- ---------------------
- ---------------------------------------------------- -------------------- -------------------- ---------------------
- ---------------------------------------------------- -------------------- -------------------- ---------------------
- ---------------------------------------------------- -------------------- -------------------- ---------------------
- ---------------------------------------------------- -------------------- -------------------- ---------------------
- ---------------------------------------------------- -------------------- -------------------- ---------------------
Total
- ---------------------------------------------------- -------------------- -------------------- ---------------------
</TABLE>
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such Outstanding Notes. See
instruction 2.
Holders of Outstanding Notes whose Outstanding Notes are not
immediately available or who cannot deliver all other required documents to the
Exchange Agent on or prior to the Expiration Date or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their
Outstanding Notes according to the guaranteed delivery procedures set forth in
the Prospectus.
Unless the context otherwise requires, the term "holder" for
purposes of this Letter of Transmittal means any person in whose name
Outstanding Notes are registered or any other person who has obtained a properly
completed bond power from the registered holder or any person whose Outstanding
Notes are held of record by The Depository Trust Company ("DTC").
/ / CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)
------------------------------------------------
Name of Eligible Institution that Guaranteed Delivery
-----------------------
Date of Execution of Notice of Guaranteed Delivery
--------------------------
<PAGE>
4
If Delivered by Book-Entry Transfer:
Name of Tendering Institution
-----------------------------------------------
Account Number
--------------------------------------------------------------
Transaction Code Number
-----------------------------------------------------
/ / CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO PERSON OTHER THAN
PERSON SIGNING THIS LETTER OF TRANSMITTAL:
Name
-----------------------------------------------------------------------
Address
---------------------------------------------------------------------
CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO ADDRESS DIFFERENT FROM
THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL:
Name
-----------------------------------------------------------------------
Address
---------------------------------------------------------------------
/ / CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED OUTSTANDING NOTES FOR
ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES
AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES
OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name
-----------------------------------------------------------------------
Address
---------------------------------------------------------------------
If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of Exchange Notes. If the undersigned is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Outstanding Notes
that were acquired as a result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus in connection with
any resale of such Exchange Notes; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. A broker-dealer may
not participate in the Exchange Offer with respect to Outstanding Notes acquired
other than as a result of market-making activities or other trading activities.
Any holder
<PAGE>
5
who is an "affiliate" of the Company or who has an arrangement or understanding
with respect to the distribution of the Exchange Notes to be acquired pursuant
to the Exchange Offer, or any broker-dealer who purchased Outstanding Notes from
the Company to resell pursuant to Rule 144A under the Securities Act or any
other available exemption under the Securities Act must comply with the
registration and prospectus delivery requirements under the Securities Act.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange
Offer, the undersigned hereby tenders to the Company the principal amount of the
Outstanding Notes indicated above. Subject to, and effective upon, the
acceptance for exchange of all or any portion of the Outstanding 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
exchanges, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such Outstanding Notes as are being tendered
herewith. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as its true and lawful agent and attorney-in-fact of the
undersigned (with full knowledge that the Exchange Agent also acts as the agent
of the Company, in connection with the Exchange Offer) to cause the Outstanding
Notes to be assigned, transferred and exchanged.
The undersigned represents and warrants that it has full power
and authority to tender, exchange, assign and transfer the Outstanding Notes and
to acquire Exchange Notes issuable upon the exchange of such tendered
Outstanding Notes, and that, when the same are accepted for exchange, the
Company will acquire good and unencumbered title to the tendered Outstanding
Notes, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim. The undersigned also warrants that it will,
upon request, execute and deliver any additional documents deemed by the
Exchange Agent or the Company to be necessary or desirable to complete the
exchange, assignment and transfer of the tendered Outstanding Notes or transfer
ownership of such Outstanding Notes on the account books maintained by the
book-entry transfer facility. The undersigned further agrees that acceptance of
any and all validly tendered Outstanding Notes by the Company and the issuance
of Exchange Notes in exchange therefor shall constitute performance in full by
the Company of its obligations under the Exchange and Registration Rights
Agreement dated March 5, 1999, among the Company, American Axle & Manufacturing
Holdings, Inc., Chase Securities Inc., Donaldson, Lufkin & Jenrette Securities
Corporation and Morgan Stanley & Co. Incorporated (the "Registration Rights
Agreement"), and that the Company shall have no further obligations or
liabilities thereunder except as provided in the first paragraph of Section 2 of
such agreement. The undersigned will comply with its obligations under the
Registration Rights Agreement. The undersigned has read and agrees to all terms
of the Exchange Offer.
The Exchange Offer is subject to certain conditions as set
forth in the Prospectus under the caption "The Exchange Offer--Certain
Conditions to the Exchange Offer." The undersigned recognizes that as a result
of these conditions (which may be waived, in whole or in part, by the Company),
as more particularly set forth in the Prospectus, the Company may not be
required to exchange any of the Outstanding Notes tendered hereby and, in such
event, the Outstanding Notes not exchanged will be returned to the undersigned
at the address shown above, promptly following the expiration or termination of
the Exchange Offer. In addition, the Company may amend the Exchange Offer at any
time prior to the Expiration Date if any of the conditions set forth under "The
Exchange Offer--Certain Conditions to the Exchange Offer" occur.
<PAGE>
7
The undersigned understands that tenders of Outstanding Notes
pursuant to any one of the procedures described in the Prospectus and in the
instructions attached hereto will, upon the Company's acceptance for exchange of
such tendered Outstanding Notes, constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of the
Exchange Offer. The undersigned recognizes that, under circumstances set forth
in the Prospectus, the Company may not be required to accept for exchange any of
the Outstanding Notes.
By tendering shares of Outstanding Notes and executing this
Letter of Transmittal, the undersigned represents that Exchange Notes acquired
in the exchange will be obtained in the ordinary course of business of the
undersigned, that the undersigned has no arrangement or understanding with any
person to participate in a distribution (within the meaning of the Securities
Act) of such Exchange Notes, that the undersigned is not an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act and that if the
undersigned or the person receiving such Exchange Notes, whether or not such
person is the undersigned, is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned or the person receiving such Exchange Notes,
whether or not such person is the undersigned, is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Outstanding Notes
that were acquired as a result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus in connection with
any resale of such Exchange Notes; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
Any holder of Outstanding Notes using the Exchange Offer to
participate in a distribution of the Exchange Notes (i) cannot rely on the
position of the staff of the Securities and Exchange Commission enunciated in
its interpretive letter with respect to Exxon Capital Holdings Corporation
(available April 13, 1989) or similar interpretive letters and (ii) must comply
with the registration and prospectus requirements of the Securities Act in
connection with a secondary resale transaction.
All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Tendered Outstanding Notes may be
withdrawn at any time prior to the Expiration Date in accordance with the terms
of this Letter of Transmittal. Except as stated in the Prospectus, this tender
is irrevocable.
Certificates for all Exchange Notes delivered in exchange for
tendered Outstanding Notes and any Outstanding Notes delivered herewith but not
exchanged, and registered in the name of the undersigned, shall be delivered to
the undersigned at the address shown below the signature of the undersigned.
The undersigned, by completing the box entitled "Description
of Outstanding Notes Tendered Herewith" above and signing this letter, will be
deemed to have tendered the Outstanding Notes as set forth in such box.
<PAGE>
TENDERING HOLDER(S) SIGN HERE
(Complete accompanying substitute Form W-9)
Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) for Outstanding Notes hereby tendered or in whose name
Outstanding Notes are registered on the books of DTC or one of its participants,
or by any person(s) authorized to become the registered holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, please set forth
the full title of such person. See Instruction 3.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Signature(s) of Holder(s))
Date
----------------------------
Name(s)
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print)
Capacity (full title)
-----------------------------------------------------------
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Including Zip Code)
Daytime Area Code and Telephone No.
---------------------------------------------
Taxpayer Identification No.
-----------------------------------------------------
<PAGE>
9
GUARANTEE OF SIGNATURE(S)
(If Required -- See Instruction 3)
Authorized Signature
------------------------------------------------------------
Dated
------------------------------
Name
----------------------------------------------------------------------------
Title
---------------------------------------------------------------------------
Name of Firm
--------------------------------------------------------------------
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone No.
-----------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 3 and 4)
To be completed ONLY if Exchange Notes or Outstanding Notes not tendered are to
be issued in the name of someone other than the registered holder of the
Outstanding Notes whose name(s) appear(s) above.
Issue
/ / Outstanding Notes not tendered to:
/ / Exchange Notes to:
Name(s)
-------------------------------------------------------------------------
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Daytime Area Code and Telephone No.
---------------------------------------------
Tax Identification No.
----------------------------------------------------------
<PAGE>
10
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4)
To be completed ONLY if Exchange Notes or Outstanding Notes not tendered are to
be sent to someone other than the registered holder of the Outstanding Notes
whose name(s) appear(s) above, or such registered holder(s) at an address other
than that shown above.
Mail
/ / Outstanding Notes not tendered to:
/ / Exchange Notes to:
Name(s)
-------------------------------------------------------------------------
Address
-------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone No.
-----------------------------------------------------
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Certificates; Guaranteed
Delivery Procedures.
A holder of Outstanding Notes may tender the same by (i)
properly completing and signing this Letter of Transmittal or a facsimile hereof
(all references in the Prospectus to the Letter of Transmittal shall be deemed
to include a facsimile thereof) and delivering the same, together with the
certificate or certificates, if applicable, representing the Outstanding Notes
being tendered and any required signature guarantees and any other documents
required by this Letter of Transmittal, to the Exchange Agent at its address set
forth above on or prior to the Expiration Date, or (ii) complying with the
procedure for book-entry transfer described below, or (iii) complying with the
guaranteed delivery procedures described below.
Holders of Outstanding Notes may tender Outstanding Notes by
book-entry transfer by crediting the Outstanding Notes to the Exchange Agent's
account at DTC in accordance with DTC's Automated Tender Offer Program ("ATOP")
and by complying with applicable ATOP procedures with respect to the Exchange
Offer. DTC participants that are accepting the Exchange Offer should transmit
their acceptance to DTC, which will edit and verify the acceptance and execute a
book-entry delivery to the Exchange Agent's account at DTC. DTC will then send a
computer-generated message (an "Agent's Message") to the Exchange Agent for its
acceptance in which the holder of the Outstanding Notes acknowledges and agrees
to be bound by the terms of, and makes the representations and warranties
contained in, this Letter of Transmittal, the DTC participant confirms on behalf
of itself and the beneficial owners of such Outstanding Notes all provisions of
this Letter of Transmittal (including any representations and warranties)
applicable to it and such beneficial owner as fully as if it had completed the
information required herein and executed and transmitted this Letter of
Transmittal to the Exchange Agent. Delivery of the Agent's Message by DTC will
satisfy the terms of the Exchange Offer as to execution and delivery of a Letter
of Transmittal by the participant identified in the Agent's Message. DTC
participants may also accept the Exchange Offer by submitting a Notice of
Guaranteed Delivery through ATOP.
The method of delivery of this Letter of Transmittal, the
Outstanding Notes and any other required documents is at the election and risk
of the holder, and except as otherwise provided below, the delivery will be
deemed made only when actually received or confirmed by the Exchange Agent. If
such delivery is by mail, it is suggested that registered mail with return
receipt requested, properly insured, be used. In all cases sufficient time
should be allowed to permit timely delivery. No Outstanding Notes or Letters of
Transmittal should be sent to the Company.
Holders whose Outstanding Notes are not immediately available
or who cannot deliver their Outstanding Notes and all other required documents
to the Exchange Agent on or prior to the Expiration Date or comply with
book-entry transfer procedures on a timely basis must tender their Outstanding
Notes pursuant to the guaranteed delivery procedure set forth in the Prospectus.
Pursuant to such procedure: (i) such tender must be made by or through an
Eligible Institution (as defined below); (ii) on or prior to the Expiration
Date, the Exchange Agent must have received from such Eligible Institution a
letter, telegram or facsimile transmission (receipt confirmed by telephone
<PAGE>
2
and an original delivered by guaranteed overnight courier) setting forth the
name and address of the tendering holder, the names in which such Outstanding
Notes are registered, and, if applicable, the certificate numbers of the
Outstanding Notes to be tendered; and (iii) all tendered Outstanding Notes (or a
confirmation of any book-entry transfer of such Outstanding Notes into the
Exchange Agent's account at a book-entry transfer facility) as well as this
Letter of Transmittal and all other documents required by this Letter of
Transmittal, must be received by the Exchange Agent within three New York Stock
Exchange trading days after the date of execution of such letter, telegram or
facsimile transmission, all as provided in the Prospectus.
No alternative, conditional, irregular or contingent tenders
will be accepted. All tendering holders, by execution of this Letter of
Transmittal (or facsimile thereof), shall waive any right to receive notice of
the acceptance of the Outstanding Notes for exchange.
2. Partial Tenders; Withdrawals.
If less than the entire principal amount of Outstanding Notes
evidenced by a submitted certificate is tendered, the tendering holder must fill
in the aggregate principal amount of Outstanding Notes tendered in the box
entitled "Description of Outstanding Notes Tendered Herewith." A newly issued
certificate for the Outstanding Notes submitted but not tendered will be sent to
such holder as soon as practicable after the Expiration Date. All Outstanding
Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise clearly indicated.
If not yet accepted, a tender pursuant to the Exchange Offer
may be withdrawn prior to the Expiration Date.
To be effective with respect to the tender of Outstanding
Notes, a written notice of withdrawal must: (i) be received by the Exchange
Agent at one of the addresses for the Exchange Agent set forth above before the
Company notifies the Exchange Agent that it has accepted the tender of
Outstanding Notes pursuant to the Exchange Offer; (ii) specify the name of the
person who tendered the Outstanding Notes to be withdrawn; (iii) identify the
Outstanding Notes to be withdrawn (including the principal amount of such
Outstanding Notes, or, if applicable, the certificate numbers shown on the
particular certificates evidencing such Outstanding Notes and the principal
amount of Outstanding Notes represented by such certificates); (iv) include a
statement that such holder is withdrawing its election to have such Outstanding
Notes exchanged; and (v) be signed by the holder in the same manner as the
original signature on this Letter of Transmittal (including any required
signature guarantee). The Exchange Agent will return the properly withdrawn
Outstanding Notes promptly following receipt of notice of withdrawal. If
Outstanding Notes have been tendered pursuant to the procedure for book-entry
transfer, any notice of withdrawal must specify the name and number of the
account at the book-entry transfer facility to be credited with the withdrawn
Outstanding Notes or otherwise comply with the book-entry transfer facility's
procedures. All questions as to the validity of notices of withdrawals,
including time of receipt, will be determined by the Company, and such
determination will be final and binding on all parties.
Any Outstanding Notes so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the Exchange Offer. Any
Outstanding Notes which have been tendered for exchange but which are not
exchanged for any reason will be returned to the holder thereof without cost to
such holder (or, in the case of Outstanding Notes tendered by book-entry
<PAGE>
3
transfer into the Exchange Agent's account at the book entry transfer facility
pursuant to the book-entry transfer procedures described above, such Outstanding
Notes will be credited to an account with such book-entry transfer facility
specified by the holder) as soon as practicable after withdrawal, rejection of
tender or termination of the Exchange Offer. Properly withdrawn Outstanding
Notes may be retendered by following one of the procedures described under the
caption "The Exchange Offer--Procedures for Tendering" in the Prospectus at any
time prior to the Expiration Date.
3. Signature on this Letter of Transmittal; Written Instruments and
Endorsements; Guarantee of Signatures.
If this Letter of Transmittal is signed by the registered
holder(s) of the Outstanding Notes tendered hereby, the signature must
correspond with the name(s) as written on the face of the certificates without
alteration, enlargement or any change whatsoever.
If any of the Outstanding Notes tendered hereby are owned of
record by two or more joint owners, all such owners must sign this Letter of
Transmittal.
If a number of Outstanding Notes registered in different names
are tendered, it will be necessary to complete, sign and submit as many separate
copies of this Letter of Transmittal as there are different registrations of
Outstanding Notes.
When this Letter of Transmittal is signed by the registered
holder or holders (which term, for the purposes described herein, shall include
the book-entry transfer facility whose name appears on a security listing as the
owner of the Outstanding Notes) of Outstanding Notes listed and tendered hereby,
no endorsements of certificates or separate written instruments of transfer or
exchange are required.
If this Letter of Transmittal is signed by a person other than
the registered holder or holders of the Outstanding Notes listed, such
Outstanding Notes must be endorsed or accompanied by separate written
instruments of transfer or exchange in form satisfactory to the Company and duly
executed by the registered holder, in either case signed exactly as the name or
names of the registered holder or holders appear(s) on the Outstanding Notes.
If this Letter of Transmittal, any certificates or separate
written instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written
instruments of transfer or exchange required by this Instruction 3 must be
guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by
an Eligible Institution, unless Outstanding Notes are tendered: (i) by a holder
who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on this Letter of Transmittal; or (ii) for the
account of an Eligible Institution (as defined below). In the event that the
signatures in
<PAGE>
4
this Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by an eligible guarantor
institution which is a member of a firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another "eligible institution" within the meaning of Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended (an "Eligible
Institution"). If Outstanding Notes are registered in the name of a person other
than the signer of this Letter of Transmittal, the Outstanding Notes surrendered
for exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company, in its sole discretion, duly executed by the registered holder with the
signature thereon guaranteed by an Eligible Institution.
4. Special Issuance and Delivery Instructions.
Tendering holders should indicate, as applicable, the name and
address to which the Exchange Notes or certificates for Outstanding Notes not
exchanged are to be issued or sent, if different from the name and address of
the person signing this Letter of Transmittal. In the case of issuance in a
different name, the tax identification number of the person named must also be
indicated. Holders tendering Outstanding Notes by book-entry transfer may
request that Outstanding Notes not exchanged be credited to such account
maintained at the book-entry transfer facility as such holder may designate.
5. Transfer Taxes.
The Company shall pay all transfer taxes, if any, applicable
to the transfer and exchange of Outstanding Notes to it or its order pursuant to
the Exchange Offer. If a transfer tax is imposed for any reason other than the
transfer and exchange of Outstanding Notes to the Company or its order pursuant
to the Exchange Offer, the amount of any such transfer taxes (whether imposed on
the registered holder or any other person) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exception therefrom
is not submitted herewith the amount of such transfer taxes will be billed
directly to such tendering holder.
6. Waiver of Conditions.
The Company reserves the absolute right to waive, in whole or
in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
7. Mutilated, Lost, Stolen or Destroyed Securities.
Any holder whose Outstanding Notes have been mutilated, lost,
stolen or destroyed, should contact the Exchange Agent at the address indicated
below for further instructions.
8. Substitute Form W-9
Each holder of Outstanding Notes whose Outstanding Notes are
accepted for exchange (or other payee) is required to provide a correct taxpayer
identification number ("TIN"), generally the holder's Social Security or federal
employer identification number, and certain other information, on Substitute
Form W-9, which is provided under "Important Tax Information" below,
<PAGE>
5
and to certify that the holder (or other payee) is not subject to backup
withholding. Failure to provide the information on the Substitute Form W-9 may
subject the holder (or other payee) to a $50 penalty imposed by the Internal
Revenue Service and 31% federal income tax backup withholding on payments made
in connection with the Outstanding Notes. The box in Part 3 of the Substitute
Form W-9 may be checked if the holder (or other payee) 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 3 is checked and a TIN is not provided by the time any payment
is made in connection with the Outstanding Notes, 31% of all such payments will
be withheld until a TIN is provided.
9. Requests for Assistance or Additional Copies.
Questions relating to the procedure for tendering, as well as
requests for additional copies of the Prospectus and this Letter of Transmittal,
may be directed to the Exchange Agent at the address and telephone number set
forth above. In addition, all questions relating to the Exchange Offer, as well
as requests for assistance or additional copies of the Prospectus and this
Letter of Transmittal, may be directed to the Exchange Agent at the address and
telephone number indicated above.
IMPORTANT: This Letter of Transmittal or a facsimile or copy
thereof (together with certificates of Outstanding Notes or confirmation of
book-entry transfer and all other required documents) or a Notice of Guaranteed
Delivery must be received by the Exchange Agent on or prior to the Expiration
Date.
<PAGE>
6
IMPORTANT TAX INFORMATION
Under U.S. Federal income tax law, a holder of Outstanding Notes whose
Outstanding Notes are accepted for exchange may be subject to backup withholding
unless the holder provides IBJ Whitehall Bank & Trust Company, as Paying Agent
(the "Paying Agent"), through the Exchange Agent, with either (i) such holder's
correct taxpayer identification number ("TIN") on Substitute Form W-9 attached
hereto, certifying that the TIN provided on Substitute Form W-9 is correct (or
that such holder of Outstanding Notes is awaiting a TIN) and that (A) the holder
of Outstanding Notes has not been notified by the Internal Revenue Service that
he or she is subject to backup withholding as a result of a failure to report
all interest or dividends or (B) the Internal Revenue Service has notified the
holder of Outstanding Notes that he or she is no longer subject to backup
withholding; or (ii) an adequate basis for exemption from backup withholding. If
such holder of Outstanding Notes is an individual, the TIN is such holder's
social security number. If the Paying Agent is not provided with the correct
TIN, the holder of Outstanding Notes may be subject to certain penalties imposed
by the Internal Revenue Service.
Certain holders of Outstanding Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. However, exempt holders of Outstanding
Notes should indicate their exempt status on Substitute Form W-9. For example, a
corporation must complete the Substitute Form W-9, providing its TIN and
indicating that it is exempt from backup withholding. In order for a foreign
individual to qualify as an exempt recipient, the holder must submit a Form W-8,
signed under penalties of perjury, attesting to that individual's exempt status.
A Form W-8 can be obtained from the Paying Agent. See the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9" for
more instructions.
If backup withholding applies, the Paying Agent is required to withhold
31% of any such payments made to the holder of Outstanding Notes or other payee.
Backup withholding is not an additional tax. Rather, the tax liability of
persons 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 from the Internal Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
surrendering holder of Outstanding Notes 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 3 is checked, the holder of Outstanding Notes 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 3 is
checked and the Certificate of Awaiting Taxpayer Identification Number is
completed, the Paying Agent will withhold 31% of all payments made prior to the
time a properly certified TIN is provided to the Paying Agent.
The holder of Outstanding Notes is required to give the Paying Agent
the TIN (e.g., social security number or employer identification number) of the
record owner of the Outstanding Notes. If the Outstanding Notes are 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.
<PAGE>
7
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number for the Payee (You)
to Give the Payer.--Social security numbers have nine digits separated by two
hyphens: i.e., 000-00-0000. Employee identification numbers have nine digits
separated by only one hyphen: i.e., 00-0000000. The table below will help
determine the number to give the payer. All "Section" references are to the
Internal Revenue Code of 1986, as amended. "IRS" is the Internal Revenue
Service.
Give the social security number
For this type of account: of--
- ------------------------- -------------------------------
1. Individual The individual
2. Two or more individuals (joint The actual owner of the account or,
account) if combined funds, the first individual
on the account(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable savings The grantor-trustee(1)
trust account (grantor
is also trustee)
b. So-called trust account that The actual owner(1)
is not a legal or valid trust
under state law
5. Sole proprietorship The owner(3)
Give the employer identification
For this type of account: number of--
- ------------------------- --------------------------------
6. Sole proprietorship The owner(3)
7. A valid trust, estate, or pension The legal entity(4)
trust
8. Corporate The corporation
9. Association, club, religious, The organization
charitable, educational, or other
tax-exempt organization account
10. Partnership The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a state
or local government, school
district, or prison) that receives
agricultural program payments
- --------------
(1) List first and circle the name of the person whose number you furnish.
If only one person on a joint account has a social security number,
that person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your
business or "doing business as" name. You may use either your social
security number or your employer identification number (if you have one).
(4) List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the taxpayer identification number of the
personal representative or trustee unless the legal entity itself is
not designated in the account title.)
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
Obtaining a Number
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5. Application for a Social Security Card, at the local
Social Administration office, or Form SS-4, Application for Employer
Identification Number, by calling 1 (800) TAX-FORM, and apply for a number.
Payees Exempt from Backup Withholding
Payees specifically exempted from withholding include:
o An organization exempt from tax under Section 501(a), an individual
retirement account (IRA), or a custodial account under Section 403(b)(7),
if the account satisfies the requirements of Section 401(f)(2).
o The United States or a state thereof, the District of Columbia, a
possession of the United States, or a political subdivision or wholly-owned
agency or instrumentality of any one or more of the foregoing.
o An international organization or any agency or instrumentality thereof.
o A foreign government and any political subdivision, agency or instrumentality
thereof.
o Payees that may be exempt from backup withholding include:
o A corporation.
o A financial institution.
o A dealer in securities or commodities required to register in the United
States, the District of Columbia, or a possession of the United States.
o A real estate investment trust.
o A common trust fund operated by a bank under Section 584(a).
o An entity registered at all times during the tax year under the Investment
Company Act of 1940.
o A middleman known in the investment community as a nominee or who is
listed in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
o A futures commission merchant registered with the Commodity Futures Trading
Commission.
o A foreign central bank of issue.
Payments of dividends and patronage dividends generally exempt from backup
withholding include:
o Payments to nonresident aliens subject to withholding under Section 1441.
o Payments to partnerships not engaged in a trade or business in the
United States and that have at least one nonresident alien partner.
o Payments of patronage dividends not paid in money.
o Payments made by certain foreign organizations.
o Section 404(k) payments made by an ESOP.
Payments of interest generally exempt from backup withholding include:
o Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and you have
not provided your correct taxpayer identification number to the payer.
o Payments of tax-exempt interest (including exempt-interest dividends under
Section 852).
o Payments described in Section 6049(b)(5) to nonresident aliens.
o Payments on tax-free covenant bonds under Section 1451.
o Payments made by certain foreign organizations.
o Mortgage interest paid to you.
Certain payments, other than payments of interest, dividends, and patronage
dividends, that are exempt from information reporting are also exempt from
backup withholding. For details, see the regulations under sections 6041, 6041A,
6042, 6044, 6045, 6049, 6050A and 6050N.
Exempt payees described above must file Form W-9 or a substitute Form W-9 to
avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER,
FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" IN PART II OF THE
FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE OF INTEREST, DIVIDENDS, OR
PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Privacy Act Notice. -- Section 6109 requires you to provide your correct
taxpayer identification number to payers, who must report the payments to tje
IRS. The IRS uses the number for identification purposes and may also provide
this information to various government agencies for tax enforcement or
litigation purposes. Payers must be given the numbers whether or not recipients
are required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to payer. Certain penalties may also apply.
Penalties
(1) Failure to Furnish Taxpayer Identification Number. -- If you fail to furnish
your taxpayer identification number to a payer, you are subject to a penalty of
$50 for each such failure unless your failure is due to reasonable cause and not
to willful neglect.
(2) Civil Penalty for False Information With Respect to Withholding. -- If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
<PAGE>
8
(3) Criminal Penalty for Falsifying Information. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
<TABLE>
<CAPTION>
PAYER'S NAME:
<S> <C> <C>
SUBSTITUTE Part 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND
CERTIFY BY SIGNING AND DATING BELOW.
----------------------------
FORM W-9 Social Security Number
Department of the
Treasury OR
Internal Revenue Service
----------------------------
Employer Identification Number
Payer's Request for PART 2 Part 3--
Taxpayer Certification--Under the penalties of perjury, I certify that:
Identification (1) The number shown on this form is my correct Taxpayer / / Awaiting TIN
Number (TIN) Identification Number (or I am waiting for a number to be
issued to me), and
(2) I am not subject to backup withholding because (a) I am
exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service (the "IRS") that
I am subject to backup withholding as a result of a failure
to report all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup
withholding.
<CAPTION>
<S> <C>
CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS that you
are currently subject to backup withholding because of under-reporting interest or dividends on your tax
return. However, if after being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to backup withholding, do not
cross out such item (2).
-------------------------------------------------------------------------------------------------------
Sign Here (ARROW) SIGNATURE
----------------------------------------------------------------------------------------
DATE
---------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER,
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
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
reportable payments made to me will be withheld.
Signature Date , 1998
---------------------------------------- --------------
<PAGE>
NOTICE OF GUARANTEED DELIVERY
for
Tender of All Outstanding
9 3/4% Senior Subordinated Notes due 2009
in Exchange for
New 9 3/4% Senior Subordinated Notes due 2009
of
AMERICAN AXLE MANUFACTURING, INC.
Registered holders of outstanding 9 3/4% Senior Subordinated Notes due
2009 (the "Outstanding Notes") who wish to tender their Outstanding Notes in
exchange for a like principal amount of new 9 3/4% Senior Subordinated Notes due
2009 (the "Exchange Notes") and whose Outstanding Notes are not immediately
available or who cannot deliver their Outstanding Notes and Letter of
Transmittal (and any other documents required by the Letter of Transmittal) to
IBJ Whitehall Bank & Trust Company (the "Exchange Agent") prior to the
Expiration Date, may use this Notice of Guaranteed Delivery or one substantially
equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand
or sent by facsimile transmission (receipt confirmed by telephone and an
original delivered by guaranteed overnight courier) or mail to the Exchange
Agent. See "The Exchange Offer--Procedures for Tendering" in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
IBJ WHITEHALL BANK & TRUST COMPANY
By Hand Delivery: By Mail:
IBJ Whitehall Bank & Trust (insured or registered recommended)
Company IBJ Whitehall Bank & Trust
One State Street Company
New York, New York 10004 P.O. Box 84
Attn: Securities Processing Bowling Green Station
Window New York, New York 10274-0084
Subcellar One, (SC-1) Attn: Reorganization Operations
Department
By Overnight Courier: By Facsimile:
IBJ Whitehall Bank & Trust (212) 858-2611
Company Attn: Reorganization Operations
One State Street Department
New York, New York 10004
Attn: Securities Processing
Window, Confirm by Telephone:
Subcellar One, (SC-1) (212) 858-2103
Delivery of this Notice of Guaranteed Delivery to an address other than
as set forth above or transmission via a facsimile transmission to a number
other than as set forth above will not constitute a valid delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an eligible institution (as defined in the Prospectus), such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signatures.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of Outstanding
Notes indicated below, upon the terms and subject to the conditions contained in
the Prospectus dated __, 1999 of American Axle & Manufacturing, Inc. (the
"Prospectus"), receipt of which is hereby acknowledged.
DESCRIPTION OF OUTSTANDING NOTES TENDERED
<TABLE>
<CAPTION>
Name and address of Certificate Number(s)
registered holder as it of Outstanding Notes
appears on the Tendered (or Account Principal Amount of
Name of Tendering Outstanding Notes Number at Book- Outstanding Notes
Holder Entry Facility Tendered
(Please Print)
<S> <C> <C> <C>
- ------------------------- ----------------------- --------------------- -------------------
- ------------------------- ----------------------- --------------------- -------------------
- ------------------------- ----------------------- --------------------- -------------------
- ------------------------- ----------------------- --------------------- -------------------
</TABLE>
SIGN HERE
Name of Registered or Acting Holder:
--------------------------------------------
Signature(s):
-------------------------------------------------------------------
Name(s) (please print):
---------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Telephone Number:
---------------------------------------------------------------
Date:
---------------------------------------------------------------------------
If shares of Outstanding Notes will be tendered by book-entry transfer, provide
the following information:
DTC Account Number:
-----------------------------------------
Date:
-------------------------------------------------------
<PAGE>
3
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(Not to be used for signature guarantee)
The undersigned, a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended, hereby guarantees to deliver to the Exchange Agent at one of
its addresses set forth on the reverse hereof, the certificates representing the
Outstanding Notes (or a confirmation of book-entry transfer of such Outstanding
Notes into the Exchange Agent's account at the book-entry transfer facility),
together with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, and any other
documents required by the Letter of Transmittal within three New York Stock
Exchange trading days after the Expiration Date (as defined in the Letter of
Transmittal).
Name of Firm:
---------------------------- -------------------------------------
(Authorized Signature)
Address:
---------------------------------
Title:
-------------------------------
- -----------------------------------------
(Zip Code)
Name:
--------------------------------
(Please type or print)
Area Code and Telephone No.:
Date:
- ----------------------------------------- --------------------------------
NOTE: DO NOT SEND OUTSTANDING NOTES WITH THIS NOTICE OF GUARANTEED
DELIVERY. OUTSTANDING NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
