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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
COMMISSION FILE NUMBER 0-21362
................................................
HARVARD INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 21-0715310
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3 WERNER WAY, LEBANON, NEW JERSEY 08833
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (908) 437-4100
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
TITLE OF SECURITIES EXCHANGES ON WHICH REGISTERED
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Common Stock ($0.01 par value) Nasdaq National Market
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
--- ---
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
TITLE OUTSTANDING
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Common Stock As of September 30, 1998 there were 7,026,437
shares outstanding. On November 24, 1998 the
Registrant's Chapter 11 plan became effective, the
old shares were cancelled and new shares were
authorized. As of January 11, 1998 the total number
of outstanding shares of new Common Stock is
8,240,295.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the
Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980). None
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PART I.
This Annual Report on Form 10-K contains forward-looking statements within the
meaning of that term in Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Additional written or oral
forward-looking statements may be made by the Company from time to time, in
filings with the Securities Exchange Commission or otherwise. Statements
contained herein that are not historical facts are forward-looking statements
made pursuant to the safe harbor provisions referenced above. Forward-looking
statements may include, but are not limited to, projections of revenues, income
or losses, capital expenditures, plans for future operations, the elimination of
losses under certain programs, financing needs or plans, compliance with
financial covenants in loan agreements, plans for liquidation or sale of assets
or businesses, plans relating to products or services of the Company,
assessments of materiality, predictions of future events, and the effects of the
bankruptcy proceedings and other pending and possible litigation, as well as
assumptions relating to the foregoing In addition, when used in this discussion,
the words "anticipates," "believes," "estimates," "expects," "intends," "plans"
and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are inherently subject to risks and
uncertainties, including, but not limited to, product demand, pricing, market
acceptance, risk of dependence on third party suppliers, intellectual property
rights and litigation, risks in product and technology development and other
risk factors detailed in the Company's Securities and Exchange Commission
filings, some of which cannot be predicted or quantified based on current
expectations. Consequently, future events and actual results could differ
materially from those set forth in, contemplated by, or underlying the
forward-looking statements. Statements in this Annual Report, particularly in
"Item 1. Business--Compliance with Environmental Laws", "Item 3. Legal
Proceedings", the Notes to Consolidated Financial Statements and "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations," describe factors, among others, that could contribute to or cause
such differences. Other factors that could contribute to or cause such
differences include unanticipated increases in launch and other operating costs,
a reduction and inconsistent demand for passenger cars and light trucks, labor
disputes, capital requirements, adverse weather conditions, the inability to
negotiate on favorable terms in the definitive agreements for program
modifications with a major customer, unanticipated developments in the
bankruptcy proceedings and other pending litigation, and increases in borrowing
costs.
Readers are cautioned not to place undue reliance on any forward-looking
statements contained herein, which speak only as of the date hereof. The Company
undertakes no obligation to release publicly the result of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
ITEM 1. BUSINESS
BUSINESS
COMPANY OVERVIEW
Harvard Industries, Inc. ("Harvard" or the "Company" or "Corporation"),
headquartered at 3 Werner Way in Lebanon, New Jersey, is a direct supplier of
components for Original Equipment Manufacturers ("OEMs") producing cars and
light trucks in North America, principally General Motors Corporation ("General
Motors"), Ford Motor Company ("Ford") and Daimler-Chrysler ("Chrysler"), which
together accounted for approximately 82% of sales in fiscal 1998. The Company
conducts its operations primarily through three wholly owned subsidiaries,
Hayes-Albion Corporation ("Hayes-Albion"); Pottstown Precision Casting, Inc.
("Pottstown"), formerly known as Doehler-Jarvis Pottstown, Inc.; and The
Kingston-Warren Corporation ("Kingston-Warren"). The Company's subsidiaries,
produce a wide range of products including: rubber glass-run channels; rubber
seals for doors and trunk lids; complex, high volume aluminum castings and other
cast, fabricated, machined and decorated metal products; and metal stamped and
roll form products.
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COMPANY HISTORY
The Company has expanded through various acquisitions, including the
acquisitions of Kingston-Warren and Hayes-Albion in 1986 and Doehler-Jarvis,
Inc. and subsidiaries ("Doehler-Jarvis") in 1995. In 1988, the Company was taken
private in a management-led leveraged buy-out transaction. As part of the
buy-out transaction, the Company issued $200 million of senior subordinated
notes on which it later defaulted in 1990. The Company sought bankruptcy
protection in May 1991, and emerged from Chapter 11 after the bankruptcy court
approved a reorganization plan that paid both the senior lenders and trade
lenders in full.
On May 8, 1997 ("Petition Date"), Harvard filed a petition for relief under
Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court for
the District of Delaware (the "Bankruptcy Court"). On November 24, 1998 (the
"Effective Date"), the Company substantially consummated its First Amended
Modified Consolidated Plan Under Chapter 11 of The Bankruptcy Code dated
August 19, 1998 (The "Reorganization Plan" or "Plan of Reorganization") and
emerged from bankruptcy.
Following the Petition Date, the Company and its subsidiaries continued to
operate as debtors-in-possession subject to the supervision of the Bankruptcy
Court. Under the Bankruptcy Code the Company and its subsidiaries were
authorized to operate their businesses in the ordinary course but transactions
that were out of the ordinary course, including the employment of attorneys,
accountants and other professionals, required approval of the Bankruptcy Court.
In May 1997, the Bankruptcy Court approved the appointment of an Official
Committee of Unsecured Creditors' in the Chapter 11 Case (The "Creditors'
Committee"). The Creditors' Committee was disbanded on the Effective Date. The
Creditors' Committee retained Roger Pollazzi as an automotive industry
consultant. Mr. Pollazzi acted in this capacity until November 1997, when, with
the support of the Creditors' Committee, the Board of Directors appointed
Mr. Pollazzi Chief Operating Officer. Prior to such appointment, Mr. Pollazzi
had served as Chairman of the Board and Chief Executive Officer of The Pullman
Company ("Pullman") from 1992 to 1996.
Shortly after his appointment, Mr. Pollazzi hired approximately fifteen
professionals as employees of Harvard to assist him in analyzing company
operations, eliminating on-going negative cash flows associated with cash drains
at several operations and coordinating and implementing the restructuring
efforts. Since November 24, 1998, the date of reorganization and when the
Company substantially completed its emergence from bankruptcy (the "Effective
Date"), the management team includes:
o Roger Pollazzi, who now serves as Chief Executive Officer;
o James Gray, President of Harvard, an automotive executive who previously
ran Tenneco Automotive's European Operations as well as the Clevite
division of Pullman;
o Theodore Vogtman, Chief Financial Officer of Harvard, who has over twenty
years of industry experience including serving as Chief Financial Officer
of Pullman; and
o Vincent Toscano, Executive Vice President of Strategic Planning of
Harvard, who was formerly the Vice President of Operations at Pullman and
has over 21 years of experience in the automotive industry.
The Company's new management developed the Plan of Reorganization with
respect to its financial affairs (including the Turnaround Business Strategy).
In order to be confirmed, the Plan of Reorganization was required to satisfy
certain requirements of the Bankruptcy Court, including that each claim in a
particular class receive the same treatment as each other claim in that class
and that the Company be adequately capitalized (upon emergence from Chapter 11)
so that confirmation of the Plan of Reorganization would not be followed by a
liquidation or the need for further reorganization. The Company was also
required to demonstrate to the satisfaction of the Bankruptcy Court that the
Plan satisfied the "best interests of creditors" test. This means that holders
of claims and interests in each impaired class must have either unanimously
accepted the Plan of Reorganization or that such holders would not receive more
in a liquidation of the Company than through the implementation of the Plan of
Reorganization. The results of the voting confirmed that, in fact, each class
approved the plan.
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MATERIAL SUBSEQUENT EVENT
On the effective date pursuant to the Plan of Reorganization, substantially
all pre-petition unsecured debt at pre-reorganization Harvard was converted into
equity of post-reorganization Harvard in the form of common stock (the "New
Common Stock"). Under the terms of the Plan of Reorganization, holders of
Harvard's Pay-In-Kind Exchangeable Preferred Stock ("PIK Preferred Stock") and
holders of Harvard's existing common stock (the "Old Common Stock") will each
receive warrants ("Warrants") to acquire, in the aggregate, approximately 5% of
the New Common Stock, with holders of PIK Preferred Stock each receiving their
pro rata share of 66.67% of the Warrants and holders of the Old Common Stock
each receiving their pro rata share of 33.33% of the Warrants. On the Effective
Date, the Old Common Stock and PIK Preferred Stock were canceled.
On November 13, 1998, the Bankruptcy Court entered the Order in Aid of
Implementation of the Plan of Reorganization and Approving the Terms of Revised
Exit Financing. The Company emerged from Bankruptcy on November 24, 1998.
Effective with the emergence from bankruptcy, as arranged by Lehman Brothers,
Inc. ("Lehman"), the Company issued $25 million of 14 1/2% Senior Secured Notes
due September 1, 2003 (the "Notes"). Additionally, the Company entered into a
$115 million senior secured credit facility with a group of lenders arranged by
Lehman, and including General Electric Capital Corporation as Administrative
Agent (the "Senior Credit Facility" and, together with the Notes, the
"Financings"). The Senior Credit Facility provides for up to $50 million in term
loan borrowings and up to $65 million in revolving credit borrowings.
The combined proceeds from the issuance of the Notes and initial borrowings
under the Senior Credit Facility were used to:
o refinance the senior and junior debtor-in-possession credit facilities
that provided financing to the Company while the Company was in
bankruptcy proceedings (together, the "DIP Credit Facilities"),
o pay administrative expenses due under the Plan of Reorganization and pay
related fees and expenses,
o provide cash for working capital purposes, and
o provide funds for general corporate purposes.
The $65 million revolving credit portion of the Senior Credit Facility will
be used to finance working capital and for other general corporate purposes.
INDUSTRY OVERVIEW
The North American automotive parts supply business is composed of sales to
OEMs and the automotive aftermarket. The Company primarily sells products to be
installed as original equipment in new cars and trucks predominantly to OEMs and
to other OEM suppliers.
New Business Development. Historically, the U.S. automakers furnished
their suppliers with blueprints and specifications for their required products
and chose vendors based on price and reputation. However, in today's automotive
supplier market, it is typical for the U.S. automakers to electronically furnish
their suppliers with mathematical data describing the surfaces of the part or
system in question, along with the technical description of its functional
requirements. At this point, the supplier is expected to assume responsibility
for all of the activities necessary to bring the part to production. The
development cycle includes the design and engineering function and the
production of prototypes for design validation. After validation of the
prototype parts or system, tooling is designed and built to manufacture the
finished product. The entire cycle usually requires between two and four years
to complete, during which the supplier assumes most of the responsibility for
managing the interface of the various groups within its own and the customer's
organization. These groups include the supplier's and OEMs' respective
purchasing/sales, design, engineering, quality assurance and manufacturing
areas.
Prior to the current era of supplier total program responsibility, customer
interface was limited to the supplier sales function dealing with the customer
purchasing function. In today's marketplace, it is necessary for the Company's
engineers and technicians to interface constantly with their counterparts at the
U.S. automakers to secure design contracts. This is the principal starting point
in the process of being awarded future business. There
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are significant differences among suppliers in their abilities to design and
manage complex systems and bring them through the product design and
manufacturing cycle on time and at a competitive price.
Automotive Supplier Consolidation. The automotive supply industry is
experiencing a period of significant consolidation. To lower costs and improve
quality, OEMs are reducing their supplier base by awarding sole-source contracts
to full-service suppliers who are able to provide design, engineering and
program management capabilities and can meet cost, quality and delivery
requirements. For suppliers such as the Company, this new environment provides
an opportunity to grow by obtaining business previously provided by other
non-full service suppliers and by acquiring suppliers that enhance product,
manufacturing and service capabilities. OEMs rigorously evaluate suppliers on
the basis of product quality, cost control, reliability of delivery, product
design capability, financial strength, new technology implementation, quality
and condition of facilities and overall management. Suppliers that obtain
superior ratings are considered for sourcing new business. Although these new
supplier policies have already resulted in significant consolidation of
component suppliers in certain groups, the Company believes that consolidation
will continue to provide attractive opportunities to acquire high-quality
companies that complement its existing business.
OEM Purchasing, Practices and Trends. In the late 1980's and early 1990's,
the U.S. automakers instituted a number of fundamental changes in their sourcing
procedures. Principal among these changes has been an increased focus on
suppliers' cost and improving quality performance, a significant consolidation
in the number of suppliers with which they have relations and, most recently, a
move toward purchasing integrated systems or modules rather than component
parts.
OEMs are increasingly seeking suppliers capable of providing complete
systems or modules rather than suppliers who only provide separate component
parts. A system is a group of component parts that operate together to provide a
specific engineering driven functionality and a module is a group of systems
and/or component parts representing a particular area within the vehicle, which
are assembled and shipped to the OEM for installation in a vehicle as a unit. By
outsourcing complete systems or modules, OEMs are able to reduce their costs
associated with the design and integration of different components and improve
quality by enabling their suppliers to assemble and test major portions of the
vehicle prior to their beginning production. In addition, by purchasing
integrated systems, OEMs are able to shift engineering, design, program
management, and product investment costs to fewer and more capable suppliers. By
designing and supplying integrated systems, a supplier is able to reduce costs
and improve quality by identifying system-wide solutions. The Company believes
that this shift creates an opportunity for suppliers, such as the Company, to
provide integrated systems.
In addition, OEMs have implemented cost reduction programs that require
suppliers to pass on a portion of the benefit of productivity improvement in the
form of lower prices in exchange for multi-year supply agreements. These
initiatives have required suppliers to implement programs to lower their costs
and reduce component and system prices to the OEMs.
New North American OEMs (Transplants). Over the last decade, foreign
automotive manufacturers have gained a significant share of the U.S. market,
first through exports and more recently through U.S.-based manufacturing
facilities ("Transplants"). Japanese export sales have dropped significantly
from 1983 to 1993, while Japanese Transplant sales have grown dramatically as
Japanese car companies have shifted more of their production to North America.
Based on industry analysts' estimates, Transplants produced 51.8% of the
Japanese cars sold in the United States in 1994 compared with 8.4% in 1985. As a
percent of total North American car production, Transplant production increased
from 2.0% in 1985 to 20.5% in 1997.
To the extent that the growth of Transplant sales results in loss of market
share for the Company's U.S. automaker customers, the Company will experience an
adverse effect. The Company plans to solicit additional business from
Transplants. There can be no assurance, however, that any additional business
will be generated from Transplants or if any such additional business is
obtained that it will compensate for any lost business that the Company may
experience.
Demand. As an OEM supplier, the Company is significantly affected by
consumer demand for new vehicles in North America. Demand in North American car
and light truck markets is tied closely to the overall strength of the North
American economies. After attaining a production level of approximately
13.6 million units
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in 1985, North American car and light truck production fell to 10.4 million
units in 1991. Since this low, production rose to 15.6 million units for the
1997 calendar year.
OPERATIONS DESCRIPTION
Overview. In general, automotive component manufacturers, like the
Company, are invited to bid for specific products and component systems which
are incorporated in both new and existing automotive platforms. If the platform
already exists, the current supplier may be favored by the OEM because of the
supplier's familiarity with the existing product as well as its existing
investment in the manufacturing process and tooling.
With respect to new platforms, there has been an increasing trend toward
involving potential suppliers much earlier in the design and development process
in order to encourage the supplier to share some of the design and development
burden. Achieving this cooperative supplier status is a significant step towards
winning a long-term supply order and gives the supplier a decided advantage over
the competition. However, even if awarded an order, in almost all instances it
will be at least two to four years before these cooperative suppliers see their
products incorporated into new platforms.
There is also an increasing trend towards potential suppliers committing to
target prices on parts or systems as a condition of being awarded a design and
supply order. Under target price arrangements, the burden of cost overruns is
generally borne by the supplier. In addition, in order to secure long-term
supply arrangements, annual price concessions through productivity improvements
are expected by OEMs. As automotive parts suppliers continue to face downward
pricing pressures on the components supplied to the OEMs, automotive production
volumes become critical in maintaining and increasing operating profitability.
Due to the long gestation between being awarded a contract for a new
platform and producing parts, and the considerable designing and planning
obligations required of the successful bidder during this period of delay, the
OEMs were reluctant to award new business to the Company during the pendency of
the Chapter 11 cases. As a result, the awarded new business during the pendency
of the Chapter 11 cases was less than would be anticipated under normal
conditions. This could have serious effects on the financial strength of the
Company in the next several years when the recently awarded platforms commence
production.
Design, Production and Delivery. The Company believes that it has strong
design and engineering capabilities which enable it to serve its customers
better in the initial phases of product development. The Company's Computer
Aided Engineering ("CAE") group, located at its Farmington Hills, Michigan
facility, is the focal point of this initiative. The CAE group utilizes Computer
Aided Design ("CAD") techniques which allow the Company's design engineers to
develop a product's physical and performance characteristics into state-
of-the-art hardware and software systems. These systems subsequently produce 3-D
representations of the products, which can be automatically downloaded into
Computer Numerically Controlled ("CNC") milling and cutting machines. These CNC
machines can produce tooling equipment and manufacture products with a high
degree of accuracy and reduced lead times, thereby reducing the historically
high labor content in the pre-production costs. Furthermore, the Company can
mathematically test its product designs prior to production, resulting in
savings through the reduction in the number of physical prototypes and
significantly reducing the lead time typical in developing and testing new
products. The Company has research and development facilities in Newfields, New
Hampshire and Farmington Hills, Michigan where Company personnel meet with
customers to incorporate the customers' structural and thermal requirements into
the product design process. In addition, the Company maintains engineering
facilities at Jackson, Michigan and Wytheville, Virginia.
Part of the Company's design philosophy is the early involvement of its
manufacturing engineers in the initial stages of a product's design. This
"Design-for-Manufacture" approach helps create a product that not only meets its
required design and performance characteristics, but also results in a product
that is easier and less expensive to manufacture. By adopting this approach the
Company is able to save costs typically related to engineering changes which can
hamper the production of new products, as well as reduce the amount of time it
takes to get new products to market.
Consistent with the Company's design approach is its increasing involvement
in cooperative supplier programs. As a cooperative supplier, the Company
receives the initial design responsibilities for a specific product or component
for a particular vehicle in the early stages of its design. These programs,
which effectively
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move the burden of design and development of new products from OEMs to their
suppliers, resulting in corresponding increased costs, have represented an
increasing trend in the automotive industry in the late 1980's and early 1990's.
In 1995 and 1996, the Company was the cooperative supplier on three major body
sealing programs at General Motors. Three additional General Motors programs
(GMX230, GMT360 and GMX320) were ultimately awarded to the Company in 1997.
Following the design of its products, the Company employs work cells and
synchronous manufacturing techniques to improve production efficiency. Central
to this approach is the emphasis on a "continuous improvement" environment that
enables employees to develop new and more efficient manufacturing techniques.
BUSINESS STRATEGY
Management's business strategy focuses on leveraging Harvard's core
competencies in the design and production of OEM automotive components in order
to target new business opportunities with existing automotive OEM customers, as
well as in the automotive aftermarket and non-automotive industrial market.
In an effort to improve operating margins, Harvard has made significant
progress in closing or divesting itself of underperforming facilities and
exiting unprofitable OEM business. Since the management transition in November
1997, the company has announced the closing or sale of numerous
divisions/manufacturing plants and is in the process of re-allocating
underutilized production capacity to higher margin industrial applications (See
Asset Sales Section below). In addition to closing unprofitable facilities,
Harvard is working with customers in evaluating product design and production
processes to increase margins to targeted levels.
Management intends to focus on accessing the non-automotive industrial
market and the automotive aftermarket to leverage its existing product portfolio
and manufacturing expertise. Harvard believes that a number of its existing
automotive processes such as spin forming, tube rolling, rubber extrusion and
high-strength steel forming will be marketable in the industrial and aftermarket
arenas because these processes are commonly used for products offered in those
markets. Management has experience in both the automotive and industrial
markets, especially in lawn and garden machinery, and construction supplies and
equipment.
In addition to the non-automotive opportunities discussed above, the
Company believes that it can effectively cross-market products from its
different divisions to leverage its relationships at General Motors, Ford and
Chrysler. The Company is focused on the design and production of integrated
systems for OEMs as opposed to individual supplying parts on a contract basis.
Harvard may also make selected small acquisitions to broaden its product
offerings, technological capabilities and customer base, or to increase its
distribution channels.
ASSET SALES
In November 1997, the Company sold the Materials Handling division of
Kingston-Warren for approximately $18 million in cash. In 1998, Harvard sold the
land, building and certain other fixed assets of its Harvard Interiors division
in St. Louis, Missouri for approximately $4.1 million. During the same period,
Harvard divested certain tooling assets associated with the underperforming
mirrors business of its Harman Automotive, Inc. subsidiary ("Harman") for
approximately $0.8 million. In June 1998, Harvard sold its Elastic Stop Nut
Division ("ESNA") facility in New Jersey, for approximately $1.9 million. In
September 1998, the Company sold, at auction, certain assets of Harman for
approximately $2 million.
In 1998, the Company focused on selling the Greeneville and Toledo plants
of Doehler-Jarvis and receiving compensatory payments from Ford and General
Motors for operating losses that Harvard incurred from continuing to operate the
Toledo plant prior to shutdown. Production ceased at Toledo in June 1998. In
September 1998, the Company sold substantially all of the assets and assigned
certain liabilities of Greeneville for $10.9 million subject to adjustments.
Among the sale transactions which are currently pending, Harvard has most
recently signed a letter of intent to divest the Tiffin plant of the
Hayes-Albion subsidiary for $1.6 million and is negotiating an agreement to sell
Doehler-Jarvis Toledo's land and building. The operations formerly in the
Snover, Michigan facility were moved to other locations and the Snover facility
is currently for sale.
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The table below lists those assets that have been or will be sold as part
of the Company's asset disposition plan:
<TABLE>
<CAPTION>
ASSETS SOLD OR TO BE SOLD MONTH/YEAR
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<S> <C>
Manufacturing Plant in Sevierville, TN (Harman) August 1997
King-Way Assets (Material Handling Division of Kingston-Warren) November 1997
St. Louis Facility (Harvard Interiors) January 1998
Certain assets of Furniture Business (Harvard Interiors) March 1998
Tooling for Automotive Component Parts (Harman) April 1998
Union, NJ Facility (Specialty Fastener Division ("ESNA")) June 1998
Remaining assets of Furniture Business (Harvard Interiors) June 1998
Tooling and Equipment for Automotive Component Parts (Toledo) August 1998
Doehler-Jarvis Greeneville, TN Plant September 1998
Harman Automotive (fixed assets) September 1998
Hayes-Albion Tiffin, OH Plant Pending
Doehler-Jarvis Toledo, OH--land and building Pending
Doehler-Jarvis Toledo, OH--equipment Pending
Harman Automotive Bolivar, TN facility Pending
Hayes-Albion (Trim-Trends) Snover, MI--land and building Pending
</TABLE>
SUBSIDIARIES
Kingston-Warren
Kingston-Warren, which was acquired by Harvard in 1986, has conducted
business since 1945 and is primarily engaged in manufacturing rubber glass-run
channels, sealing strips and body seals for door and trunk lids. Kingston-Warren
operates from three plant locations which occupy 584,000 square feet: Newfields,
NH; Wytheville, VA; and Church Hill, TN. At September 30, 1998, Kingston-Warren
employed approximately 1,200 persons.
Kingston-Warren has developed proprietary technology in the following
areas: adhesive and non-adhesive techniques for bonding polymers and metals into
single units, multiple extrusion capabilities, integrated components to realize
cost and quality advantages of total systems and advanced polymer/metal
technology that integrates polymers and metal into single systems.
Kingston-Warren is also known for its prototyping and testing functions.
Kingston-Warren provides a variety of sealing products for several
different major OEM platforms. The following table represents a product summary.
<TABLE>
<CAPTION>
CUSTOMER PRODUCT PLATFORM
- --------------------------------- --------------------------------- ---------------------------------
<S> <C> <C>
Freightliner Body & Glass Sealing Heavy Truck
General Motors Glass Sealing Malibu/Cutlass
General Motors Glass Sealing Cadillac DeVille
General Motors Glass Sealing Cavalier/Sunfire
General Motors Glass Sealing Grand Prix
General Motors Glass Sealing Bonneville
General Motors Glass Sealing LeSabre
General Motors Glass Sealing Oldsmobile 88
General Motors(1) Glass Sealing Blazer & Jimmy
General Motors(1) Glass Sealing DeVille
General Motors(1) Glass Sealing Catera
General Motors(1) Greenhouse Moldings Catera
</TABLE>
- ------------------
(1) Products constitute goods to be delivered in the future pursuant to
contracts that have been executed by the Company and the customer ("Future
Booked Business").
Kingston-Warren's three manufacturing facilities deliver over 134 million
feet of supported, unsupported, and multiple durometer extrusions per year. Its
short cycle production is supported by interactive manufacturing
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systems including MRP II, J-I-T, bar coding and statistical process controls.
During 1998, Kingston-Warren constructed a rubber mixing facility at its
Wytheville, VA location allowing the company to compound its own rubber
mixtures. This will further shorten the production cycle and permit
Kingston-Warren to custom mix its rubber compounds to it own performance and
quality specifications. Kingston-Warren's major competitors include BTR,
Standard Products, GenCorp and Waterville.
Pottstown Precision Casting (formerly Doehler-Jarvis Pottstown, Inc.)
Acquired by Harvard in July 1995 for $218 million, Doehler-Jarvis has been
in operation since 1907. Doehler-Jarvis specialized in complex, high volume
aluminum castings primarily for use in the automotive industry. Although
Doehler-Jarvis through its subsidiaries historically operated three plants
(Toledo, Ohio; Pottstown, Pennsylvania; and Greeneville, Tennessee), only the
Pottstown plant remains in operation following Harvard's emergence from
Chapter 11, and the subsidiary has been renamed Pottstown Precision Casting,
Inc. Pottstown's primary customers are Ford and General Motors. At
September 30, 1998, the Pottstown plant employed approximately 475 persons.
The Pottstown plant specializes in medium size aluminum die castings and
complements its casting capabilities with precision machining. It is an
independent supplier of parts cast with 390 aluminum alloy (a heat-resistant and
durable alloy) in North America, supplying heavy duty internal transmission and
air compressor castings. Pottstown smelts an average of 165,000 pounds of 390
aluminum alloy per day (60% capacity), and approximately 110,000 pounds of the
other alloys per day. Pottstown has over 50 casting machines to focus on small
to medium sized parts.
Pottstown makes products which are supplied to General Motors, Ford, and
Simpson Industries, among others. The following table represents a product
summary.
<TABLE>
<CAPTION>
CUSTOMER PRODUCT PLATFORM
- --------------------------------- --------------------------------- ---------------------------------
<S> <C> <C>
General Motors Engine Bed Plate Passenger Cars
General Motors Input Housing Light Trucks
Simpson Industries V6 Cylinder Head Various Vehicles
General Motors Pump Cover 4-L60 All vehicles
</TABLE>
The Pottstown facility is QS9000 certified, a quality assurance program
conducted by General Motors, and has a wide range of die casting capabilities.
The 470,000 square foot facility has advanced robotics for painting, casting,
die servicing, controlling metal pouring and casting extraction.
Pottstown competes primarily with Gibbs Die Casting Corp., Spartan, Ryobi
Die Casting (USA), Inc., ITT Lester Industries, Inc., Fort Wayne Foundry Corp.,
CMI International Inc. and Teksid SPA, as well as the captive aluminum casting
operations of the U.S. automakers.
Hayes-Albion
Hayes-Albion was purchased by Harvard in 1986 and has conducted business
since 1888 as a supplier of cast and machined parts to the automotive, farm
equipment and general industrial markets. Historically, Hayes-Albion has
operated six plants, but is in the process of divesting its Tiffin, Ohio plant.
Hayes-Abion's five manufacturing facilities located in Albion, and Jackson,
Michigan; Bridgeton, Missouri; Rock Valley, Iowa; and Ripley, Tennessee occupy
approximately 1,000,000 square feet and at September 30, 1998, employed
approximately 1,500 persons. The Company's Hayes-Albion primary customers are
Ford, General Motors and Caterpillar.
Hayes-Albion's products consist of ferrous and non-ferrous castings and
fans. Ferrous castings are made from iron or steel, while non-ferrous castings
are made from other components such as aluminum, magnesium or zinc. Products
made from ferrous castings include transmission parts, universal joint yokes,
rear axle housings and suspension parts. Products made from aluminum, magnesium
and zinc castings include valve train covers, engine covers, suspension parts
and steering columns supports, and are manufactured for the automotive,
transportation, construction and machinery industries.
9
<PAGE>
The Company is currently evaluating its options for the Hayes-Albion's
Ripley, TN operations. Ripley produces die cast magnesium components and a small
amount of die cast aluminum components primarily for the automotive OEM market.
During the Chapter 11 reorganization, Ripley was unable to participate fully in
the magnesium market and several of its programs were targeted for resourcing or
second scourcing by its customers. Absent significant new, higher margin orders,
management currently projects continued operating losses for this operation. In
its Chapter 11 restructuring plan, the Company projected a growing use of
magnesium in automotive and industrial applications due to its high strength and
light weight. Upon further analysis, due to the stability of aluminum pricing
(resulting from the OEMs recent successful conclusion of long term aluminum
commodity supply agreements) the outlook for expected growth in the use of
magnesium will be significantly delayed, and as a result of this changed
marketing outlook, the Company is evaluating a sale of the Ripley facility.
The following table represents a product summary of Hayes-Albion.
<TABLE>
<CAPTION>
CUSTOMER PRODUCT PLATFORM
- --------------------------------- --------------------------------- ---------------------------------
<S> <C> <C>
Caterpillar Various Die Castings N/A
Caterpillar Machine Shafts N/A
Chrysler Plastic Fans All Trucks
Ford Gear Cases Medium Trucks
Ford Differential Carriers Lincoln
Ford Differential Carriers All Trucks
Ford Yokes All Rear Wheel Drive Vehicles
General Motors Fans Medium Trucks
General Motors Delphi Machined Shafts All Trucks
General Motors Front Engine Covers Passenger Cars
Isuzu Valve Covers Light Trucks
Toyota Valve Covers Lexus
Ford(1) Differential Carriers Lincoln & Jaguar
Ford(1) Gear Cases F-250 and F-350 Trucks
General Motors(1) Engine Fans Blazer and Jimmy Trucks
GM-Delco(1) Shafts Various Cars & Trucks
Caterpillar(1) Various Components Engine Applications
</TABLE>
- ------------------
(1) Future Booked Business.
Hayes-Albion has also identified opportunities with General Motors, Ford
and TRW to produce differential carriers, fans and various castings for
additional model platforms.
Hayes-Albion utilizes a technology driven approach to manufacturing which
utilizes computer modeling. Their manufacturing processes include centerless
grinding, CNC machining, heat treating, broaching, vibratory deburring and parts
washing and testing. Hayes-Albion's arc and coreless induction furnaces melt
over 1,000 tons of iron daily. Heat treating capacity exceeds 100 tons per day
and Hayes-Albion can produce a broad range of castings from under one pound to
over 150 pounds.
Hayes-Albion's primary competitors include Intermet, Grede, Schwitzer, Lunt
and Racine.
Trim Trends, Division of Hayes-Albion
Trim Trends, acquired by the Company in 1986 as part of Hayes-Albion, has
conducted business since 1948 primarily in functional and decorative metal
stampings for automotive applications. Trim Trends operates from four plants
covering 467,000 square feet: Deckerville, Michigan; Bryan and Spencerville,
Ohio; and Dundalk, Ontario. In September 1998, the Company announced the
consolidation of its Snover, Michigan operation into the Deckerville, Michigan
facility. Operations at Snover ceased in December 1998. At September 30, 1998,
Trim Trends employed approximately 700 persons.
Trim Trends manufactures roll form door frames for the North American OEM
market. In addition to the U.S. automakers, Trim Trends sells its products to
Navistar, Lear Corporation, Mitsubishi and Honda. Trim
10
<PAGE>
Trends has capabilities in roll forming, stretch bending, general metal assembly
technology and design and engineering. Trim Trends is currently bidding for
programs at General Motors and Chrysler for upper door frames, bumper impact
beams, door impact beams and other door and structural components. Trim Trends
also recently obtained awards from Chrysler to supply door frames for its NS Van
platforms and structural components for the LH Sedan, and an award from General
Motors to supply a door component for its GM 200 platform.
Trim Trends products are primarily sold to automotive OEMs and automotive
seating manufacturers. Primary customers include Ford, Chrysler, General Motors,
Lear Corporation and Navistar. The following table represents a product summary.
<TABLE>
<CAPTION>
CUSTOMER PRODUCT PLATFORM
- --------------------------------- --------------------------------- ---------------------------------
<S> <C> <C>
Chrysler Door Frames Mini Vans
Chrysler Various Stampings Intrepid & LHS
Chrysler Roll Formed H.S.S. Intrepid & LHS
Ford Door Frames Escort
General Motors Door Beams All Light Trucks
General Motors Door Beams Cadillac DeVille
General Motors Door Tracks MiniVan
General Motors(1) Door Beams MiniVan
General Motors(1) Cross Member DeVille
Mitsubishi(1) Delta Sash Galant
Mitsubishi(1) Division Post Assembly Galant
Magna(1) Cross Member Chrysler Van
Magna(1) Drip Rail Chrysler Van
Lear Corporation(1) Seat Reinforcement Ford Van
</TABLE>
- ------------------
(1) Future Booked Business.
Trim Trends' four plants form a single source for specialized and
compatible metal fabricating. The processes include: roll forming, stretch
bending, stamping, various assembly functions, machining, welding, fabricating
and anodizing. On-site equipment consists of over 200 presses, ranging in size
up to 1,600 tons. Trim Trends utilizes statistical process controls to ensure
consistently high quality, reduce failure costs and maintain the dynamics for
constant product and process improvement.
Trim Trends competes against a number of other domestic and international
suppliers of formed metal components, including Visteon, Excel Industries,
Benteler Werke AG, Magna International and Inland Fisher Guide.
COMPETITION
The Company is subject to competition from many companies larger in size
and with greater financial resources and a number of companies of equal or
similar size which specialize in certain of the Company's activities. The
Company considers major competitors with respect to each unit in its business to
include: Kingston-Warren: Standard Products, GenCorp, BTR. and Waterville;
Hayes-Albion: Intermet, Grede, Schwitzer, Lunt and Racine; Trim Trends: Excel
Industries, Inland Fisher Guide, Magna International, Visteon and Benteler Werke
AG; Pottstown: Ryobi Die Casting (USA), Inc., Gibbs Die Casting Corp., ITT
Lester Industries, Inc., Fort Wayne Foundry Corp., CMI International Inc.,
Spartan and Teksid SPA, as well as the captive aluminum casting operations of
the U.S. automakers. Companies in these sectors compete based on several
factors, including product quality, customer service, product mix, new product
design capabilities, cost, reliability of supply and supplier ratings.
INTELLECTUAL PROPERTY
The Company from time to time applies for patents with respect to
patentable developments. However, no patent or group of patents held by the
Company is, in the opinion of management, of material importance to the
Company's business as a whole.
11
<PAGE>
MARKETING AND SALES
The Company markets and distributes its products to non-governmental
entities through sales persons and independent manufacturers' representatives,
the loss of any one of whom would not have a materially adverse impact on the
Company. The Company and its subsidiaries compete for OEM business at the
beginning of the development of new products, upon customer redesign of existing
components and customer decisions to outsource captive component production.
Such sales to automotive OEMs are made directly by the Company's sales, customer
service and engineering force. The Company's sales and engineering personnel
service its automotive OEM customers and manage its continuing programs of
product development and design improvement. In keeping with industry practice,
OEMs generally award blanket purchase orders and contract through the life cycle
of the product for specific parts and components for a given model for a
particular powertrain or other mechanical component. These components are
generally used across several platforms or models. Purchase orders do not commit
customers to purchase any minimum number of components and are not necessarily
dependent upon model changes. Substantially all of the Company's sales are
derived from United States and Canadian sources.
EMPLOYEES
At September 30, 1998, Harvard had approximately 4,400 employees, a
decrease of approximately 2,100 employees from September 30, 1997 resulting from
the wind-down and/or divestiture of several operating facilities as discussed
elsewhere herein. Approximately 42% of Harvard's employees as of September 30,
1998 were covered by collective bargaining agreements negotiated with 16 locals
of 9 unions (collectively, the "Unions"). These contracts expire at various
times through the year 2002. Discussions with various Unions regarding new labor
agreements or extensions of existing contracts are presently under way. The
following table outlines the labor agreement expiration dates at each of
Harvard's plants.
<TABLE>
<CAPTION>
PLANT UNION DATE OF EXPIRATION
- --------------------------------- --------------------------------- ---------------------------------
<S> <C> <C>
Albion UAW 3/01/02
Jackson UAW 7/01/02
Tiffin UAW 2/01/00
St. Louis IAM 5/01/00
Spencerville UAW 4/30/99
Bryan Paper-Workers 12/15/99
Dundalk/Canada USWA 6/27/99
Arnold Painters 3/13/01
Transportation Teamsters 3/31/00
Pottstown Master + Local UAW 10/31/99
</TABLE>
The Company expects that all of the collective bargaining agreements will
be extended or renegotiated in the ordinary course of business. As a result of
such renegotiations, the Company expects that its labor and fringe benefit costs
will increase in the future. The Company does not believe that the impact of
these increases will negatively affect the financial position or results of
operations of the Company. The Company has never experienced any work stoppages
at its facilities and has been able to extend or renegotiate its various
collective bargaining agreements without disrupting production.
In December 1997 the Company entered into modified executive severance
agreements (the "Executive Agreements") with Joseph Gagliardi, Roger Burtraw and
Richard Dawson, the then Chief Financial Officer, President and General Counsel
of the Company, respectively. These agreements continued the severance
arrangements previously established for these covered executives with certain
modifications. These modifications included changing the definition of "Change
in Control" to prevent a triggering based on the Company's reorganization
itself, confirming and supplementing certain prepetition pension arrangements
and extending the expiration date of the prepetition severance agreements.
Richard Dawson, former Senior Vice President for Law and Administration, left
the Company's employ in February 1998 and has been paid approximately $400,000
in benefits under his Executive Agreement. Roger Burtraw left the Company's
employ in July 1998 and has been paid approximately $1,000,000 in benefits under
his Executive Agreement. Joseph Gagliardi remained with the
12
<PAGE>
company as Executive Vice President Administration. The executive agreements
were approved by an order of the Bankruptcy Court dated December 30, 1997.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The raw materials required by the Company are obtained from regular
commercial sources of supply and, in most cases, from multiple sources. Under
normal conditions, there is no difficulty in obtaining adequate raw material
requirements at competitive prices, and no shortages have been experienced by
the Company. Major raw materials purchased by Harvard include aluminum, energy,
steel, glass, rubber, and paint. The Company considers its major raw material
suppliers with respect to each unit in its automotive business to include:
Kingston-Warren: PPG and Burton Rubber; Hayes-Albion: Consumer's Power, Jackson
Iron and Metal and Acustar; and Trim Trends: Inland Steel. These suppliers
furnish energy, steel, glass, rubber, and paint to such subsidiaries. Pottstown
is not dependent on any individual supplier. Its principal raw material is
aluminum, which is purchased from multiple suppliers. Captive aluminum
processing operations enable Pottstown to purchase less costly scrap aluminum
and non-certified aluminum ingot and to refine the metal to the required
certified specifications. Harvard's purchase orders with its OEM customers
provide for price adjustments related to changes in the cost of certain
materials.
The Company's top ten suppliers in 1998 for continuing businesses were:
<TABLE>
<CAPTION>
DOLLARS/YEAR
(APPROXIMATE)
(IN
SUPPLIER THOUSANDS) PRODUCT HARVARD DIVISION
- ------------------------------------- ------------- ---------------- ---------------------
<S> <C> <C> <C>
PPG $10,800 Glass Kingston-Warren
Chrysler $10,000 Steel Coil Trim Trends division
Jackson Iron & Metal $ 9,600 Steel Scrap Hayes Albion
M.A. Hanna Rubber Co. $ 8,000 Rubber Compound Kingston-Warren
Stanton Moss, Inc. $ 4,000 Aluminum Hayes Albion
Dyna-Mix, Inc. $ 3,400 Rubber Compound Kingston-Warren
Asian Metals $ 3,100 Magnesium Hayes Albion
Globe Metals $ 3,000 Silicon Hayes Albion
Steel Technologies $ 3,000 Steel Coil Trim Trends division
Eastern Alloys $ 2,900 Aluminum Hayes Albion
</TABLE>
BUSINESS CYCLE AND SEASONALITY
The Company's customers are predominantly automotive OEMs. As such, sales
of the Company's products directly correlate with the overall level of passenger
car and light truck production in North America. Although most of the Company's
products are generally not affected by year-to-year automotive style changes,
model changes may have a significant impact on sales.
In addition, the Company experiences seasonal fluctuations to the extent
that the operations of the domestic automotive industry slow down during the
summer months, when plants close for vacation period and model year changeovers,
and during the month of December for plant holiday closings. As a result, the
Company's third and fourth quarter sales are usually somewhat lower than first
and second quarter sales.
RISK FACTORS RELATING TO THE BUSINESS
Emergence from Bankruptcy
The Company emerged from bankruptcy proceedings contemporaneously with the
consummation of the Financings. The fact that the Company was in bankruptcy may
affect the Company's ability to negotiate favorable trade terms with
manufacturers and other vendors in the future. Similarly, the Company's
experience in bankruptcy could have an adverse impact on its ability to secure
new purchase orders with current and prospective customers. The failure to
obtain favorable terms from suppliers or new business from current and
prospective customers could have a material adverse effect on the Company and
its financial performance.
13
<PAGE>
In particular, the fact that the Company was in bankruptcy had a negative
impact on the Company's results of operations and may also negatively affect the
Company's ability to win new business in the future. In general, there is a
delay of between two to four years after being awarded a contract to supply
components for a new OEM platform to the period when sales of such components
are made. During this period of delay, automotive component suppliers must bear
considerable design and development costs associated with the new platform. In
light of these considerable costs and the financial constraints of bankruptcy,
the Company has not been awarded as many contracts as it might otherwise have
obtained had it not been in bankruptcy. General Motors has been supportive of
the Company during this period and has awarded several new contracts to Harvard
during the period of bankruptcy reorganization.
Net Losses
The Company experienced losses for the last three fiscal years. For fiscal
years 1996, 1997 and 1998, the Company had net losses of approximately
$69 million, $389 million and $56 million respectively. These losses have been
primarily due to operating inefficiencies and losses associated with operations
of the Company designated for sale or wind-down. If the Company continues to
experience net losses, the Company will be required to find additional sources
of financing to fund its operating deficits, working capital requirements, and
anticipated capital expenditures and financing commitments. There can be no
assurance that such financing will be available on terms and conditions
acceptable to the Company in such circumstances or that, if debt financing is
required, such financing would be permitted under the terms of the Indenture and
the Senior Credit Facility. If the Company experiences losses in the future,
that fact, combined with the absence of additional financing, could impair the
Company's ability to pay the principal of and Interest and premium, if any, on
the Notes, or to redeem the Notes.
The Company's Plan of Reorganization as an acceptable means of satisfying
creditor claims in accordance with the Bankruptcy Code, was confirmed by the
Court on October 15, 1998, and such plan became effective on November 24, 1998
(See Note 28). Continuation of the Debtors' business after reorganization is
dependent upon the success of future operations, including execution of the
Company's turnaround business strategy and the ability to meet obligations as
they become due. The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. The Company
has suffered recurring losses from operations and at September 30, 1998 had a
net working capital deficit and shareholder's deficit. These factors among
others raise substantial doubt about the Company's ability to achieve successful
future operations. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Noncomparability of Financial Information
Information reflecting the results of operations and financial condition of
the Company subsequent to the Effective Date will not be comparable to prior
periods due to (i) the replacement of the management team and the restructuring
of the Company's core operations and general and administrative activities;
(ii) the Company's bankruptcy proceedings, including the costs and expenses
relating thereto, and the effect of the settlement of certain related
liabilities; and (iii) the application of Fresh Start Reporting (as defined
herein), pursuant to which the Company's equity will be restated at
"reorganization equity value," a value which was determined by the financial
advisors to the Creditors' Committee, pursuant to the Plan of Reorganization. In
addition, because the Company has been in a restructuring phase and has
continued to incur costs and expenses relating to its bankruptcy proceedings,
the results of operations since May 1997 may not be indicative of the Company's
future performance. See "Item 1 Business--Subsequent Material Event."
Risks Associated with Execution of the Turnaround Business Strategy
The Turnaround Business Strategy entails a substantial restructuring of the
Company's revenue and customer base. As a result, the Company's value and
profitability are dependent upon its ability to successfully execute the
Turnaround Business Strategy. The success of the Turnaround Business Strategy,
however, is subject to, among other things, the Company's ability to:
o terminate consensually certain unprofitable contracts and purchase orders
with its customers;
14
<PAGE>
o attract new business or customers for its present business segments;
o produce and sell new products at projected margins and at competitive
prices;
o attract key new personnel for its manufacturing facilities;
o dispose of old customer orders in a time span that will enable the
Company to utilize capacity for new business in an efficient manner;
o develop or acquire a distribution network for after-market and industrial
products; and
o appropriately gauge the impact of the Turnaround Business Strategy on
relations with current customers.
There can be no assurance that the Turnaround Business Strategy will be
successful or that the Company will be able to operate profitably even if the
Turnaround Business Strategy is successfully executed. If implementation of the
Turnaround Business Strategy is not successful and the Company is unable to
generate sufficient operating funds to pay Interest, Liquidated Damages and
premium on, and principal of, the Notes and other indebtedness of the Company,
including indebtedness under the Senior Credit Facility, there can be no
assurance that alternative sources of financing would be available to the
Company or, if available, that such financing would be available on commercially
reasonable terms.
Capital Intensive Industry; Capital Expenditure Program
The Company operates in an industry which requires substantial capital
investment, and additional capital expenditures are required by the Company to
upgrade its facilities. The Company believes that its competition will continue
to invest heavily to achieve increased production efficiencies and improve
product quality. During the past few years, the Company has deferred certain
discretionary capital expenditures due to financial constraints.
The Company's ability to compete in such a competitive environment will be
dependent upon, among other things, its ability to make major capital
expenditures over the next several years in order to service existing business,
enter new markets and remain competitive in certain markets. The Company had
capital expenditures of approximately $25 million in 1998 and forecasts capital
spending to be $20 million in 1999. Through 2002 (inclusive of 1998), the
Company expects to spend approximately $110 million in capital expenditures.
There can be no assurance that there will be sufficient internally generated
cash or available acceptable external financing available to make the necessary
capital expenditures for a sufficient period of time.
Risks Inherent in the Automotive Industry
A significant portion of the Company's sales are made to customers in the
automobile and light truck manufacturing industry. Direct sales of the Company's
products to the automobile and light truck manufacturing market accounted for
approximately 92%, 98%, and 96% of its net sales for its fiscal years ended
September 30, 1998, 1997 and 1996, respectively. Demand for certain of its
products is affected by, among other things, the relative strength or weakness
of the North American automobile and light truck manufacturing industry and
events, such as regulatory requirements, trade agreements and labor disputes,
one of which was settled in the third quarter of 1998 after a 54 day strike at
General Motors which occurred between June 7 and July 31, 1998, affecting the
North American automobile and light truck manufacturing industry. The Company's
revenue and operating income was adversely impacted by the strike.
In addition, automotive sales and production are cyclical and somewhat
seasonal and can be affected by the strength of a country's general economy. A
decline in automotive production and sales would likely affect not only the
sales of components, tools and services to vehicle manufacturers and their
dealerships, but also the sales of component, tools, and services to aftermarket
customers. Such a decline in sales and production could result in a decline in
the Company's results of operations or a deterioration in the Company's
financial condition. If demand changes and the Company fails to respond
accordingly, its results of operations could be adversely affected in any given
quarter. See "Item 1 Business--Industry Overview."
15
<PAGE>
Risks Associated with Obtaining Business for New and Redesigned Model
Introductions
The Company principally competes for new business both at the beginning of
the development of new models and upon the redesign of existing models by its
major customers. New model development generally begins two to five years prior
to the marketing of such models to the public, and existing business generally
lasts for the model life cycle. In order to meet the needs of customers with
changing products, the Company needs to implement new technologies and
manufacturing processes when launching its new products. Moreover, in order to
meet its customers' requirements, the Company may be required to supply its
customers regardless of cost and consequently suffer an adverse impact to
operating profit margins. Although management believes it has implemented
manufacturing processes that adapt to the changing needs of its customers, no
assurance can be made that the Company will not encounter difficulties when
implementing new technologies in future product launches, any of which could
adversely affect the Company.
Reliance on Major Customers
Of the Company's consolidated net sales for fiscal year 1998, approximately
39%, 34%, and 10% were attributable to General Motors, Ford and Chrysler
respectively. Although the Company has purchase orders from many of its
customers, such purchase orders generally provide for supplying the customer's
annual requirements for a particular model or assembly plant, renewable on a
year-to-year basis, rather than for manufacturing a specific quantity of
products. The loss of any one of its major customers or a significant decrease
in demand for certain key models or a group of related models sold by any of its
major customers could have a material adverse effect on the Company. (See "Item
1 Business--Customers.")
Dependence on Key Personnel
The success of the Company depends in large part upon the abilities and
continued service of its executive officers and other key employees and, in
particular, of Roger Pollazzi, who currently serves as Chairman and Chief
Executive Officer. There can be no assurance that the Company will be able to
retain the services of such officers and employees. The failure by the Company
to retain the services of Mr. Pollazzi and other key personnel could have a
material adverse effect on the Company's results of operations and financial
condition. (See "Item 1 Business--Company History.")
Environmental Matters
The Company is subject to extensive regulation under environmental and
occupational health and safety laws and regulations. In addition, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section Section 9601 et seq., ("CERCLA") generally imposes joint and several
liability for clean-up and enforcement costs, without regard to fault on parties
allegedly responsible for contamination at a site. The Company may be subject to
liability as a result of the disposal of hazardous substances on and off the
properties currently and formerly owned or operated by the Company. In addition,
the Company is subject to various federal, state, local and foreign laws and
regulations, including CERCLA, governing the use, discharge and disposal of
hazardous materials. During fiscal years 1996, 1997, and 1998, the Company
expended, in cash, $2.7 million, $1.7 million, and $0.1 million, respectively,
in environmental remediation costs and related expenses.
As a result of historical and current operations involving the use and
disposal of hazardous materials in the ordinary course of its operations, the
Company has been named as a defendant or potentially responsible party in a
variety of environmental matters, including contractual indemnity and statutory
cost recovery litigation involving current and former operating facilities as
well as waste disposal sites. As part of such litigation, the Company has
asserted counterclaims and cross-claims relating to the properties involved and
other properties where the Company believes that the original plaintiffs, as
well as other parties, are liable for certain investigative and remedial costs
that have been or may be incurred by the Company. The Company believes that all
claims for costs related to off-site disposal or formerly owned properties will
be discharged by the bankruptcy.
The Company is also conducting remedial activities at certain current and
former facilities pursuant to governmental orders and private contractual
agreements. The Company has granted access to the Michigan Department of
Environmental Quality at the Hayes-Albion plant in Jackson, Michigan for an
investigation of the
16
<PAGE>
plant's use and disposal of chlorinated solvents. The investigation is in
connection with the Department's evaluation of an area-wide groundwater
contamination problem. The Company may be subject to injunctive orders requiring
remediation of this property. In addition, the State of Ohio has filed a
complaint in state court in Ohio seeking penalties and injunctive relief arising
out of alleged air emission violations at the Tiffin, Ohio facility.
Furthermore, as a result of the Company's manufacturing operations
involving the use and disposal of hazardous substances, the Company is aware of
certain currently owned facilities that are not required to be remediated at the
current time but that could possibly require remediation activity in the future.
While the Company believes it has provided adequate reserves (estimated to be
approximately $8.5 million upon consummation of the Plan of Reorganization) for
its share of potential costs associated with the clean-up of hazardous
substances at various sites. Changes in existing environmental laws or their
interpretation and more rigorous enforcement by regulatory authorities may give
rise to additional expenditures, compliance requirements or liabilities that
could have a material adverse effect on the business, financial condition and
results of operations of Harvard.
Finally, given the historical operations involving the use and disposal of
hazardous substances at the Company's facilities, additional environmental
liability and litigation may arise in the future, the precise nature and
magnitude of which cannot be predicted. (See "Item 3 Legal Proceedings.")
Underfunded Pension Plans
As reflected in its audited financial statements, the Company and its
subsidiaries collectively had aggregate unfunded pension liabilities as of
September 30, 1998 and 1997 of approximately $17.0 and $5.7 million respectively
related to their defined benefit pension plans where plan liabilities (on an
accumulated benefit obligation basis) exceeded the fair value of plan assets.
Approximately $7.4 million of the increase in 1998 is due to a curtailment loss
associated with the Toledo plant shut down. On July 26, 1994, the Company and
certain of its affiliate companies entered into a settlement agreement (the
"PBGC Settlement Agreement") with the Pension Benefit Guaranty Corporation
("PBGC"), pursuant to which the Company and certain of its subsidiaries were
obligated, among other things, to make contributions to specified underfunded
pension plans. All contributions required to be made pursuant to such settlement
agreement have been made. In connection with the Plan of Reorganization, the
PBGC and the Company have entered into a new PBGC Settlement Agreement under
which the PBGC Settlement Agreement was terminated. The terms and provisions of
the old and new PBGC Settlement Agreements are more fully described in the
Disclosure Statement.
On November 6, 1998, the Company filed a Post-Event Notice of Reportable
Event disclosing more than 20% reductions in participation under the
Doehler-Jarvis Pension Plan for wage basis employees, the Harvard Retirement
Plan and the Retirement Plan for Union Employees of Harman Automotive, Inc. as a
result of the shut down, during the pendency of the Chapter 11 proceedings, of
the Doehler-Jarvis Toledo operations, the St. Louis, Missouri facility of the
Company's Harvard Interiors Manufacturing Company ("Harvard Interiors") division
and the Bolivar, Tennessee facility of Harman Automotive, Inc., and the sale of
assets of the Greeneville, Tennessee facility of Greeneville. The PBGC and the
Company have amended the new PBGC Settlement Agreement to expand the matters as
to which the PBGC will refrain from exercising its remedies under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") to include the
above-described shutdowns and sale of assets. No additional obligations were
imposed upon the Company or its subsidiaries as a result of this amendment. The
Company estimates that, upon emergence from Chapter 11, the unfunded liabilities
related to defined benefit pension plans will be approximately $17 million. If
the Company is unable to meet its contribution obligations under such plans, and
alternative contribution arrangements cannot be agreed upon, the PBGC has
remedies under ERISA that would permit it to seek to terminate the affected plan
or plans, thus accelerating payment obligations for the affected underfunded
plan or plans.
Impact of the Year 2000
As is the case with most other companies using computers in their
operations, the Company is in the process of addressing the Year 2000 problem
and certain of the Company's information systems are not presently Year 2000
compliant. The Company is currently installing a new management information
system that will allow its
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critical information systems and technology infrastructure to be Year 2000
compliant before transactions for the year 2000 are expected. Many of the
Company's systems include new hardware and packaged software recently purchased
from large vendors who have represented that these systems are already Year 2000
compliant. The Company is in the process of obtaining assurances from vendors
that timely updates will be made available to make all remaining purchased
software Year 2000 compliant. The Company will utilize both internal and
external resources to reprogram or replace and test all of its software for Year
2000 compliance, and the Company has commenced the installation and testing of
its Year 2000 compliant systems at various locations subsequent to the fiscal
year end, with an expected Company-wide rollout to be completed by the end of
fiscal 1999. The estimated cost for this project is $14 million. The Company
spent approximately $7.7 million for Year 2000 compliance in fiscal 1998 and
plans to spend approximately $5.8 million in fiscal 1999. Failure by the Company
and/or vendors and customers to complete Year 2000 compliance work in a timely
manner could have a material adverse effect on certain of the Company's
operations.
Competition
The markets for the Company's products are highly competitive. The
Company's products compete with those of a substantial number of companies, many
of which are larger and have resources, financial or otherwise, substantially
greater than those of the Company and which have not and will not likely suffer
the negative effects of having been in bankruptcy. Competitive factors in the
market include product quality, customer service, product mix, new product
design capabilities, cost, reliability of supply and supplier ratings. There can
be no assurance that the Company will be able to compete effectively with these
companies in the future or that significant new competitors will not enter the
market.
Collective Bargaining Agreements
As of September 30, 1998, the Company had approximately 4,400 employees.
Approximately 42% of the Company's employees are covered by collective
bargaining agreements negotiated with 16 locals of 9 unions (collectively, the
"Unions"). These contracts expire at various times through the year 2000.
Discussions with various Unions regarding new labor agreements or an extension
of existing contracts are presently underway.
Prices and Availability of Raw Materials
Major raw materials purchased by the Company include aluminum, energy,
steel, glass, rubber and paint. The Company obtains the raw materials it uses
from regular commercial sources of supply and, in most cases, from multiple
sources. Under normal conditions, there is no difficulty in obtaining adequate
raw material requirements at competitive prices, and no shortages have been
experienced by the Company. Nevertheless, significant increases in raw material
prices could have a material adverse effect on the financial condition or
results of operations of the Company. Historically, the Company has, and in the
future may, enter into hedging arrangements designed to protect against
fluctuations in raw material prices and also attempts to offset raw material
cost increases through the use of selling price increases.
Trends in the Automotive Industry
In the late 1980's and early 1990's, U.S. automakers instituted a number of
fundamental changes in their sourcing procedures. Principal among these changes
has been an increased focus on suppliers' costs and improving quality
performance, requiring component suppliers to bear a greater proportion of the
burden of design and development costs and a consolidation in the number of
suppliers with which the OEMs place purchase orders, among others. The result of
these trends, as summarized below, has been to place greater business and
financial risk on automotive component suppliers, such as the Company.
In general, there has been substantial and continuing pressure from OEMs to
reduce costs, including the cost of products purchased from outside suppliers.
Certain of the Company's products are sold under agreements that require the
Company to provide annual cost reductions to such purchasers (directly through
price reductions or indirectly through suggestions regarding manufacturing
efficiencies or other cost savings) by certain percentages each year. There can
be no assurance that the Company will be able to generate such cost savings in
the future. If
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the Company were unable to generate sufficient cost savings in the future to
offset such price reductions, the Company's profit margins could be adversely
affected. See "Item 1 Business--Industry Overview."
Another trend in the automotive industry is that OEMs are requiring
potential suppliers of components to become involved earlier in and share a
greater proportion of the costs of the design and development process for new
platforms and to develop integrated systems or modules rather than merely
manufacture separate parts. The component supplier is expected to manage the
entire development cycle of the product or system, including design and
engineering, production of prototypes, design validation, design of tooling and
completion of manufactured products and integrated systems of products, all of
which can take between two and four years.
The ability to become involved earlier in the design and development
process for new platforms is an important factor in winning new business from
the OEMs. This trend has placed greater pressure on automotive component
suppliers and has shifted a larger percentage of the cost of research and
development and design and capital outlays for such new platforms and systems
onto component suppliers, such as the Company. In addition, this trend has had a
relatively greater impact on the Company than on many of its competitors because
of OEMs' reluctance to award new business to the Company due to its emergence
from bankruptcy. There can be no assurance that the Company will be able to
become involved earlier in the design and development process for new platforms
nor, if successful in becoming involved earlier in such processes, can there be
any assurance that the Company will be able to generate sufficient cash or have
financing available to fund the greater costs associated with that effort.
One result of the above described trends is that the automotive supply
industry is experiencing a period of significant consolidation. As part of OEMs'
efforts to reduce costs and improve quality, U.S. automakers are reducing their
supplier base by awarding sole-source contracts to full-service suppliers who
are able to provide design, engineering and program management capabilities and
can meet cost, quality and delivery requirements. This trend has also resulted
in greater competition from larger companies with greater financial and other
resources. In addition, there is no assurance that the Company will have the
financial flexibility to make the necessary capital expenditures or to make
acquisitions to grow its business to remain competitive and viable in the
component supplier industry.
An additional trend in the automotive industry is that foreign automotive
manufacturers have gained a significant share of the U.S. market, both from
export sales as well as the more recent opening of manufacturing facilities
located domestically. Between 1985 and 1997, sales of automobiles from foreign
car makers with U.S. manufacturing facilities increased from 2.0% to 20.5% of
the North American market. Based on industry analysts' estimates, the percentage
of Japanese cars sold in the United States from domestic manufacturing
facilities grew from 8.4% in 1985 to 51.8% in 1994. To the extent that the
growth of such "transplant" sales has resulted, and will likely continue to
result in, a loss of market share for U.S. automakers, component suppliers,
including the Company, will experience an adverse effect as most of its current
customers are U.S. automakers. Although the Company plans to solicit additional
business from foreign automakers, there can be no assurance that it will be
successful in doing so or that such additional business will compensate for lost
business that the Company has already experienced.
ITEM 2. PROPERTIES
FACILITIES
In connection with the election of Mr. Roger Pollazzi as Chief Operating
Officer in November 1997, the Company relocated its principal executive offices
to leased space in Lebanon, New Jersey. The principal properties of the Company
include its production facilities, all of which are owned by the Company and its
subsidiaries, except for the real property in Ripley, Tennessee. The Company
also leases certain warehouse and distribution facilities and regional sales
offices that are not included among the Company's principal properties. None of
the leases is material to the Company's business as a whole, or provides any
unique advantage. Capacity at any plant depends, among other things, on the
product mix, the processes and equipment used and tooling. While capacity varies
periodically as a result of customer demand, the Company currently estimates
that its automotive business plants generally operate between 60% and 100% of
capacity on a five-day per week basis.
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The following table sets forth certain information with respect to the
Company's principal properties:
<TABLE>
<CAPTION>
SUBSIDIARY OR DIVISION LOCATION TYPE OF FACILITY SQ. FT.
- ----------------------- ---------------------- -------------------------------------- -------
<S> <C> <C> <C>
Harvard Industries Farmington Hills, MI Administrative offices 70,000
Kingston-Warren Newfields, NH Mfg. Plant, office and warehouse 302,000
Kingston-Warren Wytheville, VA Mfg. Plant, office and warehouse 119,000
Kingston-Warren Church Hill, TN Mfg. Plant, office and warehouse 162,900
Harman Bolivar, TN Mfg. Plant, warehouse, and office(1) 294,400
Hayes-Albion Albion, MI Mfg. Plant 458,300
Hayes-Albion Bridgeton, MO Mfg. Plant 128,300
Hayes-Albion Jackson, MI Mfg. Plant 218,600
Hayes-Albion Rock Valley, IA Mfg. Plant 86,000
Hayes-Albion Ripley, TN Mfg. Plant(2) 100,000
Hayes-Albion Tiffin, OH Mfg. Plant(1) 467,400
Trim-Trends Division Kingston, MI Rental Property 12,000
Trim-Trends Division Deckerville, MI Mfg. Plant 74,900
Trim-Trends Division Snover, MI Mfg. Plant(1) 75,500
Trim-Trends, Canada Dundalk, ON, Canada Mfg. Plant 80,000
Trim-Trends Division Bryan, OH Mfg. Plant 141,500
Trim-Trends Division Spencerville, OH Mfg. Plant 159,000
Doehler-Jarvis Toledo, Ohio Mfg. Plant and office building(1) 542,000
Doehler-Jarvis Pottstown, PA Mfg. Plant 470,000
Harvard Industries Arnold, MO Mfg. Plant 31,400
Harvard Industries Salem, South Carolina Idle Mfg. Plant(1) 51,000
</TABLE>
- ------------------
(1) Facility is currently for sale.
(2) The real property underlying this facility is leased through August 30,
1999.
ITEM 3. LEGAL PROCEEDINGS
On three separate occasions in fiscal 1994, the Company became aware that
certain products of its ESNA division were not manufactured and/or tested in
accordance with required specifications at its Union, New Jersey and/or
Pocahontas, Arkansas facility. These fastener products were sold to the United
States Government and other customers for application in the construction of
aircraft engines and airframes. In connection therewith, the Company notified
the Department of Defense Office of Inspector General ("DOD/OIG") and, upon
request, was admitted into the Voluntary Disclosure Program of the Department of
Defense (the "ESNA matter"). The Company has settled this matter in principal
(final stipulation yet to be executed) for $475, to be paid subsequent to the
fiscal year end.
In June 1995, a group of former employees of the Company's subsidiary,
Harman Automotive-Puerto Rico, Inc., commenced an action against the Company and
individual members of management in the Superior Court of the Commonwealth of
Puerto Rico seeking approximately $48 million in monetary damages and unearned
wages relating to the closure by the Company of the Vega Alta, Puerto Rico plant
previously operated by such subsidiary. Claims made by the plaintiffs in such
action include the following allegations: (i) such employees were discriminated
against on the basis of national origin in violation of the laws of Puerto Rico
in connection with the plant closure and that, as a result thereof, the Company
is alleged to be obligated to pay unearned wages until reinstatement occurs, or
in lieu thereof, damages, including damages for mental pain and anguish;
(ii) during the years of service, plaintiffs were provided with a one-half hour
unpaid meal break, which is alleged to violate the laws of Puerto Rico,
providing for a one-hour unpaid meal break and demand to be paid damages and
penalties and request seniority which they claim was suspended without
jurisdiction; and (iii) plaintiffs were paid pursuant to a severance formula
that was not in accordance with the laws of Puerto Rico, which payments were
conditioned upon the plaintiffs executing releases in favor of the Company, and
that, as a result thereof, they allege that they were discharged without just
cause and are entitled to a statutory severance formula.
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The Company is a party to various claims and routine litigation arising in
the normal course of its business. Obligations of the Company in respect of
litigation arising out of activities prior to the Petition Date, will be
discharged in accordance with the Plan of Reorganization. Based on information
currently available, management of the Company believes, after consultation with
legal counsel, that the result of such claims and litigation, will not have a
material adverse effect on the financial position or results of operations of
the Company.
ENVIRONMENTAL MATTERS
The Company is subject to various foreign, federal, state and local
environmental laws and regulations, including those relating to air emissions,
wastewater discharges, the handling and disposal of solid and hazardous wastes
and the remediation of contamination associated with the use and disposal of
hazardous substances. Certain subsidiaries of the Company have received
information requests or have been named potentially responsible parties ("PRPs")
by the United States Environmental Protection Agency ("EPA"), state
environmental agencies, or PRP groups under the Comprehensive Environmental
Response, CERCLA or analogous state laws with respect to approximately 25 sites.
As discussed below, any potential claims related to sites which are not owned
properties will be discharges as a result of Harvard's Chapter 11 case. Given
the Company's historic operations involving the use and disposal of hazardous
substances, additional environmental issues may arise in the future the precise
nature and magnitude of which the Company cannot predict.
A number of governmental agencies, PRP groups, and individual claimants
have filed proofs of claim against certain of the Company's subsidiaries with
respect to liabilities relating to environmental matters, including liabilities
arising under the Federal Water Pollution Control Act, 33 U.S.C.
Section Section 1251 et seq., ("Clean Water Act"), and the Clear Air Act,
("CERCLA") and analogous state laws (collectively, the "Environmental Claims").
The Company believes that the aggregate costs of resolving such Environmental
Claims will in all likelihood range between approximately $4 million and $8.5
million. This range reflects a number of factors which may influence the
ultimate outcome of the claims resolution process, such as the amount of such
claims paid in cash, the assertion of factual or legal defenses to certain
claims and the willingness of certain claimants to compromise their claims. The
potentially significant Environmental Claims presently asserted against the
Company and its subsidiaries and the proposed treatment of all Environmental
Claims are as follows:
Consent Decrees and Settlement Agreements
The Company and its subsidiaries are parties to several consent decrees and
settlement agreements relating to environmental matters executed prior to the
Chapter 11 filing (collectively, the "Consent Decrees and Settlement
Agreements"). The potentially significant Environmental Claims relating to the
Consent Decrees and Settlement Agreements include the following:
Vega Alta Superfund Site. A Record of Decision ("ROD") was issued on
November 10, 1987 naming Harman Automotive-Puerto Rico, Inc., a wholly owned
subsidiary of Harman, as one of several PRPs by the EPA pursuant to CERCLA
concerning environmental contamination at the Vega Alta, Puerto Rico Superfund
site (the "Vega Alta Site"). Other named PRPs include subsidiaries of General
Electric Company ("General Electric"), Motorola, Inc. ("Motorola"), The West
Company, Inc. ("West Company") and the Puerto Rico Industrial Development
Corporation ("PRIDCO"). PRIDCO owns the industrial park where the PRPs were
operating facilities at the time of alleged discharges. Another party, Unisys
Corporation ("Unisys"), was identified by General Electric as an additional PRP
at the Vega Alta Site.
There were two phases of administrative proceedings in the case. The first
phase, known as Operable Unit I ("OUI"), involves a unilateral order requiring
the named PRPs to implement the remedy chosen by the EPA, consisting of the
replacement of the drinking water supply to local residents and installation and
operation of a groundwater treatment system to remediate groundwater
contamination. In addition, the EPA filed a complaint in the United States
District Court for the District of Puerto Rico seeking damages and recovery of
costs from the PRPs, as well as a declaratory judgment that the PRPs were liable
for future response costs.
Motorola, West Company and Harman completed construction of the OUI remedy
pursuant to a cost-sharing arrangement. In June 1995, the parties agreed that
the total amount due from Harman to West Company and Motorola was $557,297,
payable in twenty equal quarterly installments. Payments have been suspended due
to the Chapter 11 Cases. West Company and Motorola have each made claims for
$139,324.25 for the remaining
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costs due pursuant to the cost-sharing arrangement for construction of the OUI.
Such claims have been allowed under the Plan of Reorganization and will be
discharged upon the receipt by West Company and Motorola of the Company's common
stock in respect of such allowed claims.
As to Harman's share of all other costs, pursuant to a Settlement
Agreement, dated June 30, 1993, Harman, Motorola and West Company each agreed to
pay General Electric the sum of $800,000 in return for General Electric's and
Unisys' agreement to assume liability for, and indemnify and hold Harman and the
others harmless against, the EPA's cost recovery claim, to undertake operation
and maintenance of the OUI cleanup system and to construct, operate and maintain
any other proposed system that may be required by the EPA under OUI, and to
conduct any further work concerning further phases of work at the Vega Alta
Site. Harman, West Company and Motorola retained liability for any cleanup
activities that may in the future be required by EPA at their respective
facilities due to their own actions, for toxic tort claims and for natural
resource damage claims. Harman's settlement payment to General Electric was
being made in 20 equal quarterly installments that commenced in January 1995
with 9% interest per annum. As a result of Harman's bankruptcy filing in May
1997, such payments were suspended. General Electric made a claim in the
Chapter 11 Cases for the remaining amount which General Electric believes is
owed pursuant to the Settlement Agreement. On December 29, 1998, the Bankruptcy
Court approved the Company's Assumption and Modification of the Settlement
Agreement whereby the Company will pay General Electric a total of $300,000 in
settlement of its claims.
In light of the Settlement Agreement described above, the PRPs (including
Harman) have stipulated with the EPA as to liability in order to avoid further
litigation. A consent decree among all of the PRPs and the United States, on
behalf of the EPA, was fully executed by all parties, and was entered by the
Federal District Court for the District of Puerto Rico, finally resolving the
cost recovery litigation.
On December 8, 1997, the EPA issued an amendment to its cleanup
requirements, together with a supplemental statement of work required at the
Vega Alta Site. In addition, on March 27, 1998 and April 8, 1998, the EPA
requested all of the PRPs (including Harman) to reimburse the EPA for
approximately $940,000 in past costs related to the Vega Alta Site. Harman has
notified both General Electric and the EPA that pursuant to the Settlement
Agreement described above, Harman expects General Electric and Unisys to comply
with all of EPA's further requirements.
Alsco-Anaconda Superfund Site. Alsco Inc. ("Alsco"), a predecessor of
Harvard, was the former owner and operator of a manufacturing facility located
in Gnadenhutten, Ohio. The Alsco division of Harvard was sold in August 1971 to
Anaconda Inc. Subsequently, Alsco became Alsco-Anaconda, Inc., a predecessor to
an entity now merged with and survived by the Atlantic Richfield Company
("ARCO"). The facility, when acquired by ARCO's predecessor, consisted of an
architectural manufacturing plant, office buildings, a wastewater treatment
plant, two sludge settling basins and a sludge pit. The basins and pit were used
for treatment and disposal of substances generated from its manufacturing
processes. The basins, pit and adjacent wooded marsh were proposed for inclusion
on EPA's National Priorities List in October 1984. Those areas were formally
listed by the EPA as the "Alsco-Anaconda Superfund Site" in June 1986.
On December 28, 1989, EPA issued a unilateral administrative order pursuant
to Section 106 of CERCLA, to Harvard and ARCO for implementation of the remedy
at the Alsco-Anaconda Superfund Site. Litigation between Harvard and ARCO
subsequently commenced in the United States District Court for the Northern
District of Ohio regarding allocation of response costs. Pursuant to a
Settlement Agreement, dated January 16, 1995, Harvard agreed to pay ARCO
$6.25 million (as its share of up to $25 million of the cleanup and
environmental costs at the Alsco-Anaconda Superfund Site) in twenty equal
quarterly installments with accrued interest at the rate of 9% per annum, of
which nine installments were paid through May 7, 1997. In return, ARCO assumed
responsibility for cleanup activities at the site and agreed to indemnify
Harvard against any environmental claims below the cap. If cleanup costs should
exceed $25 million, the parties will be in the same position as if the
litigation was not settled. Based on information provided by ARCO, Harvard
believes that ARCO has completed 100% of the cleanup of the 4.8-acre National
Priorities List site and 80% of the cleanup of the property adjacent to the
National Priorities List site. Total costs are expected to be in the range of
$19 million. Due to the Chapter 11 Cases, payments to ARCO, pursuant to the
Settlement Agreement, have been suspended. ARCO Environmental Remediation, LLC,
ARCO's successor, made a claim in the Chapter 11 Cases for all amounts that ARCO
is owed under the Settlement Agreement or, in the alternative, for all amounts
that ARCO
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has expended or may expend for cleanup of the site. The Company has agreed to
assume the Settlement Agreement with the modification that the Company will pay
ARCO $575,000 in full satisfaction of its claim. This payment was made in
December, 1998.
Town of Newmarket, New Hampshire. Kingston-Warren allegedly disposed of
waste at the Newmarket Landfill in New Hampshire from 1952-1975. After the State
of New Hampshire ordered the Town of Newmarket (the "Town") to close the
landfill, the Town sought contribution for cleanup costs from Kingston-Warren
and other local manufacturers. The Town completed closure of the landfill in
1996. Pursuant to a Settlement Agreement between Harvard, Kingston-Warren, and
the Town as subsequently amended, Harvard made a lump sum payment of $480,000 to
the Town to satisfy its outstanding cleanup liability. No further sums are due
from Harvard and Kingston-Warren unless there is a catastrophic failure of the
geomembrane landfill covering. In the event of a catastrophic failure, Harvard
and Kingston-Warren may be called upon to contribute further, based on a
task-by-task maximum allocation. Based on the recent accounting provided by the
Town, Kingston-Warren's future potential liability is presently capped at a
maximum amount of approximately $655,000. The Town is required to pursue all
other PRPs before seeking further payments from Harvard and Kingston-Warren. In
addition, the Town is required to indemnify Harvard and Kingston-Warren from all
claims and costs relating to the landfill. The Town made a contingent claim in
the Chapter 11 Cases in the event there is a catastrophic failure of the
landfill's geomembrane cap. The Company has assumed the Settlement Agreement but
does not expect to pay any further costs because a catastrophic failure of the
landfill covering is highly unlikely.
State Agency claims
A number of state environmental agencies have asserted environmental claims
against the Company and its subsidiaries. The potentially significant
environmental claims are described below:
Groundwater at West Jackson, Michigan Facility. The Hayes-Albion facility
in Jackson, Michigan is located within a regional area of groundwater
contamination designated as West Jackson Groundwater Contamination Site ("the
Site"). Hayes-Albion has completed several investigations on its property since
1989 to assist in defining the nature and source of the chlorinated solvent
contamination at the Site. Hayes-Albion believes that the results, which have
been submitted to the Michigan Department of Environmental Quality ("MDEQ")
establish that the Hayes-Albion facility is not the source of the contamination
and that the contaminants are migrating onto the Hayes-Albion property from
another source. The MDEQ made a claim in the Chapter 11 Cases that Hayes-Albion
is responsible for groundwater contamination at the Site seeking recovery of
past and future response costs of at least $2 million. On July 21, 1998, MDEQ
issued a request for voluntary access to the Hayes-Albion facility for the
purpose of conducting an investigation of the nature and extent of releases at
the facility. Hayes-Albion denied access because it vigorously denies that it is
a source of contamination. On August 10, 1998, MDEQ issued an administrative
inspection warrant for access and Hayes-Albion recently granted access. On
October 15, 1998, the Bankruptcy Court issued an order expunging MDEQ's claim
because it was filed after the bar date. MDEQ may bring an action for injunctive
relief in the future.
Air Emissions at Tiffin, Ohio Facility. On July 2, 1998, the State of Ohio
filed a two count complaint against Harvard and Hayes-Albion in state court (the
"Complaint") seeking civil penalties and injunctive relief for alleged
violations of air emissions regulations at Hayes-Albion's Tiffin, Ohio facility
from March 1990 to the present. The Complaint seeks civil penalties in the
amount of $25,000 per day per violation from March 1990 to the present.
Hayes-Albion disputes Ohio's method of calculating the allowable emission rate
for the four induction furnaces upon which the State of Ohio bases its
allegations in the Complaint, and believes that, using the proper method of
calculation, the facility should have no liability. The State of Ohio filed a
claim against Harvard and against Hayes-Albion in the Chapter 11 Cases for
penalties related to the alleged air violations in the amount of $1,315,000.
Subject to Bankruptcy Court approval Harvard and Hayes-Albion have concluded a
settlement with the State of Ohio with the entry of a consent decree dated
December 23, 1998. Under the settlement the Company will pay Ohio a civil
penalty of $205,857.
PJP Landfill Site. Pursuant to a 1985 Asset Purchase Agreement, Harvard
acquired certain assets of the Elastic Stop Nut Division ("ESNA") from the
Amerace Corporation ("Amerace") and agreed to indemnify Amerace for certain
environmental liabilities related to the purchased assets. Although ESNA had
facilities in several locations, including Union and Elizabeth, New Jersey,
Harvard purchased only the Union Facility.
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In 1992, the New Jersey Department of Environmental Protection ("NJDEP")
filed a complaint in the Superior Court of New Jersey seeking cleanup costs
against a number of PRPs, including Amerace, which allegedly sent waste to the
PJP Landfill in New Jersey. Amerace is one of 57 defendants who signed an
Administrative Consent Order, dated June 2, 1997, with NJEDP agreeing to perform
and fund the future remedy at the PJP Landfill.
The NJDEP made a claim in the Chapter 11 Cases for past and future response
costs relating to the PJP Landfill. Amerace also asserted a claim in the
Chapter 11 Cases that it is entitled to indemnification from Harvard pursuant to
the 1985 Asset Purchase Agreement for response costs it incurs in connection
with the PJP Landfill. The NJDEP has provided notice to Harvard that it has
withdrawn its claim. Harvard intends to object to Amerace's claim.
Stratford Industrial Park Facility. Hayes-Albion operated a facility at
the Stratford Industrial Park in Forsyth County, North Carolina from 1968 until
1982, when the facility and assets were sold to Sonoco Products Company ("Sonoco
Products"). The North Carolina Department of Environment and Natural Resources
("NCDENR") made a claim in the Chapter 11 Cases that Hayes-Albion may be
responsible for possible soil contamination in connection with the removal of a
20,000-gallon underground storage tank in 1984 at the facility. According to the
NCDENR, there is no evidence of confirmation sampling to ensure that all
contamination was removed at the time of the removal of the underground storage
tank and therefore the site may be contaminated. Hayes-Albion believes that
Sonoco Products is solely responsible for all matters related to the operation
and closure of the tank, and intends to object to the claim.
Pottstown Precision Casting, Inc. The Pennsylvania Department of
Environmental Protection ("PADEP") has filed a claim in the Chapter 11 Cases for
$125,000 which is a payment owed under a consent decree between Doehler-Jarvis
and PADEP entered April 17, 1997. The payment is a civil penalty for Clean Water
Act violations at the Pottstown Precision Casting, Inc., Pennsylvania facility.
It is being handled as an unsecured claim under the Plan of Reorganization.
Other
Vega Alta Toxic Tort. In October 1997, several property owners in Puerto
Rico filed an action against Harvard, Harman, General Electric, West Company,
Motorola, Unisys, and the EPA in the U.S. District Court for the District of
Puerto Rico seeking to recover costs and property damage arising from
contamination of the groundwater in Vega Alta, Puerto Rico. The complaint
alleges that damages exceed $50 million. Although Harvard and Harman were named
defendants in this action, neither entity was served. A claim, however, was
filed in the Chapter 11 Cases by the property owner plaintiffs for environmental
and property damage associated with the Vega Alta groundwater contamination.
That claim has been resolved and the settlement for $150,000 has been approved
by the Bankruptcy Court.
In addition, Unisys, on its own behalf and on behalf of Owens-Illinois de
Puerto Rico, has asserted several claims in the Chapter 11 Cases against Harman
and Harvard for contribution in the event Unisys is held liable to (i) the
property owner plaintiffs in the Vega Alta toxic tort, (ii) Owens-Illinois de
Puerto Rico in its threatened claim related to groundwater contamination in Vega
Alta, and (iii) any other third party to whom Unisys may be held liable in
connection with groundwater contamination at the Vega Alta Superfund Site.
Harvard intends to object to the claims.
Treatment of Environmental Matters Under Plan
Other than the executory contracts listed below, the Company believes that,
except as provided below, none of the outstanding Consent Decrees and Settlement
Agreements which were entered into prior to the Petition Date of the Chapter 11
Cases by the Company or any of its subsidiaries relating to environmental
matters constitutes executory contracts subject to assumption or rejection. The
Company and its subsidiaries assumed the Settlement Agreement with the Town of
Newmarket (dated July 8, 1992, as amended March 11, 1997). Additionally the
Company and its subsidiaries have agreed to assume with certain modifications
the following contracts: (1) the GE Vega Alta Settlement Agreement, and (2) the
ARCO Alsco-Anaconda Settlement Agreement. All monetary obligations arising out
of the Consent Decrees and Settlement Agreements (other than those listed above
as being assumed) will be discharged under the Plan.
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The Company believes that the claims relating to disposal of hazardous
substances or contamination at formerly owned properties or off-site properties
(as opposed to currently owned properties) ("Off-Site Claims") will be
discharged under the Plan of Reorganization. Such Off-Site Claims include any
claim by any governmental unit, person, or other entity, whether based in
contract, tort, implied or express warranty, strict liability, criminal or civil
statute, rule or regulation, ordinance, permit, authorization, license, order,
or judicial or administrative decision, arising out of, relating to, or
resulting from pollution, contamination, protection of the environment, human
health or safety, or health or safety of employees, including without limitation
(i) the presence, release, or threatened release of any hazardous substance that
is regulated by or forms the basis of liability under any environmental law
(including, without limitation, CERCLA, the Resource Conservation and Recovery
Act, 42 U.S.C. Section Section 6901 et seq., the Clean Air Act, 42 U.S.C.
Section Section 7401 et. seq., and any analogous state or local law) ("Hazardous
Substance") on, in, under, within, or migrating to or from any real property
formerly owned, leased, operated, or controlled by the Company or any of its
subsidiaries or any predecessor of the Company or any of its subsidiaries,
(ii) the transportation, disposal or arranging for the disposal of any Hazardous
Substances by the Company or any of its subsidiaries or any predecessor of the
Company or any of its subsidiaries at or to any offsite location, and (iii) any
harm, injury or damage to any real or personal property, natural resources, the
environment or any person or other entity alleged to have resulted from any of
the foregoing. The Company and its subsidiaries believe that any claims and
obligations relating to Hazardous Substance contamination on, in, under, within,
or migrating to or from any real property formerly owned, leased, operated, or
controlled by the Company or any of its subsidiaries or any predecessor of the
Company or any of its subsidiaries or any other offsite location constitute
"claims" within the meaning of section 101(5) of the Bankruptcy Code, 11 U.S.C.
Section 101(5), and, therefore, all such claims are dischargeable within the
meaning of section 1141 of the Bankruptcy Code, 11 U.S.C. Section 1141.
It is possible that under current case law in the Third Circuit Court of
Appeals, claims for injunctive relief related to currently owned property such
as the Hayes-Albion facilities in Jackson, may not be discharged. The Company
may be required to comply with injunctive orders issued by the state
environmental agency with respect to this property.
Various other legal actions, governmental investigations and proceedings
and claims are pending or may be instituted or asserted in the future against
the Company and its subsidiaries, none of which are expected to be material.
The Company is subject to extensive and changing environmental laws and
regulations. Expenditures to date in connection with the Company's compliance
with such laws and regulations did not have a material adverse effect on the
results of its operations, financial position, capital expenditures or
competitive position. Although it is possible that new information or future
developments could require the Company to reassess its potential exposure to all
pending environmental matters, including those described in the footnotes to the
Company's consolidated financial statements, management believes that, based
upon all currently available information, the resolution of all such pending
environmental matters will not have a material adverse effect on the Company's
operating results, financial position, capital expenditures or competitive
position. (See Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation, Results of Operations)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, through the solicitation
of proxies or otherwise.
Pursuant to an order of the United States Bankruptcy Court for the District
of Delaware, claimants of the company, including equity holders, voted to accept
or reject Plan of Reorganization.
25
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Harvard's Pre-reorganization Common Stock (the "Old Common Stock") was
traded on the Over The Counter Bulletin Board of NASDAQ since March 17, 1997
under the symbol "HAVAQ." Prior to that time, the Old Common Stock was traded on
the NASDAQ National Market.
Upon consummation of the Plan of Reorganization on November 24, 1998, the
Old Common Stock was canceled and Harvard was authorized to issue its new Common
Stock to certain creditors of pre-reorganized Harvard. The Company's Common
Stock is traded on the NASDAQ National Market under the symbol "HAVAV".
The table below sets forth the high and low bid quotations for the
Company's Old Common Stock from October 1, 1996 through September 30, 1998.
These bid prices, which were obtained from NASDAQ Trading and Market Services,
represent prices between dealers without adjustment for retail mark-ups,
mark-downs or commissions and may not represent actual transactions.
COMMON STOCK PRICE RANGE(1)
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
September 30, 1998:
First Quarter $ 1.375 $ 0.375
Second Quarter $ 1.0625 $ 0.5
Third Quarter $ 0.75 $ 0.5
Fourth Quarter $ 0.75 $ 0.25
September 30, 1997:
First Quarter $ 10.875 $ 2.75
Second Quarter $ 4.500 $ 0.6875
Third Quarter $ 1.1875 $ 0.4375
Fourth Quarter $0.96875 $0.28125
</TABLE>
- ------------------
(1) Reflects prices on the NASDAQ National Market prior to March 17, 1997, and
on the Over the Counter Bulletin Board of NASDAQ thereafter.
On January 7, 1999, the high and low bid quotations for the Company's New
Common Stock were $7 1/2 and $7 1/4 respectively. There were approximately 4
holders of record.
The Company has paid no cash dividends in its last two fiscal years. The
Company was restricted under the terms of its borrowings, including its debt
instruments from paying cash dividends on its Old Common Stock.
The Company does not expect to pay cash dividends on its New Common Stock
for the foreseeable future. Moreover, the Company is restricted under the terms
of the Financings, from paying cash dividends on its New Common Stock.
26
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
The following table presents selected consolidated historical financial
data for the Company as of the dates and for the fiscal periods indicated. The
selected financial data for each of the five years ended September 30, 1998, has
been derived from the Consolidated Financial Statements of the Company for the
applicable periods. From May 8, 1997 through November 23, 1998, the Company was
operating under Chapter 11, which afforded the Company protection from the
claims of its creditors and caused the Company to incur certain bankruptcy-
related expenses including legal fees, financial advisory fees, investment
banking fees and independent auditor fees. As a result of the fact that the
Company has emerged from Chapter 11 and the prospective effect of Fresh Start
Reporting, the Company does not believe that its historical results of
operations are necessarily indicative of its results of operations as an ongoing
entity following its emergence on November 24, 1998 from Bankruptcy
Reorganization. The following information should be read in conjunction with and
is qualified by reference to "Management's Discussion and Analysis of Financial
Condition and Results of Operations," contained herein this Form 10-K.
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------------------------------------------
($ IN THOUSANDS) 1998 1997 1996 1995(1) 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................................... $ 690,076 $ 810,769 $ 824,837 $ 631,832 $ 614,952
Cost of sales..................................... 656,243 797,774 776,141 557,340 543,532
--------- --------- --------- --------- ---------
Gross profit...................................... 33,833 12,995 48,696 74,492 71,420
Selling, general and administrative expenses...... 66,546 45,822 42,858 33,037 32,217
Amortization of goodwill.......................... 1,584 8,448 15,312 2,986 1,584
Impairment and restructuring charges(3)........... 10,842 288,545 -- -- --
Interest expense(2)............................... 14,231 36,659 47,004 19,579 11,947
Gain on sale of operations(4)..................... (28,673) -- -- -- --
Other (income) expense, net(5).................... 3,980 5,530 1,538 (1,789) (532)
--------- --------- --------- --------- ---------
Income (loss) from continuing operations before
reorganization items, income taxes and
extraordinary item.............................. (34,677) (372,009) (58,016) 20,679 26,204
Reorganization items.............................. 14,920 16,216 -- -- --
--------- --------- --------- --------- ---------
Income (loss) from continuing operations before
income taxes and, extraordinary item............ (49,597) (388,225) (58,016) 20,679 26,204
Provision (benefit) for income taxes.............. 6,207 1,204 3,196 11,566 9,536
--------- --------- --------- --------- ---------
Income (loss) from continuing operations before
extraordinary item.............................. (55,804) (389,429) (61,212) 9,113 16,668
Loss from discontinued operations, net of
tax(6).......................................... -- -- (7,500) -- (9,038)
--------- --------- --------- --------- ---------
Income (loss) before extraordinary item........... (55,804) (389,429) (68,712) 9,113 7,630
Extraordinary item................................ -- -- -- (2,192) --
--------- --------- --------- --------- ---------
Net income (loss)................................. $ (55,804) $(389,429) $ (68,712) $ 6,921 $ 7,630
PIK preferred dividends and accretion(7).......... -- $ 10,142 $ 14,844 $ 14,809 $ 14,767
--------- --------- --------- --------- ---------
Net loss attributable to common stockholders...... $ (55,804) $(399,571) $ (83,556) $ (7,888) $ (7,137)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
(Footnotes appear on the following page.)
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------
1998 1997 1996 1995(1) 1994
--------- --------- --------- --------- ---------
SHARE DATA:
<S> <C> <C> <C> <C> <C>
BASIC AND DILUTED EARNINGS PER SHARE
Income (loss) from continuing operations.......... $ (7.94) $ (56.91) (10.87) (0.82) 0.27
Loss from discontinued operations................. -- -- (1.07) -- (1.28)
Extraordinary Item................................ -- -- -- (0.32) --
--------- --------- --------- --------- ---------
Net loss per share................................ (7.94) (56.91) (11.94) (1.14) (1.01)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average number of shares and
equivalents..................................... 7,026,437 7,020,692 6,999,279 6,894,093 7,041,324
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
FINANCIAL RATIOS AND OTHER DATA:
Depreciation and amortization..................... $ 27,904 $ 60,186 $ 65,658 $ 34,856 $ 29,855
Cash flows (used in) provided by continuing
operations...................................... 23,526 11,045 (3,133) 24,305 89,071
Capital expenditures.............................. 24,887 36,572 40,578 22,080 10,141
Cash flows (used in) provided by investing
activities...................................... 3,564 (34,156) (43,001) (226,023) (13,954)
Cash flows (used in) provided by financing
activities...................................... (24,678) 31,216 27,316 161,283 (30,348)
BALANCE SHEET DATA:
Working capital (deficiency)...................... $ (90,024) $ 2,096 $ (7,158) $ 19,417 $ 30,333
Total assets...................................... 250,981 307,494 617,705 662,262 387,942
Liabilities subject to compromise(8).............. 385,665 397,319 -- -- --
DIP Credit Facilities, including current portion.. 39,161 87,471 -- -- --
Creditors subordinated term loan.................. 25,000 -- -- -- --
Long-term debt, including current portion......... 0 14,087 360,603 324,801 113,381
PIK preferred stock............................... 124,637 124,637 114,495 99,651 99,841
Shareholders' equity (deficiency)................. $(609,230) $(547,128) $(145,724) $ (62,206) $ (59,032)
</TABLE>
- ------------------
(1) Includes the results of operations of the Doehler-Jarvis Entities from
July 28, 1995, the effective date of that acquisition.
(2) Interest expense does not include interest after May 7, 1997 amounting to
$13,605 and $35,618 for the fiscal years ended September 30, 1997 and 1998
respectively of the Old Senior Notes as all such interest was included as a
liability subject to compromise. See Note 1 to the Consolidated Financial
Statements.
(3) During 1997, the Company recorded charges for impairment of long-lived
assets of the Doehler-Jarvis Entities and at two other plants. The Company
also recorded restructuring charges related to two operations scheduled for
closing. During 1998, the Company recorded charges for impairment of
long-lived assets of its Tiffin, Ohio facility and for certain assets
relating to a platform that will end earlier than anticipated, and a
restructuring charge. See Note 13 to the Consolidated Financial Statements.
No tax benefit is currently available for any of these charges.
(4) In November of 1997, the Company sold Kingston-Warren's Material Handling
division resulting in a gain on sale of $11,354. During 1998, there was a
gain on sale of $17,319 as a result of the sale of the land, building and
certain other assets of the Harvard Interiors' St. Louis, Missouri facility
and the transfer of certain assets at the Doehler-Jarvis Toledo, Ohio
facility and related lease obligations to a third party and the sale of
substantially all of the assets and the assumption of certain liabilities of
the Doehler-Jarvis Greeneville Facility.
(5) For 1997, other (income) expense, net includes approximately $2,200 related
to joint venture losses.
(6) The Company, in the first quarter of fiscal 1994, decided to discontinue its
then specialty fastener segment ("ESNA") and therefore applied the
accounting guidelines for discontinued operations. In 1996, the Company
recorded a $7,500 charge to discontinued operations representing the
write-down of the ESNA facility and continuing carrying costs. See Note 4 to
the Consolidated Financial Statements.
(7) PIK Preferred dividends after May 7, 1997 do not include $6,749 of accrued
dividends.
(8) September 30, 1998 and 1997, includes $300,000 of Old Senior Notes payable
which are subject to the guaranty of the combined guarantor subsidiaries and
accrued interest of $9,728 which is subject to the guaranty of the combined
guarantor subsidiaries.
28
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1998 COMPARED TO 1997
Sales. Consolidated sales decreased $120,693 from $810,769 to $690,076, or
14.9%. Aggregate sales for the operations designated for sale or wind down
decreased approximately $110,462 from $315,078 to $204,616. The remaining
operations sales decreased $10,231 from $495,691 to $485,460 as lower volume due
to the GM strike was partially offset by new business.
Gross Profit. The consolidated gross margin, expressed as a percentage of
sales, increased from 1.6% to 4.9%, or by $20,838. The gross profit (loss) for
operations designated for sale or wind-down increased approximately $20,379 from
$(15,502) to $4,877 due mainly to a decrease of approximately $17,000 in
depreciation resulting from the write-down of certain property, plant and
equipment in the fourth quarter of 1997 and the compensatory payments from Ford
and GM relating to the Toledo Shutdown. The increase of $459 in gross profit for
the remaining operations was mainly due to improved operating efficiencies and
approximately $4,600 of decreases in depreciation resulting from the write-down
of certain property, plant and equipment, at the continuing operations of
Doehler-Jarvis offset by lost volume due to the GM strike.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $45,822 to $66,546. The increase reflects
a $7,700 charge for costs to make the company's systems year 2000 compliant, a
$16,000 charge for emergence related payments and deferred compensation
arrangements, offset by the prior period's charge of $4,000 relating to the
termination and consulting and release agreement of a former executive.
Interest Expense. Interest expense decreased from $36,659 to $14,231.
However, but for giving effect to the discontinuance of accruing interest on the
senior notes of $35,618 in 1998 and $13,605 in 1997 from the date of filing
bankruptcy, interest expense would have decreased by $415 as financing fees of
$2,500 relating to the post-petition term loan facility were offset by lower
borrowing levels.
Amortization of Goodwill. Amortization of goodwill decreased from $8,448
to $1,584 as amortization of goodwill related to the acquisition of
Doehler-Jarvis ceased March 31, 1997, when such goodwill was written-off as
impaired.
Impairment of Long-Lived Assets and Restructuring Costs. During 1998 the
Company recorded $5,000 in restructuring charges representing shutdown and
relocation costs of $2,500, relating primarily to severance and moving costs
associated with the move of the corporate headquarters from Tampa, Florida to
Lebanon, New Jersey, and approximately $2,500 for two senior executive officers.
Additionally, the Company wrote-off as impaired substantially all the property,
plant and equipment at Hayes Albion's Tiffin, Ohio facility and the equipment
and tooling for a platform that is being discontinued earlier than planned.
During 1997, a charge of $288,545 was recorded for the impairment of long-lived
assets at several subsidiaries.
Gain on Sale of Operations. This includes the gain on the sale of the
Material Handling division of Kingston-Warren of $11,354, the gain on the sale
of the land, building and certain other assets of the Harvard Interiors' St.
Louis facility of $1,217 , the gain of $13,999 on the transfer of certain assets
at the Toledo facility and their related lease obligations to a third party and
the gain on the sale of certain assets and assumption of liabilities of the
Doehler-Jarvis Greeneville subsidiary of $2,103.
Other Expense, Net. Other expense decreased from $5,530 to $3,980 due to a
decrease in loss on disposal of machinery and equipment.
Reorganization Items. Represents mainly professional fees incurred in
connection with the bankruptcy proceedings.
29
<PAGE>
Provision for Income Taxes. The increase from $1,204 to $6,207 was
principally due to the reorganization of the Company. Several items that
materially contributed to the increase were the federal minimum tax and state
income taxes.
Net Loss. The net loss decreased from $389,429 to $55,804 for the reasons
described above.
1997 COMPARED TO 1996
Sales. Consolidated sales decreased $14,068 from $824,837 to $810,769, or
1.7%. Aggregate sales for Harman Automotive, the furniture production line of
Harvard Interiors, Toledo and the Material Handling Division of Kingston-Warren,
each of which had been designated for sale ("Operations designated for sale or
wind-down"), decreased approximately $35,574 from $251,442 to $215,868
(including $5,700 due to a decline in average aluminum prices, the benefit of
which was passed on to customers). The remaining operations sales increased
$21,506 from $573,395 to $594,901 due to a higher demand for its products.
Gross Profit. The consolidated gross profit expressed as a percentage of
sales (the "gross profit margin") decreased from 5.9% to 1.6%, after recording
curtailment gains with respect to post-retirement obligations of $8,249 in 1997.
The decrease was due primarily to operational inefficiencies at most of the
Company's operating units, price reductions and from unfavorable comparisons
relative to tooling margins and long-term contract recoveries. The gross profit
(loss) for Operations designated for sale or wind-down amounted to $(14,952) and
$12,312 in 1997 and 1996, respectively, and the change represents 76% of the
consolidated decrease in gross profits. The remaining operations gross profit
decreased from $36,384 to $27,947.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $2,964, due principally to charges of
approximately $4,000 in the second quarter, primarily related to the
Termination, Consulting and Release Agreement dated February 12, 1997 with
Mr. Vincent J. Naimoli, the former Chairman of the Board, President and Chief
Executive Officer of the Company.
Interest Expense. Interest expense decreased from $47,004 to $36,659. But
for giving effect to the discontinuance of accruing interest on the senior notes
of $13,605 after May 7, 1997, interest expense increased by $3,260. This
increase resulted from increased borrowings under financing agreements.
Amortization of Goodwill. The decrease of $6,864 in goodwill amortization
occurred because goodwill amortization related to Doehler-Jarvis ceased March
31, 1997, when such goodwill was written-off as impaired.
Other (Income) Expense, Net. The increase of $3,992 was mainly due to an
increase in loss on disposal of machinery and equipment and losses from a joint
venture.
Impairment of Long-Lived Assets and Restructuring Costs. As a result of
continuing losses and projections of future operations and cash flows, the
Company recorded charges in 1997 of $288,545 reflecting the permanent impairment
of long-lived assets at its Doehler-Jarvis and Harman Automotive subsidiaries
and one plant. The goodwill portion of this charge is $114,385. See Note 13 to
the Consolidated Financial Statements. Operations designated for sale accounted
for approximately $101,000 of the impairment charge.
Reorganization Items. As a result of the bankruptcy, the Company adjusted
the senior notes to the amount of its allowed claim with a charge to operations
of $10,408. In addition, the Company incurred professional fees in the amount of
$5,828.
Provision for Income Taxes. The decrease in the provision for income taxes
resulted from a decrease in operating profit in Canada.
Net Loss. The net loss increased from $68,712 to $389,429 for the reasons
described above.
1996 COMPARED TO 1995
Sales. Excluding the 1996 and 1995 Doehler-Jarvis sales, consolidated
sales decreased $57,388, primarily during the first six months. The automotive
accessories segment sales accounted for 96% and 95%, respectively, of
consolidated sales for the years 1996 and 1995. Automotive sales, excluding such
sales by Doehler-Jarvis, decreased $59,000, of which $41,000 was due mainly to
the lower volumes for existing light vehicle platforms, principally for large
passenger cars and somewhat to the effects of the March 1996 strike at General
Motors, and
30
<PAGE>
$18,000 was attributable to the inclusion in 1995 of sales to Ford phased out in
June 1995, as previously disclosed. Non-automotive sales increased $1,600 due to
an increase in furniture sales.
Gross Profit. The consolidated gross profit expressed as a percentage of
sales (the "gross profit margin") decreased from 11.8% to 5.9%. The decrease in
the gross profit was due principally to the lower passenger car sales mentioned
above and somewhat to the effects of adverse weather conditions, the General
Motors strike, and excess launch costs for new and replacement products in 1996.
In 1996, sales of certain products aggregated $50,000 for which a negative gross
margin of $7,800 was incurred. More than half of the decrease in the gross
profit margin was attributable to the fact that Doehler-Jarvis contributed no
gross profit on over $296,000 of sales, which was caused mainly by operational
inefficiencies at the Toledo and Pottstown plants, including the impact of
significant overtime resulting from operating the Toledo plant on a seven day
week basis and the negative margins incurred from sales of the Programs. The
remaining gross profit margin decrease was caused by decreases in the other
automotive operations due to the reasons mentioned, in particular excess launch
costs and the General Motors strike. The non-automotive segment had a decrease
in gross profit of $1,600 due principally to the fact that the prior year's
gross profit included a one-time favorable settlement with a supplier amounting
to $475, as well as lower margins on increased sales to major retailers in 1996.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $3,700, or 13.8%, after excluding such
expenses of Doehler-Jarvis, and after considering the fact that 1996 does not
include any bonus provision with respect to the Company's key management and
operating personnel, as compared to $3,700 in 1995. 1996 includes salary
increases and additional non-automotive selling costs incurred to penetrate the
mass merchandising furniture market. As a percentage of sales, such consolidated
expenses were 5.2% for both 1996 and 1995.
Interest Expense. Interest expense increased from $19,579 in 1995 to
$47,004 in 1996. The increase in interest expense was the result of the issuance
in July 1995 of the 11 1/8% Senior Notes, capital leases (which were assumed in
the Doehler-Jarvis acquisition), the revolving working capital loans under the
Credit Agreement, dated as of July 28, 1995, among the Company, the Guarantors
and Chemical Bank, as Agent (the "Chemical Agreement") and the $7,000 short term
credit facility utilized from August 2, 1996 to September 27, 1996. The
effective rate of interest was 13.6% in 1996 and 12.1% in 1995.
Amortization of Goodwill. Amortization of goodwill increased $12,326 due
to the additional goodwill resulting from the acquisition of Doehler-Jarvis. In
the fourth quarter of 1996, based upon Doehler-Jarvis' unprofitable operating
results since acquisition and projected operating results for 1997, the life of
such goodwill was changed from 15 years to 10 years effective October 1, 1995.
Other (income) Expense, Net. The change was due, principally, to the
reduction in interest income due to the use of approximately $26,300 of cash on
hand in the acquisition of Doehler-Jarvis.
Provision for Income Taxes. The differences between the statutory federal
income tax rate and the Company's effective income tax rates result,
principally, from generating an operating profit in Canada and an operating loss
in the U.S. for which no tax benefit has been recognized.
Loss from Discontinued Operations. Discontinued operations was charged
$7,500 representing the write-down of the ESNA facility, continuing costs
associated with the Company's ongoing participation in the Department of Defense
Voluntary Disclosure Program and carrying costs of the Union, NJ facility. See
Note 4 to the Consolidated Financial Statements.
Net Income (Loss). Net loss for 1996 was $68,712 compared to net income of
$6,921 in 1995. The change is because operating results (as described above)
were insufficient to cover increases of $27,425 in interest expense, $12,326 in
amortization of goodwill and the $7,500 loss from discontinued operations.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended September 30, 1998, the Company had cash flow from
operations of $23,526 as compared with cash flow from operations of $11,045 for
the year ended September 30, 1997. The 1998 cash flows improved due to increased
profit margins, lower inventory and receivable levels, but were negatively
affected by payments of reorganization items and accelerated payments to
post-petition suppliers and spending
31
<PAGE>
on year 2000 conversion costs. The cash flow from operations in 1998, together
with the proceeds of $27,822 from the sale of operations and the $22,500
proceeds from the creditors' subordinated term loan were used primarily to fund
capital expenditures of $24,887 and to repay obligations under DIP loans
amounting to $45,810. As of September 30, 1998, the Company had availability to
borrow funds in the amount of approximately $34,500 pursuant to the DIP
revolving credit facility.
In early 1998 the Company's new management contemplated incurring
significant restructuring charges, year 2000 conversion costs, and capital
expenditures to implement its turnaround business strategy. The Company,
therefore, entered into a Term Loan Agreement, dated as of January 16, 1998, for
a $25,000 post-petition term loan facility to allow greater borrowing
availability for its ongoing operations. This facility was subordinated to the
security interests under the then existing DIP loans, was payable on the earlier
of (a) May 8, 1999 or (b) the date the existing DIP loan was terminated and bore
interest at a rate per annum equal to the greater of (i) the highest per annum
interest rate for term loans and revolving credit loans under the then existing
DIP loans plus 3% or (ii) 13%. The Company was required to pay facility and
funding fees aggregating $2,500. The net proceeds of $22,500 were used to reduce
the then current balance of the revolver portion of the DIP loans.
As discussed in Footnote 28 to the Consolidated Financial Statements the
Company emerged from Chapter 11 on November 24, 1998, repaid the DIP Facility,
the Post-Petition Term Loan, and issued $25,000 of Senior Secured Notes and
entered into a $115,000 Senior Secured Credit facility. Management anticipates
having sufficient liquidity to conduct its activities in fiscal 1999 as a result
of the borrowing availability provided by these facilities.
The Company did not meet the fixed charge ratio covenant of its DIP
Facility during the months of October and November 1997. On December 29, 1997,
the Company entered into Amendment No. 1 Waiver and Consent (the "Amendment") to
Post-Petition Loan and Security Agreement with its lenders whereby the lenders
from December 29, 1997 waived all defaults or events of default which had
occurred prior to such date from the failure to comply with the above financial
covenant. The lenders also entered into the Amendment to replace the fixed
charge ratio covenant with monthly consolidated EBITDA and consolidated tangible
net worth covenants commencing with calculations at December 31, 1997. The
Amendment required the lenders' consent for capital expenditures in excess of
$30,000 for the year ending September 30, 1998.
In addition, the Company entered into Amendment No. 2 and Consent to the
Post-Petition Loan and Security Agreement, dated as of January 27, 1998,
pursuant to which the lenders consented to the term loan, discussed above, the
creation of subordinated liens thereunder and to certain asset sales.
Capital Expenditures. Capital expenditures for property, plant and
equipment during 1998 and 1997 were $24,887 and $36,572, respectively,
principally for machinery and equipment required in the ordinary course of
operating the Company's business. The Company is currently projecting to spend
approximately $20,000 principally for machinery and equipment in 1999. The
projected capital expenditures are required for new business and on-going cost
saving programs necessary to maintain competitive benefits, and the balance for
normal replacement. The actual timing of capital expenditures for new business
may be impacted by customer delays and acceleration of program launches and the
Company's continual review of priority of the timing of capital expenditures.
YEAR 2000 COMPLIANCE
The Company is in the process of addressing the Year 2000 concerns and
determined that certain of the Company's information systems are not presently
Year 2000 compliant. The Year 2000 issue is the result of many computer programs
and imbedded chips being written using two digits rather than four to define the
applicable year. Many of the Company's computer programs that have
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000.
If not addressed and completed on a timely basis, failure of the Company's
computer systems to process Year 2000 related data correctly could have a
material adverse effect on the Company's financial condition and results of
operations. Failures of this kind could, for example, lead to incomplete or
inaccurate accounting, supplier and customer order processing or recording
errors in inventories or other assets and the disruption of its
32
<PAGE>
manufacturing process as well as transactions with third parties. If not
addressed, the potential risks to the Company include financial loss, legal
liability and interruption to business.
The Company is currently installing a new management information system
that will allow its critical information systems and technology infrastructure
to be Year 2000 compliant before transactions for the year 2000 are expected.
Many of the Company's systems include new hardware and packaged software
recently purchased from large vendors who have represented that these systems
are already Year 2000 compliant. The Company is in the process of obtaining
assurances from vendors that timely updates will be made available to make all
remaining purchased software Year 2000 compliant. The Company expects to utilize
both internal and external resources to reprogram or replace and test all of its
software for Year 2000 compliance, and the Company has commenced the
installation of its Year 2000 compliant systems at pilot locations subsequent to
the fiscal year end, with the Company-wide rollout to be completed by the Spring
of 1999. The estimated cost for this project is $14 million. The Company spent
approximately $7.7 million for Year 2000 compliance in fiscal 1998 and plans to
spend approximately $5.8 million in fiscal 1999.
However, even if these changes are successful, the Company remains at risk
from Year 2000 failures caused by third parties. The Company has surveyed key
utilities and suppliers but is still in the process of assessing the information
provided to remediate Year 2000 issues. Failure by such key utilities or
suppliers to complete Year 2000 compliance work in a timely manner could have a
material adverse effect on certain of the Company's operations. Examples of
problems that could result from the failure by third parties with whom the
Company interacts to remediate Year 2000 problems include, in the case of
utilities, service failures such as power, telecommunications, elevator
operations and loss of security access control and, in the case of suppliers,
failures to satisfy orders on a timely basis and to process orders correctly.
Additionally, general uncertainty regarding the success of remediation may cause
many suppliers to reduce their activities temporarily as they assess and address
their Year 2000 efforts in 1999. This could result in a general reduction in
available supplies in late 1999 and early 2000. Management cannot predict the
magnitude of any such reduction or its impact on the Company's financial
results. There can be no assurance that the systems of other companies on which
the Company's systems rely will be converted in a timely fashion, or that a
failure to convert by another company, or a conversion that is incompatible with
the Company's systems, would not have a material adverse effect on the Company's
consolidated financial statements included at page 48.
EFFECTS OF THE PLAN OF REORGANIZATION
Following the consummation of the Plan of Reorganization, the Company's
primary capital requirements consist principally of working capital
requirements, capital expenditures, scheduled payments of principal and interest
on outstanding indebtedness. The Company believes that cash flow from operating
activities, cash generated from the sale of certain assets and periodic
borrowings under the revolving credit portion of the Senior Credit Facility will
be adequate to meet these capital requirements. It is expected that the combined
proceeds of the Offering and initial term loan borrowing under the Senior Credit
Facility will be used to (i) refinance the existing first lien and second lien
DIP Credit Facilities, (ii) pay administrative expenses due under the Plan of
Reorganization and pay related fees and expenses and (iii) provide cash for
working capital purposes. The $65 million revolving credit portion of the Senior
Credit Facility will be available to finance working capital and other general
corporate purposes and is expected to be undrawn at closing, although upon
consummation of the Plan of Reorganization, approximately $12.5 million of
stand-by letters of credit are expected to be outstanding for workers'
compensation and other insurance claims which are ongoing. The revolving credit
facility will be available on a revolving basis prior to its expiration on the
third anniversary of the Effective Date, provided that the sum of (i) the
outstanding amount of all direct borrowings under the revolving credit facility
plus (ii) the outstanding amounts of all undrawn letters of credit under the
revolving credit facility may not exceed the defined eligible assets.
INFLATION AND OTHER MATTERS
There was no significant impact on the Company's operations as a result of
inflation during the prior three year period. In some circumstances, market
conditions or customer expectations may prevent the Company from increasing the
price of its products to offset the inflationary pressures that may increase its
costs in the future.
33
<PAGE>
SEASONALITY
Although most of the Company's products are generally not affected by
year-to-year automotive style changes, model changes may have a significant
impact on sales. In addition, the Company experiences seasonal fluctuations to
the extent that the operations of the domestic automotive industry slows down
during the summer months, when plants close for vacation period and model year
changeovers, and during the month of December for plant holiday closings. As a
result, the Company's third and fourth quarter sales are usually somewhat lower
than first and second quarter sales.
RECENT ACCOUNTING PRONOUNCEMENTS
Derivative Transactions. In June 1998, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards requiring that every
derivative instrument be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement. SFAS No. 133 is effective for fiscal years
beginning after June 15, 1999, but may be adopted earlier. Historically, the
Company has used, and in the future may use, derivative instruments or hedge
accounting. The adoption of SFAS No. 133 will have no impact on the Company's
consolidated results of operations, financial position or cash flows.
Reporting Comprehensive Income. In June 1997, the FASB issued SFAS
No. 130, "Reporting Comprehensive Income," which establishes standards for
reporting comprehensive income and its components in annual and interim
financial statements. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
is required. The adoption of SFAS No. 130 will have no impact on the Company's
consolidated results of operations, financial position or cash flows.
Segment Reporting. In June 1997, the FASB issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
establishes standards for companies to report information about operating
segments in annual financial statements, based on the approach that management
utilizes to organize the segments within the company for management reporting
and decision making. In addition, SFAS No. 131 requires that companies report
selected information about operating statements in interim financial reports. It
also establishes standards for related disclosures about products and services,
geographic areas, and major customers. SFAS No. 131 is effective for financial
statements for fiscal years beginning after December 15, 1997. Financial
statement disclosures for prior periods are required to be restated. The
adoption of SFAS No. 131 will have no impact on the Company's consolidated
results of operations, financial position or cash flows.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and schedules listed in Item 14 are included in
this Annual Report on Form 10-K beginning on page 48.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
On September 17, 1998, management of Harvard Industries, Inc. (the
"Company") dismissed PriceWaterhouseCoopers LLP ("PriceWaterhouseCoopers") as
the Company's independent accountants and appointed the firm of Arthur Andersen
LLP ("Arthur Andersen") as the new independent accountants for the Company. The
decision to change accountants was ratified by the Board of Directors of the
Company.
Pursuant to Item 304(a)(1) of Regulation S-K, the Company reports the
following:
(i) The reports of PriceWaterhouseCoopers on the Company's
consolidated financial statements for the fiscal years ended September 30,
1997 and 1996 contained no adverse opinion or disclaimer of opinion and
were not qualified as to audit scope or accounting principle. However, the
report included an explanatory paragraph to reflect the uncertainty arising
from the Company's ability to continue as a going concern as a
34
<PAGE>
result of its voluntary filing of petition for reorganization under Chapter
11 of the United States Bankruptcy Code.
(ii) In connection with its audits for the fiscal years ended
September 30, 1997 and 1996 and through September 17, 1998, there have been
no disagreements with PriceWaterhouseCoopers on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope
or procedure, which disagreements if not resolved to the satisfaction of
PriceWaterhouseCoopers would have caused them to make reference thereto in
their report on the financial statements for such years.
(iii) During each of the fiscal years ended September 30, 1997 and
1996, the following reportable events, as that term is defined by Item
304(a)(1)(v) of Regulation S-K, occurred:
(1) PriceWaterhouseCoopers became aware of accounting
irregularities related to the Company's Doehler-Jarvis, Inc.
subsidiaries during the fiscal year ended September 30, 1996. These
matters related to inventories, materials and supplies and fixed assets.
(2) During each of the two years in the period ended September 30,
1997, the Company experienced significant turnover of accounting and
financial personnel. This reduction complicated a lack of uniform
(company-wide) accounting practices and information systems. As a
result, the Company experienced certain material weaknesses in internal
control.
PriceWaterhouseCoopers discussed these reportable events with the
Company's Audit Committee in August 1996, November 1996, February 1997 and
December 1997.
Management of the Company has authorized PriceWaterhouseCoopers to
respond fully to the inquiries of Arthur Andersen, as the Company's
successor accountants, concerning the reportable events described above.
Pursuant to Item 304(a)(2) of Regulation S-K, the Company reports the
following:
During the Company's two most recent fiscal years, and any subsequent
interim period prior to engaging Arthur Andersen, the Company has not
consulted with Arthur Andersen regarding the application of accounting
principles to a specific transaction, or the type of audit opinion that
might be rendered with respect to the Company's financial statements.
35
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS OF REGISTRANT
ROGER G. POLLAZZI
Chairman of the Board and Chief Executive Officer since November 24, 1998.
Roger G. Pollazzi was elected Chief Operating Officer of the Company in November
1997 and, has been Chairman of the Board and Chief Executive Officer since the
Effective Date. He was associated with Concord Investment Partners, an
investment firm headquartered in Concord, Massachusetts, from 1996 to October
1997. From 1992 to 1996, Mr. Pollazzi was Chief Executive Officer and Chairman
of Pullman, an automotive parts manufacturer.
Term of Office: 1 year
Age: 61
JON R. BAUER
Director since December 9, 1998. John R. Bauer became a director of the
Company December 9, 1998. Jon R. Bauer is a Managing Partner of Contrarian
Capital Management, L.L.C., and an investment management firm founded in May
1995 and located in Greenwich, Connecticut. He was a Managing Director of the
Horizon series of Partnerships from 1986 to 1995.
Term of Office: 1 year
Age: 42
THOMAS R. COCHILL
Director since November 24, 1998. Thomas R. Cochill became a director of
the Company on the Effective Date. Mr. Cochill is a founding partner and serves
as CEO of Ingenium, LLC, a crisis and transition management consulting firm. He
currently serves as non-executive Chairman of the Board of Quantegy, Inc., a
manufacturer of recording media. He served as the President, Chief Executive
Officer and Chairman of the Board of Webcraft Technologies, Inc. ("Webcraft")
from 1992 to 1997. Webcraft specializes in printing of direct mail products,
specialized government forms, complex commercial print formats and fragrance
samplers. Webcraft emerged from Chapter 11 in 1994. He serves as a member of the
Board of Directors of Grand Union Company, a grocery chain in the Northeast
United States, and U.S. Leather, Inc., a producer of leather and leather
products. From 1981 to 1992, Mr. Cochill was the President, member of the Board
of Directors, and member of the Executive Committee as well as a minority
partner of The Lehigh Press, Inc., a private printing company. Mr. Cochill also
served as a Group Business Manager for the Dow Chemical Company from 1969 to
1972.
Term of Office: 1 year
Age: 59
RAYMOND GARFIELD, JR.
Director since November 24, 1998. Raymond Garfield, Jr. became a director
of the Company on the Effective Date. He has been the President of Garfield
Corporation, a national real estate finance and development firm, specializing
in design-build/finance projects. In 1992, Mr. Garfield became Chairman and
Chief Executive Officer of Vista Properties, Inc., a public national development
firm formerly known as Lomas Realty USA. Mr. Garfield guided a restructuring
which resulted in Vista's merger with Centex Corporation in 1996. From 1988 to
1992, Mr. Garfield served as a Senior Managing Director of Cushman & Wakefield,
responsible for all financial services for the Western U.S. Mr. Garfield has
also served as a Vice President of Salomon Brothers from 1984 to 1988 and Senior
Vice President and National Sales Manager for Merrill Lynch Commercial Real
Estate from 1980 to 1984. He is a graduate of the U.S. Naval Academy and is a
former naval aviator.
Term of Office: 1 year
Age: 54
36
<PAGE>
DONALD P. HILTY
Director since November 24, 1998. Donald P. Hilty became a director of the
Company on the Effective Date. He is a business consultant. From 1980 to 1994,
Mr. Hilty served as the Chief Economist of the Chrysler Corporation. In
addition, at Chrysler, he held marketing, finance and research positions during
twelve years in Geneva, London and Paris. He was a Senior Fellow at the Economic
Strategic Institute from 1994 to 1996. Mr. Hilty holds a BA degree from Wheaton
College, an MBA from the University of Colorado and a Doctor of Business
Administration from the Indiana University Graduate School of Business.
Term of Office: 1 year
Age: 69
GEORGE A. POOLE, JR.
Director since November 24, 1998. George A. Poole, Jr. became a director of
the Company on the Effective Date. He has been private investor for more than
five (5) years and is currently a member of the Board of Directors of Anacomp,
Inc., a provider of multiple media data management solutions, which emerged from
Chapter 11 in 1996. In addition to serving on the Board of Anacomp, Inc. since
June 1996, Mr. Poole has served on the Board of Directors of U.S. Home Corp., a
home building company since it emerged from Chapter 11 in June 1993. Mr. Poole
also serves on the Board of Directors of Bibb Company, and has served on the
Board of Directors of Bucyrus International, Inc. and Spreckles Industries.
Term of Office: 1 year
Age: 67
JAMES P. SHANAHAN, JR.
Director since November 24, 1998. James P. Shanahan, Jr. became a director
of the Company on the Effective Date. Mr. Shanahan has been the Executive Vice
President, General Counsel and a member of the Board of Directors of Pacholder
Associates, Inc. since 1986. He also serves on the Board of Directors of
LaBarge, Inc., a manufacturer of electronic components headquartered in St.
Louis, MO. In addition, Mr. Shanahan served as Chief Executive Officer of ICO,
Inc. from 1990 to 1995.
Term of Office: 1 year
Age: 37
RICHARD W. VIESER
Director since December 1998. Richard W. Vieser became a director of the
Company in December 1998. Chairman, Chief Executive Officer and President of
Lear Siegler, Inc. (a diversified manufacturing company) from 1987 to 1989.
Chairman of the Board and Chief Executive Officer of FL Industries, Inc. and FL
Aerospace (Formerly Midland-Ross Corporation) (also a diversified manufacturing
company) from 1985 and 1986 to 1989 respectively. Former President and Chief
Operating Officer of McGraw-Edison Co. Currently Mr. Vieser serves as a director
of Ceridian Corporation (formerly Control Data), Global Industrial Technologies
(formerly INDRESCO, Inc.) International Wire, Sybron International Corporation,
Varian Associates and Viasystems Group, Inc.
Term of Office: 1 year
Age: 71
37
<PAGE>
EXECUTIVE OFFICERS OF REGISTRANT
ROGER G. POLLAZZI
See Directors of Registrant.
JAMES B. GRAY
President since July 8, 1998. James B. Gray joined the Company on July 8,
1998 as its President and currently remains President. Before joining the
Company, he was the Managing Director of Tenneco Automotive Europe since 1997.
From 1987 to 1996, Mr. Gray was President of the Elastomers division of Pullman.
Term of Office: 1 year
Age: 56
THEODORE W. VOGTMAN
Executive Vice President and Chief Financial Officer since November 17,
1997. Theodore W. Vogtman joined the Company on November 17, 1997 and is
currently Executive Vice President and Chief Financial Officer. Prior to joining
the Company, he was associated with Concord Investment Partners, an investment
firm headquartered in Concord, Massachusetts, from 1996 to October 1997. From
1994 to 1996, he was Chief Financial Officer of Pullman. From 1992 to 1994, he
was Chief Financial Officer for Safelite Glass.
Term of Office: 1 year
Age: 58
J. VINCENT TOSCANO
Executive Vice President of Strategic Planning/Acquisition and Divestitures
since November 17, 1997. J. Vincent Toscano joined the Company on November 17,
1997 and is currently Executive Vice President of Strategic Planning/Acquisition
and Divestitures. Prior to joining the Company, he was associated with Concord
Investment Partners, an investment firm headquartered in Concord, Massachusetts,
from 1996 to October 1997. From 1993 to 1996, he was Vice President--Operations,
at Pullman. From 1992 until 1993, Mr. Toscano was Chief Financial Officer of
Pullman.
Term of Office: 1 year
Age: 50
JOSEPH J. GAGLIARDI
Executive Vice President, Administration and Information Technology since
July 1998. Joseph J. Gagliardi is currently the Executive Vice President,
Administration and Information Technology, a position he has held since July
1998. From March 1997 to July 1998, he was the Senior Vice President, Finance
and Chief Financial Officer of the Company, and from 1980 to March 1997 he
served as Vice President, Finance and Chief Financial Officer of the Company.
Term of Office: 1 year
Age: 59
GERALD G. TIGHE
Senior Vice President, General Counsel since November 17, 1997 Gerald G.
Tighe joined the Company on November 17, 1997 and currently serves as Senior
Vice President, General Counsel. Prior to joining the Company, he was a
consultant to Pullman from 1994 until 1997. Previously, he was General Counsel
of Lear Siegler Inc.
Term of Office: 1 year
Age: 62
38
<PAGE>
D. CRAIG BOWMAN
Vice President, Law and Secretary since December 1, 1997. D. Craig Bowman
joined the Company on December 1, 1997 and is currently Vice President, Law and
Secretary. Before joining the Company, he was a principal in the
management-consulting firm of The Tappan Group, located in New York, New York,
from June 1994 until November 1997. From 1991 to 1994, Mr. Bowman was Vice
President and General Counsel of Pullman.
Term of Office: 1 year
Age: 52
JOHN J. BROCK
Vice President, Tax since November 17, 1997. John J. Brock joined the
Company on November 17, 1997 and is currently Vice President, Tax. Prior to
joining the Company, he was Vice President-Tax at Pullman from 1994 through
1997. From 1990 to 1994, Mr. Brock was Vice President--Taxation with Fiat
Automotive (USA).
Term of Office: 1 year
Age: 53
ROBERT J. CLARK
Vice President, Human Resources since January 15, 1998. Robert J. Clark
joined the Company on January 15, 1998 and is currently Vice President, Human
Resources. Prior to joining the Company, he was Vice President Benefits and
Compensation with Polygram Holding, Inc. from August 1992 until January 1998.
Term of Office: 1 year
Age: 44
KEVIN L. B. PRICE
Vice President, Controller and Treasurer since November 17, 1997. Kevin L.
B. Price joined the Company on November 17, 1997 and is currently Vice
President, Controller and Treasurer. Prior to joining the Company, he was Vice
President--Controller of Pullman, from 1994 until 1997. Prior to that time,
Mr. Price was the Assistant Controller of Pullman.
Term of Office: 1 year
Age: 43
BRIAN D. BENNINGER
Senior Vice President, Marketing since August 1995. Brian D. Benninger has
been a Senior Vice President of the Company since August 1995. From February
1992 to July 1995, Mr. Benninger was an executive of the Company's subsidiary,
Kingston-Warren. In addition, from October 1993 to the time he became an officer
of the Company, Mr. Benninger served as Vice President, Sales, Marketing and
Product Design for both Harman Automotive Sales, Marketing and Project Design
and Corporate CAE. Prior thereto, he was employed by Clevite Elastometers, a
producer of automotive vibration dampening devices, as a Vice President of Sales
and Marketing.
Term of Office: 1 year
Age: 51
DAVID L. KUTA
Senior Vice President, Sales and Product Design since July 1996. David L.
Kuta has been a Senior Vice President of the Company since July of 1996. Prior
to joining the Company in 1996, Mr. Kuta was Vice President of Operations for
United Technologies Automotive-Interiors Division since 1994 and from 1990 to
1994, Vice President and General Manager of the Padded Products
Division-Interiors Division.
Term of Office: 1 year
Age: 54
39
<PAGE>
DAVID C. STEGEMOLLER
Senior Vice President, Powertrain since August 1995. David C. Stegemoller
has been a Senior Vice President of the Company since August 1995. For the past
five years, Mr. Stegemoller served in various positions with Hayes-Albion and
its Trim Trends division (which was then a subsidiary of the Company). Prior to
joining the Company in 1990, Mr. Stegemoller was employed by Navistar
International for 3 years.
Term of Office: 1 year
Age: 57
DOUGLAS D. ROSSMAN
Vice President, Purchasing since December 1996. Douglas D. Rossman has been
a Vice President of the Company since December 1996. Previously, he was
Purchasing Manager of Federal Mogul Corp., an automobile parts manufacturer, for
more than eight years.
Term of Office: 1 year
Age: 47
40
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION
-------------------------------------------- AWARDS
OTHER ---------- UNDER- PAYOUTS
ANNUAL RESTRICTED LYING -------
COMPEN- STOCK OPTIONS/($) LTIP
NAME AND SATION AWARD)(S) (#)SARS PAYOUTS
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(6) ($)(1)(6) (5) (5) ($)(5)
- --------------------------------- ---- --------- ----------- -------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
John W. Adams:
Chairman of the Board and Chief
Executive Officer(7)............. 1998 $ 400,000 0 0 0 0 0
1997 $ 250,000 0 0 0 0 0
1996 0 0 0 0 0 0
Roger G. Pollazzi:
Chief Operating Officer.......... 1998 $ 525,000(2) 0 0 0 0 0
Theodore W. Vogtman:
Executive Vice President and
Chief Financial Officer.......... 1998 $ 218,750 0 0 0 0 0
J. Vincent Toscano:
Executive Vice President of
Strategic Planning............... 1998 $ 218,750 0 0 0 0 0
Joseph J. Gagliardi:
Executive Vice President,
Administration and Information
Technology....................... 1998 $ 250,000 $ 3,177
1997 236,250 0 3,177 0 0 0
1996 220,000 0 3,300 0 0 0
Roger L. Burtraw:
President(7)..................... 1998 $ 298,942 $70,000 $852,561(4)
1997 350,000 35,000 3,177 0 0 0
1996 350,000 0 3,167 0 0 0
Richard Dawson:
Senior Vice President Law and
Administration and General
Counsel(7)....................... 1998 $ 80,000 0 $407,716(3) 0 0 0
1997 174,259 0 3,385 0 0 0
1996 154,975 0 2,999 0 0 0
<CAPTION>
ALL OTHER
COMPEN-
NAME AND SATION
PRINCIPAL POSITION ($)(6)
- --------------------------------- ---------
<S> <C>
John W. Adams:
Chairman of the Board and Chief
Executive Officer(7)............. 0
0
0
Roger G. Pollazzi:
Chief Operating Officer.......... 0
Theodore W. Vogtman:
Executive Vice President and
Chief Financial Officer.......... 0
J. Vincent Toscano:
Executive Vice President of
Strategic Planning............... 0
Joseph J. Gagliardi:
Executive Vice President,
Administration and Information
Technology.......................
0
0
Roger L. Burtraw:
President(7).....................
0
0
Richard Dawson:
Senior Vice President Law and
Administration and General
Counsel(7)....................... 0
0
0
</TABLE>
- ------------------
(1) All Other Compensation represents amounts contributed or accrued for fiscal
1998, 1997, and 1996 for the Named Officers under the Company's 401(k)
savings plan.
(2) Mr. Roger G. Pollazzi is being compensated at the annual rate of $600,000
since November 1997 in his capacity as Chief Operating Officer of the
Company.
(3) Includes severance, non-qualified pension, 401(k) matching contribution by
the Company and vacation pay.
(4) Includes severance, non-qualified pension, 401(k) matching contribution by
the Company and vacation pay.
(5) On the Effective Date of the Plan of Chapter 11 Reorganization, all
pre-reorganization stock, options and other equity interests of the Company
were cancelled.
(6) All pre-reorganization management incentive plans were rejected by the
Company in its Chapter 11 Reorganization Plan. Employee Benefit Plans,
including plans qualified under Section 401 of the Internal Revenue Code
were unaffected by the Plan.
(7) Mr. Adams, Mr. Dawson, and Mr. Burtraw are no longer employed by the
Company.
41
<PAGE>
PENSION AND RETIREMENT BENEFITS
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE(3)
--------------------------------------------------------
REMUNERATION(1)(2) 15 20 25 30 40
- ----------------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$150,000............................................. $ 33,075 $ 44,100 $ 55,125 $ 66,150 $ 88,200
200,000............................................. 44,325 59,100 73,875 88,650 118,200
250,000............................................. 55,575 74,100 92,625 111,150 148,200
300,000............................................. 66,825 89,100 111,375 133,650 178,200
400,000............................................. 89,325 119,100 148,875 178,650 238,200
500,000............................................. 111,825 149,100 186,375 223,650 298,200
800,000............................................. 179,325 239,100 298,875 358,650 478,200
</TABLE>
- ------------------
(1) Covered compensation is composed of base salary for the calendar year,
excluding bonuses, commissions and other special forms of compensation. The
maximum amount of compensation used to determine the benefits shown in the
Pension Table above has been limited by federal law. The limit on
compensation for 1998 is $160,000.
(2) Under applicable federal law, the annual benefits payable to any participant
under the Retirement Plan may not exceed a ceiling currently $130,000 a year
(subject to certain reductions based upon age and certain increases based
upon adjustments to the consumer price index).
(3) The Named Officers will have the following estimated credited years of
service under the Retirement Plan based on continued service to normal
retirement age: Mr. Gagliardi: 24; Mr. Burtraw: 15.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS(1)
<TABLE>
<CAPTION>
AMOUNT AND
TITLE OF NAME AND ADDRESS NATURE OF PERCENT
CLASS OF BENEFICIAL OWNER BENEFICIAL OWNER(1) OF CLASS
- ------------- ----------------------------------------------------------------- ------------------- --------
<S> <C> <C> <C>
Common Stock Contrarian Capital Advisors, L.L.C. ............................. 803,289(4) 9.75
Common Stock Contrarian Capital Management, L.L.C. ........................... 2,056,240(4) 24.95
Common Stock Contrarian Capital Fund II, LP................................... 774,921(4) 9.40
Common James P. Shanahan................................................ 384,182(2)(3) *
</TABLE>
- ------------------
(1) On the Effective Date of the Plan of Chapter 11 Reorganization, all
pre-reorganization stock, options and other equity interests of the Company
were cancelled. Share holdings reflected herein are as of December 15, 1998.
(2) Mr. Shanahan is a member of a Limited Liability Company, which is the
General Partner of Pacholder Heron, LP and Pacholder Value Opportunity Fund
LP which own 128,080 and 41,199 shares respectively. Mr. Shanahans's
ownership in each is less than 1% and he disclaims ownership of the balance
of the partnership's interests in the shares. These shares were obtained in
exchange for pre-petition debt pursuant to the Plan of Chapter 11
Reorganization.
(3) Mr. Shanahan is an officer of Pacholder Fund, Inc. which owns 214,903
shares. He owns less than 1% of the shares of this company and disclaims
ownership of the balance of the company's interests in the shares. These
shares were obtained in exchange for pre-petition debt pursuant to the Plan
of Chapter 11 Reorganization.
(4) These entities disclaim any beneficial ownership in these shares.
(5) *Less than one percent.
As of December 15, 1998, the Retirement Plan owned no shares of the Common
Stock and no shares of the Company's PIK Preferred Stock.
42
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT(3)
<TABLE>
<CAPTION>
AMOUNT AND
TITLE OF NAME AND ADDRESS NATURE OF PERCENT
CLASS OF BENEFICIAL OWNER BENEFICIAL OWNER(2) OF CLASS(3)
- ------------- --------------------------------------------------------- -------------------- -------------
<S> <C> <C> <C>
Common Stock Roger G. Pollazzi........................................ 51,580(1) Less than 1%
Common Stock Theodore W. Vogtman...................................... 5,733(1) Less than 1%
Common Stock J. Vincent Toscano....................................... 5,733(1) Less than 1%
Common Stock Joseph J. Gagliardi...................................... 3,333(1) Less than 1%
Common Stock John W. Adams............................................ 15(2) Less than 1%
Common Stock Roger L. Burtraw......................................... 47(2) Less than 1%
Common Stock Richard Dawson........................................... 237(2) Less than 1%
Common Stock All Directors and Executive Officers taken together as a 80,344
group..................................................
</TABLE>
- ------------------
(1) These shares were obtained in exchange for pre-petition debt pursuant to the
Plan of Chapter 11 Reorganization.
(2) These shares are represented by warrants to purchase the New Common Stock.
(3) The holdings reflected herein are as of December 15, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1998 there were no such relationships or transactions.
43
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1)(2) Financial Statements and Schedules.
The following financial statements and schedules are filed as part of this
Annual Report on Form 10-K.
HARVARD INDUSTRIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL STATEMENTS PAGE
- ------------------------------------------------------------------------------------------------------- --------
<S> <C>
Reports of Independent Public Accountants.............................................................. 46, 47
Consolidated Balance Sheets at September 30, 1998 and 1997............................................. 48
Consolidated Statements of Operations Years Ended
September 30, 1998, 1997 and 1996.................................................................... 49
Consolidated Statements of Shareholders' Deficiency Years Ended
September 30, 1998, 1997 and 1996.................................................................... 50
Consolidated Statements of Cash Flows Years Ended
September 30, 1998, 1997 and 1996.................................................................... 51
Notes to Consolidated Financial Statements............................................................. 52
</TABLE>
FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because they are either not applicable or the
required information is included in the Consolidated Financial Statements or
Notes thereto.
(b) List of Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------------------------------------------------
<S> <C>
2.1 Plan of Reorganization and related Disclosure Statement, filed with the U.S. Bankruptcy Court for the
District of Delaware on July 10, 1998 (incorporated by reference to Exhibits 99.1 and 99.2 to the
Company's Form 8-K filed with the Commission on July 24, 1998 (Commission File No. 001-01044)).
2.2 First Amended and Modified Consolidated Plan of Reorganization dated August 19, 1998, filed with the
U.S. Bankruptcy Court for the District of Delaware on August 25, 1998 (incorporated by reference to
Exhibit 2.1 to the Company's Form 8-K filed with the Commission on October 30, 1998 (Commission File
No. 001-01044)).
3.1(a) Certificate of Incorporation of the Company.
3.1(b) Certificate of Merger of the Company.
3.2 By-laws of the Company.
4.1 Form of Common Stock Certificate of the Company.
4.2 Indenture (including the Form of 14 1/2% Senior Secured Note due September 1, 2003), dated as of
November 24, 1998 between the Company, the Subsidiary Guarantors and Norwest Minnesota Bank, National
Association, as Trustee.
10.1 Settlement Agreement dated as of October 15, 1998, by and among the Company, certain of its
subsidiaries and the PBGC.
10.2 Registration Rights Agreement, dated as of November 24, 1998, between the Company and the signatories
listed therein.
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------------------------------------------------
<S> <C>
10.3 Registration Rights Agreement, dated as of November 23, 1998, between the Company and Lehman Brothers
Inc., as Initital Purchaser.
10.4 Credit Agreement, dated as of November 24, 1998, between the Company, its subsidiaries, General
Electric Capital Corporation, as Administrative Agent and the lenders party thereto.
10.5 Loan Collateral Agreement, dated as of November 24, 1998, by the Company and its subsidiaries in favor
of General Electric Capital Corporation, as Administrative Agent.
10.6 Collateral Agreement, dated as of November 24, 1998, by the Company and its subsidiaries in favor of
Norwest Bank Minnesota, National Association, as Collateral Agent.
10.7 Warrant Agreement, dated as of November 24, 1998, between the Company and State Street Bank and Trust
Company, as Warrant Agent.
10.8 Harvard Industries, Inc. Nonqualified ERISA Excess Benefit Plan (incorporated by reference to Exhibit
10.20 to the Company's Registration Statement on Form S-1 (File No. 33-96376)).
10.9 Harvard Industries, Inc. Nonqualified Additional Credited Service Plan (incorporated by reference to
Exhibit 10.21 to the Company's Registration Statement on Form S-1 (File No. 33-96376)).
10.10 Harvard Industries, Inc. 1998 Stock Incentive Plan
16 Letter re change in certifying accountant (incorporated by reference to Exhibit 16.1 to the Company's
Current Report on Form 8-K/A filed with the Commission October 7, 1998 (Commission File No.
001-01044)).
21 List of subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of PriceWaterhouseCoopers
24 Powers of Attorney (contained in the signature pages hereto).
</TABLE>
(c) Reports on Form 8-K
Form 8-K filed September 17, 1998
Form 8-K/A filed October 6, 1998
Form 8-K filed November 24, 1998
45
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Harvard Industries, Inc.:
We have audited the accompanying consolidated balance sheet of Harvard
Industries, Inc. (a Delaware corporation) and subsidiaries (the "Company") as of
September 30, 1998, and the related consolidated statements of operations,
shareholders' deficiency and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Harvard Industries, Inc. as of
September 30, 1997 and for the two years in the period ended September 30, 1997
were audited by other auditors whose report dated November 14, 1997 (except for
Note 9 as to which the date was December 29, 1997) contained an explanatory
paragraph relating to the ability of the Company to continue as a going concern,
as discussed in Note 1 to such financial statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Harvard Industries, Inc. and
subsidiaries as of September 30, 1998 and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully discussed in Note 1 to
the financial statements, on May 8, 1997, the Company and substantially all of
its subsidiaries each filed a voluntary petition for relief under Chapter 11 of
the United States Bankruptcy Code. On August 19, 1998, the Company filed its
plan of reorganization, which detailed new management's turnaround business
strategy. On November 24, 1998, the Company emerged from bankruptcy (See
Note 28). In addition, the Company has suffered recurring losses from operations
and at September 30, 1998 had a net working capital deficit and shareholders'
deficit. Continuation of the business is dependent on the Company's ability to
achieve successful future operations. These factors among others raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
January 12, 1999
46
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders of
Harvard Industries, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, cash flows and shareholders' deficiency
present fairly, in all material respects, the financial position of Harvard
Industries, Inc. and its subsidiaries (the "Company") at September 30, 1997, and
the results of their operations and their cash flows for each of the two years
ended September 30, 1997 and 1996 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
The consolidated financial statements audited by us have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, on May 8, 1997, Harvard Industries, Inc. and
substantially all of its subsidiaries each filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code, thereby
raising substantial doubt about their ability to continue as a going concern.
The Company has not filed a plan of reorganization with the Bankruptcy Court.
The consolidated financial statements audited by us do not include any
adjustments that might result from the outcome of the petitions for
reorganization.
PRICE WATERHOUSE LLP
Tampa, Florida
November 14, 1997, except for
Note 9 as to which date
is December 29, 1997
47
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND 1997
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
------------------ ------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................... $ 11,624 $ 9,212
Accounts receivable, net of allowance of $1,675 in 1998 and $2,589 in
1997................................................................. 57,046 76,190
Inventories............................................................. 26,646 54,218
Prepaid expenses and other current assets............................... 5,701 7,602
-------- --------
Total current assets.................................................... 101,017 147,222
-------- --------
Property, plant and equipment, net........................................ 122,579 132,266
Intangible assets, net.................................................... 2,833 4,417
Other assets, net......................................................... 24,552 23,589
-------- --------
Total Assets.............................................................. $250,981 $307,494
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities:
Current portion of debtor-in-possession (DIP) loans..................... $ 39,161 $ 36,436
Creditors Subordinated Term Loan........................................ 25,000 --
Current portion of long term debt....................................... -- 1,748
Accounts payable........................................................ 25,098 32,267
Accrued expenses........................................................ 93,337 72,235
Income taxes payable.................................................... 8,445 2,440
-------- --------
Total current liabilities............................................ 191,041 145,126
Liabilities subject to compromise......................................... 385,665 397,319
DIP loans................................................................. -- 51,035
Long-term debt............................................................ -- 12,339
Post-retirement benefits other than pensions.............................. 95,515 96,929
Other..................................................................... 63,353 27,237
-------- --------
Total liabilities.................................................... 735,574 729,985
Commitments and contingencies............................................. -- --
14 1/4% Pay-In-Kind Exchangeable Preferred Stock (At September 30, 1998
and 1997--includes $10,142 of undeclared accrued dividends)............. 124,637 124,637
-------- --------
Shareholders' deficiency:
Common Stock, $.01 par value; 15,000,000 shares authorized; 7,026,437
shares issued and outstanding at September 30, 1998 and 1997......... 70 70
Additional paid-in capital.............................................. 32,134 32,134
Additional minimum pension liability.................................... (8,902) (3,665)
Foreign currency translation adjustment................................. (2,991) (1,930)
Accumulated deficit..................................................... (629,541) (573,737)
-------- --------
Shareholders' Deficiency............................................. (609,230) (547,128)
-------- --------
Total Liabilities and Shareholders' Deficiency............................ $250,981 $307,494
-------- --------
-------- --------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these Balance Sheets.
48
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net Sales............................................................... $ 690,076 $ 810,769 $ 824,837
---------- ---------- ----------
Costs and expenses:
Cost of sales......................................................... 656,243 797,774 776,141
Selling, general and administrative................................... 66,546 45,822 42,858
Amortization of goodwill.............................................. 1,584 8,448 15,312
Impairment of long-lived assets and restructuring costs............... 10,842 288,545 --
Interest expense (contractual interest of $49,849 in 1998 and $50,264
in 1997)........................................................... 14,231 36,659 47,004
Gain on sale of operations............................................ (28,673) -- --
Other expense, net.................................................... 3,980 5,530 1,538
---------- ---------- ----------
Total costs and expenses........................................... 724,753 1,182,778 882,853
---------- ---------- ----------
Loss from continuing operations before reorganization items and income
taxes................................................................. (34,677) (372,009) (58,016)
Reorganization items.................................................... 14,920 16,216 --
---------- ---------- ----------
Loss from continuing operations before income taxes..................... (49,597) (388,225) (58,016)
Provision for income taxes.............................................. 6,207 1,204 3,196
---------- ---------- ----------
Loss from continuing operations......................................... (55,804) (389,429) (61,212)
Loss from discontinued operations....................................... -- -- (7,500)
---------- ---------- ----------
Net loss................................................................ $ (55,804) $ (389,429) $ (68,712)
---------- ---------- ----------
---------- ---------- ----------
PIK preferred dividends and accretion (contractual amount of $19,010 in
1998 and $16,891 in 1997)............................................. $ -- $ 10,142 $ 14,844
---------- ---------- ----------
---------- ---------- ----------
Net loss attributable to common shareholders............................ $ (55,804) $ (399,571) $ (83,556)
---------- ---------- ----------
---------- ---------- ----------
Basic and Diluted Earnings per share:
Loss from continuing operations....................................... $ (7.94) $ (56.91) $ (10.87)
Loss from discontinued operations..................................... -- -- (1.07)
---------- ---------- ----------
Net loss per share.................................................... $ (7.94) $ (56.91) $ (11.94)
---------- ---------- ----------
---------- ---------- ----------
Weighted average number of common and common equivalent shares
outstanding........................................................ 7,026,437 7,020,692 6,999,279
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these Statements.
49
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIENCY
YEARS ENDED SEPTEMBER 30, 1998, 1997, AND 1996
(IN THOUSANDS OF DOLLARS, EXCEPT SHARES)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL MINIMUM TOTAL
----------------------- PAID-IN PENSION FOREIGN ACCUMULATED SHAREHOLDERS'
NO. OF SHARES AMOUNTS CAPITAL LIABILITY CURRENCY DEFICIT DEFICIENCY
------------- ------- ---------- ------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance September 30, 1995......... 6,994,907 $70 $ 56,899 $(1,836) $(1,743) $(115,596) $ (62,206)
Net loss--1996..................... -- -- -- -- -- (68,712) (68,712)
PIK preferred stock dividend....... -- -- (14,375) -- -- -- (14,375)
Accretion of discount on PIK
preferred stock.................. -- -- (469) -- -- -- (469)
Exercise of stock options including
related tax benefits............. 19,450 -- 190 -- -- -- 190
Minimum pension liability.......... -- -- 69 69
Foreign currency adjustment........ -- -- -- -- (221) -- (221)
--------- --- -------- ------- -------- --------- ---------
Balance September 30, 1996......... 7,014,357 70 42,245 (1,767) (1,964) (184,308) (145,724)
Net loss--1997..................... -- -- -- -- -- (389,429) (389,429)
PIK preferred stock dividend....... -- -- (9,854) -- -- (9,854)
Accretion of discount on PIK
preferred stock.................. -- -- (288) -- -- -- (288)
Sale of stock...................... 12,080 -- 31 -- -- -- 31
Minimum pension liability.......... -- -- -- (1,898) -- -- (1,898)
Foreign currency adjustment........ -- -- -- -- 34 -- 34
--------- --- -------- ------- -------- --------- ---------
Balance September 30, 1997......... 7,026,437 70 32,134 (3,665) (1,930) (573,737) (547,128)
Net loss--1998..................... -- -- -- -- -- (55,804) (55,804)
Minimum pension liability.......... -- -- -- (5,237) -- -- (5,237)
Foreign currency adjustment........ -- -- -- -- (1,061) -- (1,061)
--------- --- -------- ------- -------- --------- ---------
Balance September 30, 1998......... 7,026,437 $70 $ 32,134 $(8,902) $(2,991) $(629,541) $(609,230)
--------- --- -------- ------- -------- --------- ---------
--------- --- -------- ------- -------- --------- ---------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these Statements.
50
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1998 1997 1996
-------- --------- --------
<S> <C> <C> <C>
Cash flows related to operating activities:
Loss from continuing operations before reorganization items................ $(40,884) $(373,213) $(61,212)
Add back (deduct) items not affecting cash and cash equivalents:
Depreciation and amortization......................................... 27,904 60,186 65,658
Impairment of long-lived assets and restructuring charges............. 10,842 288,545 --
Gain on sale of operations............................................ (28,673) -- --
Loss on disposition of property, plant and equipment and property held
for sale........................................................... 1,030 1,931 2,053
Curtailment (gain) loss............................................... 4,390 (8,249) --
Write-off of deferred debt expense.................................... -- 1,792 --
Senior notes interest accrued not paid................................ -- 9,728 --
Changes in operating assets and liabilities of continuing operations,
net of effects from acquisitions and reorganization items:
Accounts receivable................................................... 10,673 22,798 3,133
Inventories........................................................... 21,862 (7,225) 7,112
Other current assets.................................................. 1,460 (5,965) (222)
Accounts payable...................................................... (6,658) (56,806) 9,371
Accounts payable prepetition.......................................... -- 81,429 --
Accrued expenses and income taxes payable............................. 18,567 (10,254) (30,444)
Postretirement benefits............................................... 1,386 (4,138) 5,822
Other noncurrent...................................................... 10,683 13,350 (4,404)
-------- --------- --------
Net cash provided by (used in) continuing operations before
reorganization items.................................................. 32,582 13,909 (3,133)
Net cash used in reorganization items................................... (9,056) (2,864) --
-------- --------- --------
Net cash provided by (used in) continuing operations.................... 23,526 11,045 (3,133)
-------- --------- --------
Cash flows related to investing activities:
Acquisition of property, plant and equipment............................ (24,887) (36,572) (40,578)
Cash flows related to discontinued operations........................... 557 713 (3,332)
Proceeds from sales of operations....................................... 27,822 -- --
Proceeds from disposition of property, plant and equipment.............. 72 1,703 909
-------- --------- --------
Net cash provided by (used in) investing activities..................... 3,564 (34,156) (43,001)
-------- --------- --------
Cash flows related to financing activities:
Issuance costs of Senior Notes and financing agreements................. -- (2,200) --
Net borrowings (and repayments) under credit agreement.................. -- (38,834) 38,834
Net borrowings (and repayments) under DIP financing agreement........... (45,810) 87,471 --
Net borrowings under Unsecured Creditors Term Loan...................... 25,000 -- --
Proceeds from sale of stock and exercise of stock options............... -- 31 190
Repayments of long-term debt............................................ (88) (7,682) (3,032)
Pension fund payments pursuant to PBGC settlement agreement............. -- (6,000) (6,000)
Deferred financing costs................................................ (3,725)
Payment of EPA settlements.............................................. (55) (1,570) (2,676)
-------- --------- --------
Net cash (used in) provided by financing activities..................... (24,678) 31,216 27,316
-------- --------- --------
Net increase (decrease) in cash and cash equivalents......................... 2,412 8,105 (18,818)
Cash and cash equivalents, beginning of period............................... 9,212 1,107 19,925
-------- --------- --------
Cash and cash equivalents, end of period..................................... $ 11,624 $ 9,212 $ 1,107
-------- --------- --------
-------- --------- --------
Supplemental disclosure of cash flow information:
Interest paid........................................................... $ 14,039 $ 37,328 $ 41,868
-------- --------- --------
-------- --------- --------
Income taxes paid....................................................... $ 776 $ 2,244 $ 5,092
-------- --------- --------
-------- --------- --------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these Statements.
51
<PAGE>
HARVARD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
(1) BASIS OF PRESENTATION
Harvard Industries, Inc., a Florida corporation at September 30, 1998,
reorganized as a Delaware Corporation on November 24, 1998, and its subsidiaries
(the "Company") are primarily engaged in the business of designing, engineering
and manufacturing components for OEMs producing cars and light trucks. The
Company's principal customers are General Motors, Ford and Chrysler.
The Company operates primarily in the automotive accessories business. The
Company produces a wide range of products, including: rubber glass-run channels;
rubber seals for doors and trunk lids; aluminum castings; cast, fabricated,
machined and decorated metal products; and metal stamped and roll form products.
General Motors, Ford, and Chrysler accounted for 39%, 34%, and 10%,
respectively, of the consolidated sales in 1998, 43%, 33%, and 7% respectively,
in 1997 and 43%, 31%, and 8%, respectively, in 1996.
On May 8, 1997, Harvard Industries, Inc. and its domestic subsidiaries (all
of whom are hereinafter sometimes designated the "Debtors") filed voluntary
petitions for relief under Chapter 11 of the Federal bankruptcy laws in the
United States Bankruptcy Court (the "Court") for the District of Delaware. Under
Chapter 11, certain claims against the Debtors arising prior to the filing of
the petitions for relief under the Federal bankruptcy laws are stayed from
collection while the Debtors continue business operations as debtors-in-
possession ("DIP").
The Debtors received approval from the Court to pay or otherwise honor
certain pre-petition obligations, including certain employee wages, salaries and
other compensation, employee medical, pension and similar benefits, reimbursable
employee expenses and certain workers' compensation, as well as continuation of
pre-petition customer practices with respect to warranties, refunds and return
policies.
The Company's Plan of Reorganization (the Plan), as an acceptable means of
satisfying creditor claims in accordance with the Bankruptcy Code, was confirmed
by the Court on October 15, 1998, and such plan became effective on
November 24, 1998 (See Note 28). Continuation of the Debtors' business after
reorganization is dependent upon the success of future operations, including
execution of the Company's turnaround business strategy and the ability to meet
obligations as they become due. The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going
concern. The Company has suffered recurring losses from operations and at
September 30, 1998 had a net working capital deficit and shareholders'
deficiency. These factors among others raise substantial doubt about the
Company's ability to achieve successful future operations. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Liabilities subject to compromise consisted of the following at September
30:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Accounts Payable.................................................... $ 71,635 $ 79,060
Senior notes........................................................ 309,728(a) 309,728(a)
Taxes............................................................... -- 3,269
Other............................................................... 4,302 5,262
-------- --------
$385,665 $397,319
-------- --------
-------- --------
</TABLE>
- ------------------
(a) Includes accrued interest to the date of bankruptcy of $9,728 in 1998 and
1997.
52
<PAGE>
Reorganization expenses included in the consolidated statements of
operations for the year ended September 30 are comprised of the following:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Adjustment to record senior notes to amount of allowed claims........... $ -- $10,408
Professional fees....................................................... 15,350 5,828
Interest income on cash resulting from Chapter 11 proceedings........... (430) (20)
------- -------
$14,920 $16,216
------- -------
------- -------
</TABLE>
In a previous Chapter 11 case the Company had a Plan of Reorganization
confirmed by the Court on August 10, 1992, and that Plan became effective on
August 30, 1992. In connection with its emergence from the 1992 Chapter 11
bankruptcy proceedings, the Company implemented "Fresh Start Reporting" as of
August 23, 1992. Accordingly, all assets and liabilities were restated to
reflect respective fair values at that date. The portion of the reorganization
value which could not be attributed to specific tangible or identifiable
intangible assets of the reorganized Company has been reported under the caption
"Intangible Assets." (See Note 7)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Principles of Consolidation. The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries. Investments of
50% or less in companies and/or joint ventures are accounted for under the
equity method. All material intercompany transactions and balances have been
eliminated in consolidation.
Cash and Cash Equivalents. The Company considers all investments in highly
liquid bank certificates of deposit to be cash equivalents. Cash equivalents
include only investments with purchased maturities of three months or less. In
accordance with the DIP financing agreement, substantially all the Company's
cash receipts from trade receivables must be applied against the revolving line
of credit. Accordingly, the Company offset $12,160 against the revolving line of
credit for certain cash held in lockboxes at September 30, 1997.
Trade Receivables. A substantial portion of the Company's trade
receivables is mainly concentrated with the three largest U.S. automotive
companies. The Company does not require collateral or other security to support
credit sales. General Motors, Ford and Chrysler accounted for 46%, 11% and 17%,
respectively, of consolidated trade receivables at September 30, 1998, and 42%,
12% and 11%, respectively, at September 30, 1997.
Inventories. Inventories are stated at the lower of cost or market. Cost
is determined using the first-in, first-out (FIFO) method.
Property, Plant and Equipment. All property, plant and equipment owned at
August 23, 1992 were restated to reflect fair value in accordance with "fresh
start reporting". Additions after August 23, 1992 are recorded at cost.
Depreciation and amortization, which includes the amortization of machinery and
equipment under capital leases, is calculated using the straight-line method at
rates to depreciate assets over their estimated useful lives or remaining term
of leases. The rates used are as follows: buildings and building improvements,
2.5% to 20.0%; and machinery, equipment and furniture and fixtures, 5.0% to
33.3%. Replacements and betterments are capitalized. Major scheduled furnace
maintenance and die replacement programs are accrued based on units of
production; all other maintenance and repairs are expensed as incurred. Upon
sale or retirement of property, plant and equipment, the related cost and
accumulated depreciation are removed from the accounts and any resultant gain or
loss is recognized. See Note 13 for impairment of certain property, plant and
equipment.
Intangible Assets. Intangible assets consist of goodwill and
reorganization value in excess of amounts allocable to identifiable assets.
Goodwill applicable to the acquisition of Doehler-Jarvis, originally being
amortized over 15 years was changed to 10 years in the fourth quarter of 1996,
effective October 1, 1995, based
53
<PAGE>
upon Doehler-Jarvis' unprofitable operating results since acquisition and
projected future operating results. Reorganization value in excess of amounts
allocated to identifiable assets is being amortized using the straight-line
method over 10 years. (see Note 13 for impairment of goodwill.)
Long-Lived Assets. The Company assesses the recoverability of its
long-lived assets by determining whether the amortization of each such asset
over its remaining life can be recovered through projected undiscounted future
cash flows. The amount of impairment, if any, is measured based on projected
discounted future cash flows using a discount rate reflecting the Company's
average cost of funds. (See Note 13.)
Debt Issuance Costs. The Company amortizes its deferred debt issuance
costs over the term of the related debt.
Revenue Recognition. Revenues are recognized as products are shipped to
customers.
Income Taxes. The Company accounts for income taxes in accordance with
Financial Accounting Standards Board (FASB) Statement No. 109. Such statement
requires the recognition of deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between tax basis and financial
reporting basis of assets and liabilities.
Environmental Liabilities. It is the Company's policy to accrue and charge
against operations environmental remediation costs when it is probable that a
liability has been incurred and an amount is reasonably estimable. As
assessments and cleanups proceed, additional information becomes available and
these accruals are reviewed periodically and adjusted, if necessary. These
liabilities can change substantially due to such factors as additional
information on the nature or extent of contamination, methods of remediation
required, and other actions required by governmental agencies or private
parties. Cash expenditures often lag behind the period in which an accrual is
recorded by a number of years.
Foreign Currency Translation Adjustment. Exchange adjustments resulting
from foreign currency transactions are generally recognized in the results of
operations, whereas adjustments resulting from the translation of balance sheet
accounts are reflected as a separate component of shareholders' deficiency. Net
foreign currency transaction gains or losses are not material in any of the
years presented.
Earnings Per Share. Statement of Financial Accounting Standards No. 128,
"Earnings Per Share", which became effective for fiscal 1998, establishes new
standards for computing and presenting earnings per share (EPS). The new
standard requires the presentation of basic EPS and diluted EPS and the
restatement of previously reported EPS amounts. Basic EPS is calculated by
dividing income available to common shareholders by the weighted average number
of shares of common stock outstanding during the period. Diluted EPS is
calculated by dividing income available to common shareholders, adjusted to add
back dividends or interest on convertible securities, by the weighted average
number of shares of common stock outstanding plus additional common shares that
could be issued in connection with potentially dilutive securities. In
connection with the Company's emergence from bankruptcy (Note 28), the number of
shares of common stock outstanding will increase, thereby diluting current
equity interests.
Recent Accounting Pronouncements
Derivative Transactions. In June 1998, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS")
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133 establishes accounting and reporting standards requiring that every
derivative instrument be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and loses to offset related results on the hedged
item in the income statement. SFAS No. 133 is effective for fiscal years
beginning after June 15, 1999, but may be adopted earlier. Historically, the
Company has used, and in the future may use, derivative instruments or hedge
accounting. The adoption of SFAS No. 133 will have no impact on the Company's
consolidated results of operations, financial position or cash flows.
Reporting Comprehensive Income. In June 1997, the FASB issued SFAS
No. 130, "Reporting Comprehensive Income," which establishes standards for
reporting comprehensive income and its components in
54
<PAGE>
annual and interim financial statements. SFAS No. 130 is effective for fiscal
years beginning after December 15, 1997. Reclassification of financial
statements for earlier periods is required. The adoption of SFAS No. 130 will
have no impact on the Company's consolidated results of operations, financial
position or cash flows.
Segment Reporting. In June 1997, the FASB issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
establishes standards for companies to report information about operating
segments in annual financial statements, based on the approach that management
utilizes to organize the segments within the company for management reporting
and decision making. In addition, SFAS No. 131 requires that companies report
disclosures about products and services, geographic areas, and major customers.
SFAS No. 131 is effective for financial statements for fiscal years beginning
after December 15, 1997. Financial statement disclosures for prior periods are
required to be restated. The adoption of SFAS No. 131 will have no impact on the
Company's consolidated results of operations, financial position or cash flows.
Reclassifications. Certain amounts in the 1997 and 1996 Consolidated
Financial Statements and Notes to Consolidated Financial Statements have been
reclassified to conform to the 1998 presentation.
(3) DISPOSITION OF BUSINESSES
In November 1997, the Company sold the Material Handling division of its
Kingston-Warren subsidiary for approximately $18,000 of gross proceeds, of which
$7,840 was applied to the scheduled DIP term loans' quarterly payments in
November 1997 and February and May 1998 and $7,840 was applied to the final
installment due May 1999. The balance of the proceeds was used to reduce the DIP
revolving facility. The transaction resulted in a gain on sale of approximately
$11,400 in the first quarter of fiscal 1998.
In June 1998, the Company finalized the sale of its land, building and
certain other assets related to the Harvard Interiors Furniture Division located
in St. Louis, Missouri for approximately $4,100 of gross proceeds. Of the
proceeds, $830 was applied to the May 31, 1998 DIP quarterly term payment, $501
was applied to the August 31, 1998 payment, $1,330 was applied to the May 8,
1999 payment and the balance was applied to reduce the DIP revolving facility.
The transaction resulted in a gain on sale of approximately $1,200, which was
recorded in the second and third quarters of fiscal 1998.
In June 1998, the Company sold its Elastic Stop Nut ("ESNA") land and
building located in Union, New Jersey for $1,900. On September 7, 1998, the
Company sold substantially all of the assets of Doehler-Jarvis Greeneville, Inc.
for $10,907 of gross proceeds and resulted in a gain on sale of approximately
$2,100.
Production has ceased at the Company's Doehler-Jarvis Toledo, Inc.
subsidiary. During 1998, General Motors and Ford defrayed certain expenses of
the shut down and in return obtained certain assets, which were written off when
the Company recorded the impairment charge in 1997 (See Note 13), and assumed
the related lease obligation. As a result of the lease assumption during 1998,
the Company recorded a gain on sale of approximately $14,000. This gain is
recorded within "Gain on sale of operations." The facility is currently for
sale.
In September 1998, the Company sold, at auction, certain assets of Harman
for approximately $2,000.
Condensed operating data of operations designated for sale or wind-down
(Harman Automotive, Harvard Interiors, Material Handling, Toledo, Greeneville
and the Tiffin, Ohio facility of the Hayes-Albion subsidiary) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30
--------------------
1998 1997
-------- --------
<S> <C> <C>
Net Sales............................................................. $204,616 $315,078
Gross profit (loss)................................................... 4,877 (15,502)
</TABLE>
55
<PAGE>
(4) ESNA DISCONTINUED OPERATIONS
On three separate occasions in fiscal 1994, the Company became aware that
certain products of its ESNA division were not manufactured and/or tested in
accordance with required specifications at its Union, New Jersey and/or
Pocahontas, Arkansas facility. These fastener products were sold to the United
States Government and other customers for application in the construction of
aircraft engines and airframes. In connection therewith, the Company notified
the Department of Defense Office of Inspector General ("DOD/OIG") and, upon
request, was admitted into the Voluntary Disclosure Program of the Department of
Defense (the "ESNA matter"). The Company has settled this matter in principal
(final stipulation yet to be executed) for $475, to be paid subsequent to the
fiscal year end.
In September 1996 the Company determined that it is not likely that the
agreement entered into in May 1996 with a developer to sell the Company's ESNA
facility in Union, NJ would be successfully concluded, due to Environmental
Protection Agency ("EPA") requirements necessary to bring the site up to
residential standards. After considering the length of time, current market
conditions and environmental cleanup costs to dispose of the facility for
residential and/or industrial use, the Company determined that it was
appropriate to reflect the value of the ESNA facility to the Company at a
nominal net realizable value including clean up costs. As a result, the Company
recorded a $7,500 charge to discontinued operations in the fourth quarter of
1996 representing the write-down of the ESNA facility, continuing carrying costs
associated with the Company's ongoing participation in the Department of Defense
Voluntary Disclosure Program and carrying costs of the Union, NJ facility.
Net assets of discontinued operations of $500 and $1,057 at September 30,
1998 and 1997 respectively reflect the estimated net realizable value of
remaining assets consisting primarily of royalty receivables and are included in
other non-current assets. In June of 1998, the Company sold its ESNA land and
building in NJ for approximately $1,900.
(5) INVENTORIES
Inventories at September 30 consist of the following:
<TABLE>
<CAPTION>
1998 1997
------- --------
<S> <C> <C>
Finished goods......................................................... $ 6,476 $ 3,530
Work-in-process........................................................ 2,078 16,805
Tooling................................................................ 5,991 19,934
Raw materials.......................................................... 12,101 13,949
------- --------
Total Inventories...................................................... $26,646 $ 54,218
------- --------
------- --------
</TABLE>
(6) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at September 30 consist of the following:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Land.................................................................. $ 3,445 $ 4,537
Buildings and improvements............................................ 52,590 57,367
Machinery and equipment............................................... 161,875 177,127
Furniture and fixtures................................................ 1,768 2,011
Construction in progress.............................................. 26,331 14,799
-------- --------
Total............................................................ 246,009 255,841
Less accumulated depreciation......................................... (123,430) (123,575)
-------- --------
Property, Plant and Equipment, Net.................................... $122,579 $132,266
-------- --------
-------- --------
</TABLE>
56
<PAGE>
Depreciation expense amounted to $24,209, $46,377, and $42,632 in 1998, 1997 and
1996, respectively. (See Note 13 regarding the impairment of property, plant and
equipment in 1997 and 1998.)
(7) INTANGIBLE ASSETS
Intangible assets at September 30 consist of the following:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Reorganization value (See Note 2)....................................... $12,339 $12,339
Less accumulated amortization........................................... (9,506) (7,922)
------- -------
Intangible assets, net........................................... $ 2,833 $ 4,417
------- -------
------- -------
</TABLE>
Amortization expense related to reorganization value amounted to $1,584,
$8,448, and $15,312 in 1998, 1997 and 1996, respectively. (See Note 13)
(8) OTHER ASSETS
Other assets at September 30 consist of the following:
<TABLE>
<CAPTION>
AMORTIZATION
PERIOD 1998 1997
----------------- -------- -------
<S> <C> <C> <C>
Deferred financing costs..................................... life of agreement $ 3,862 $ 2,200
Deferred tooling............................................. units produced 10,297 10,291
Pension Asset................................................ N/A 18,675 16,074
Net assets of discontinued operations........................ N/A 500 1,057
Other........................................................ N/A 2,821 3,261
-------- -------
Total................................................. 36,155 32,883
Less accumulated amortization................................ (11,603) (9,294)
-------- -------
Other assets, net..................................... $ 24,552 $23,589
-------- -------
-------- -------
</TABLE>
Amortization expense related to deferred financing costs amounted to
$1,262, $1,627, and $5,136 in 1998, 1997 and 1996, respectively. Amortization
expense related to deferred tooling amounted to $849, $3,743, and $2,578, in
1998, 1997 and 1996, respectively. In addition, in 1997 the Company wrote-off
deferred financing costs of $10,408 related to the senior notes as
reorganization costs and $1,792 relating to the financing agreement as interest
expense upon the refinancing of such debt with DIP financing described in
Note 9.
(9) DIP FINANCING AND CREDITORS SUBORDINATED TERM LOAN
As discussed in Note 28, both of these financing facilities were repaid
upon emergence from bankruptcy on November 24, 1998. On May 8, 1997, the Company
and certain of the Company's subsidiaries obtained a two-year Post-Petition Loan
and Security Agreement ("DIP financing") to enable it to continue operations
during the Chapter 11 proceedings. The DIP financing provides for $65,000 of
Term Loans and $110,000 of Revolving Credit Loans which includes a $25,000
sub-limit of credit facility principally for standby letters of credit. As
collateral, the Debtors have pledged substantially all of the assets of the
Debtors.
The Company entered into a Term Loan Agreement dated as of January 16, 1998
for a $25,000 post-petition term loan facility which is subordinated to the
security interests under the existing DIP loans. The loan is payable on the
earlier of May 8, 1999 or the date the existing DIP loan is terminated and bears
interest at a rate per annum equal to the greater of (i) the highest per annum
interest rate for term loans and revolving credit loans under the existing DIP
loans plus 3% or (ii) 13%. The net proceeds of $22,500 from the loan were used
to reduce the current balance of the revolver portion of the DIP loans.
57
<PAGE>
All of the Pre-petition indebtedness outstanding at May 8, 1997 under the
financing agreement described in Note 10 amounting to $105,044 was repaid from
borrowings under the DIP financing. At September 30, 1998 and 1997, the amount
outstanding under the term loans was $64,161 and $64,035, respectively, the
amount outstanding under the Revolving Credit Loans was $0 and $23,436
respectively, and outstanding letters of credit amounted to $12,243 and $12,670
(principally standby), respectively.
The Revolving Credit Loans bear interest at the rate of 1.50% in excess of
the Base Rate (Prime) and the Term Loans bear interest at the rate of 1.75% in
excess of the Base Rate. The prime rate was 8.25% at September 30, 1998. The DIP
Lenders also earn a fee of 2% per annum of the face amount of each standby
letter of credit in addition to passing along to the borrowers all bank charges
imposed on the DIP Lenders by the letter of credit issuing bank. Further, the
DIP Lenders receive a line of credit fee of .5% per annum on the unutilized
portion of the Revolving Line of Credit, together with certain other fees,
including a $1,375 closing fee. The Term Loans provide for quarterly payments of
$3,250 beginning November 30, 1997 through February 28, 1999, with a final
installment of $45,500 due on May 8, 1999.
The Company failed to meet the fixed charge ratio financial covenant during
the months of October and November 1997 and on December 29, 1997 obtained a
waiver of such default from its lenders. On December 29, 1997 the Company
entered into Amendment No. 1, Waiver and Consent (the "Amendment") to
Post-Petition Loan and security Agreement with its vendors whereby the lenders
from December 29, 1997 waived all defaults or events of default which had
occurred prior to such date from the Companies' failure to comply with the above
financial covenants. The lenders also entered into the Amendment to replace the
fixed charge ratio covenant with monthly consolidated EBITDA and consolidated
tangible net worth covenants commencing calculations at December 31, 1997. The
Amendment required the lenders' consent for capital expenditures in excess of
$30 million for the year ending September 30, 1998.
The Company also entered into Amendment No. 2 and Consent to the
Post-Petition Loan and Security Agreement, dated January 27, 1998 (the "Amended
DIP Financing Agreement"), pursuant to which the lenders consented to the term
loan, discussed above, the creation of subordinated liens thereunder and to
certain asset sales.
The Company entered into Amendment Nos. 3 and 4 to the Post-Petition Loan
and Security Agreement, dated April 30, 1998 and June 23, 1998, respectively,
extending to May 31, 1998 and June 30, 1998, respectively, the date upon which
an agreement with Ford regarding the wind-down of the Toledo facility was
required to be approved by the Court. An agreement with Ford was signed on
May 18, 1998 and approved by the Court on June 22, 1998. (See Note 3.)
(10) LONG TERM DEBT AND CREDIT AGREEMENTS
Long term debt at September 30 consists of the following:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
12% Senior Notes Due 2004............................................... $ -- $ --
11 1/8% Senior Notes Due 2005........................................... -- --
Revolving Credit Agreement.............................................. -- --
Industrial revenue bonds................................................ -- --
Capital lease obligations............................................... -- 14,087
------- -------
Total Long Term Debt............................................... 14,087
Less current portion.................................................... -- (1,748)
------- -------
Long-term portion....................................................... $ -- $12,339
------- -------
------- -------
</TABLE>
58
<PAGE>
On July 26, 1994, the Company consummated a public offering relating to
$100,000 aggregate principal amount of the Company's 12% Senior Notes Due 2004
("12% Notes") and on July 28, 1995, the Company consummated a private placement
offering of $200,000 principal amount of 11 1/8% Senior Notes Due 2005 ("11 1/8%
Notes") (which were subsequently exchanged for new 11 1/8% Notes which are not
subject to transfer restrictions). Both Notes were issued pursuant to indentures
by and among the Company and Guarantors, which are subsidiaries of the Company,
and First Union National Bank of North Carolina, as Trustee. (See Note 26 for
information concerning the Guarantors and Note 1 for the classification of such
debt which is in default.)
In addition, both Note Indentures require the repayment of the Notes upon
the occurrence of a change in control, as defined, at a repurchase price of 101%
of the principal amount thereof plus accrued and unpaid interest. The Note
Indentures limit the issuance of new debt, preferred stocks, as defined, and
restrict the payment of dividends, distributions from subsidiaries and the sale
of assets and subsidiary stock, as defined.
The Notes are redeemable at the option of the Company, in whole or in part,
at any time after July 15, 1999 for the 12% Notes or August 1, 2000 for the
11 1/8% Notes at the various redemption prices set forth in the Indentures
relating to the Notes, plus accrued interest to the date of redemption. The 12%
Notes mature on July 15, 2004, and the 11 1/8% Notes on August 1, 2005. Interest
on both Notes is payable semiannually. The Company discontinued accruing
interest on both Notes from the date of bankruptcy.
The net proceeds from the sale of the 12% Notes of $94,300 were used to
prepay all indebtedness outstanding under the Company's then existing bank
credit agreement (approximately $51,100) and to pay certain trade payables that
were incurred by the Company prior to its bankruptcy (approximately $31,000).
The balance of the proceeds from the sale of the 12% Notes was used for general
corporate purposes. The proceeds of $188,196 from the sale of the 11 1/8% Notes
were utilized as part of the purchase price of the acquisition of
Doehler-Jarvis.
Contemporaneously with the sale of the 11 1/8% Notes, the Company and
Guarantors (see Note 26) entered into a Revolving Credit Agreement, dated as of
July 28, 1995 ("Chemical Agreement"), by and among the Company and Guarantors
and Chemical Bank, as Agent, providing for up to $100,000 of working capital
loans.
The Company and certain of its subsidiaries entered into a financing
agreement dated October 4, 1996 with the CIT Group/Business Credit, Inc. as a
lender and as agent for a group of lenders. On October 4, 1996, the Company
borrowed $38,273, under such financing agreement of which $30,000 was borrowed
as term loans and $8,273 as revolving loans. Contemporaneously with entering
such financing agreement, the Company terminated the Chemical Agreement, dated
as of July 28, 1995. Proceeds from this new financing agreement were used to
repay all outstanding loans under the Chemical Agreement. (See Note 9 for
subsequent refinancing of this Agreement.)
Machinery and equipment at September 30, 1996 includes equipment held under
capital leases with an acquisition cost of approximately $16,727, which arose
principally through the acquisition of Doehler-Jarvis. The initial lease terms
for such leases end December 2002 and September 2003. The leases are subject to
renewal and the equipment under the leases may be purchased at the end of the
leases at fair market value not to exceed 24% of the original cost.
Substantially all such equipment was written-off as impaired in September 1997
and the lease commitments were assumed by Ford in December 1997. (See Notes 3
and 13).
For current Long Term Debt and Credit Agreements see Footnote 28,
Subsequent Events.
59
<PAGE>
(11) ACCRUED EXPENSES
Accrued expenses at September 30 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Interest................................................................ $ 758 $ 713
Salaries and wages...................................................... 17,080 13,207
Pension liabilities..................................................... 3,404 2,177
Workers' compensation and medical....................................... 11,510 13,521
Costs related to discontinued operations................................ 7,885 4,822
Tooling and maintenance costs........................................... 3,031 5,366
Environmental........................................................... 2,785 2,397
Post-retirement benefits................................................ 2,112 2,300
Reorganization costs.................................................... 8,808 2,944
Restructuring costs (see Note 13)....................................... 1,653 10,000
Other................................................................... 34,311 14,788
------- -------
$93,337 $72,235
------- -------
------- -------
</TABLE>
(12) OTHER LIABILITIES
Other liabilities at September 30 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Pension liabilities (see Notes 19 and 20)............................... $23,566 $ 3,495
Workers' compensation................................................... 26,478 10,462
Environmental........................................................... 5,748 78
Deferred taxes.......................................................... 4,345 1,262
Tool and die replacement................................................ 3,189 8,027
Other................................................................... 27 3,913
------- -------
$63,353 $27,237
------- -------
------- -------
</TABLE>
(13) IMPAIRMENT OF LONG-LIVED ASSETS AND RESTRUCTURING CHARGES
In 1998 and 1997 the Company recorded the following charges:
<TABLE>
<CAPTION>
1998 1997
------- --------
<S> <C> <C>
Impairment of Doehler-Jarvis long-lived assets......................... $ -- $266,545
Impairment of long-lived assets........................................ 5,842 12,000
Severance payments related to two facilities scheduled for closing..... -- 3,285
Restructuring charges.................................................. 5,000 6,715
------- --------
$10,842 $288,545
------- --------
------- --------
</TABLE>
During the year ended September 30, 1998, the Company recorded a $5,000
restructuring charge representing estimated shutdown costs, of which $2,500
related primarily to severance and moving costs associated with the move of the
corporate headquarters from Tampa, Florida to Lebanon, New Jersey and
approximately $2,500 related to three senior officers.
In March 1998, the Company announced its intention to sell or wind down its
Tiffin operations and recorded a charge of $3,042 for the impairment of long
lived assets. In addition, it recorded a charge of $2,800 for the impairment of
certain long lived assets relating to a platform that will end sooner than
planned.
In March 1997, the Company wrote off $114,385 unamortized goodwill related
to its 1995 acquisition of Doehler-Jarvis, and in July 1997 the Company
announced its intention to sell this subsidiary. Based on the absence of
acceptable offers to date and the projected future cash flows, in September
1997, the Company recorded an impairment charge of $152,160 related to all other
long-lived Doehler-Jarvis assets.
60
<PAGE>
In February 1997, the Company announced its plans to sell its Harman
Automotive subsidiary and in March 1997 recorded a charge for the impairment of
Harman's long-lived assets, and certain long-lived assets of the Tiffin plant.
In September 1997, the Company reflected a restructuring charge for
employee severance and plant closing costs for the Harman and Harvard Interiors
facilities.
(14) OTHER EXPENSE, NET
Other (income) expense, net includes the following:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Loss on disposal of PP&E................................................... $1,030 $1,931 $2,053
Loss on joint venture...................................................... -- 2,221 --
Interest income............................................................ (37) (106) (220)
Other, net................................................................. 2,987 1,484 (295)
------ ------ ------
$3,980 $5,530 $1,538
------ ------ ------
------ ------ ------
</TABLE>
(15) INCOME TAXES
Provision for income tax expense for continuing operations consists of the
following:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Domestic................................................................... $5,722 $ -- $ --
Foreign.................................................................... 485 1,204 3,196
------ ------ ------
Income tax provision..................................................... $6,207 $1,204 $3,196
------ ------ ------
------ ------ ------
</TABLE>
Deferred income taxes result from temporary differences in the recognition
of revenue and expense for tax and financial statement purposes. The tax effects
of temporary differences that give rise to the deferred tax assets and deferred
tax liabilities at September 30, 1998 and 1997 are as follows:
Deferred tax assets:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Net operating loss carry forwards..................................... $ 96,788 $ 98,533
Pension and post-retirement benefits obligations...................... 34,264 33,732
Reorganization items capitalizable for tax purposes................... 4,094 4,100
Reserves and accruals not yet recognized for tax purposes............. 116,546 115,193
-------- --------
Total................................................................. 251,692 251,558
Less valuation allowance.............................................. 201,354 200,780
-------- --------
Total deferred tax assets............................................. $ 50,338 $ 50,778
-------- --------
-------- --------
</TABLE>
The Company believes it will more likely than not be able to realize its
net deferred tax assets of $50,338 by offsetting it against deferred tax
liabilities related to existing temporary differences that would reverse in the
carry forward period. The Company has established a valuation allowance for
certain of its gross deferred tax assets which exceed such deferred tax
liabilities.
The change in the valuation allowance in 1998 and 1997 primarily represents
recognition of the deferred tax asset related to reserves and accruals not yet
recognized for tax purposes.
Deferred tax liabilities:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Depreciation............................................................ $51,580 $50,322
Other................................................................... 3,103 1,718
------- -------
Total deferred tax liabilities.......................................... $54,683 $52,040
------- -------
------- -------
</TABLE>
61
<PAGE>
The net deferred tax liabilities of $4,345 and $1,262 are included in other
liabilities in the consolidated balance sheets at September 30, 1998 and 1997,
respectively.
The following reconciles the statutory federal income tax expense
(benefit), computed at the applicable federal tax rate, to the effective income
tax expense:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------------
1998 1997 1996
-------- --------- --------
<S> <C> <C> <C>
Tax expense (benefit) at statutory rate............................ $(16,863) $(135,879) $(20,305)
State income taxes, net of federal benefit......................... 1,529 549 736
Permanent differences arising in connection with businesses
acquired or reorganization....................................... 1,126 42,991 3,737
Earnings of foreign subsidiaries subject to a different tax........ 134 109 318
Other permanent differences........................................ 115 114 115
U.S. Federal Minimum Tax........................................... 500 -- --
Amount for which no tax benefit is recognized...................... 19,666 93,320 17,837
Other.............................................................. -- -- 758
-------- --------- --------
Actual tax expense from continuing operations...................... $ 6,207 $ 1,204 $ 3,196
-------- --------- --------
-------- --------- --------
</TABLE>
At September 30, 1998, the Company had available net operating loss
carryforwards and general business tax credits of approximately $242,000 for
Federal income tax purposes. These carryforwards expire in the years 2002
through 2013. Of this total, approximately $83,000 is subject to current
limitation under Section 382 of the Tax Code and approximately $27,700 is
subject to the "SRLY" limitations of the Income Tax Regulations. These tax
attributes will be reduced by any gain or income realized as a result of the
transactions contemplated by the reorganization plan, in particular, any
discharge of indebtedness income ("COD Income") excluded from income pursuant to
Section 108 of the Tax Code. The precise amount of COD income realized but not
recognized upon reorganization has not been finally determined, and will depend
in part upon the fair market value of the New Common Stock. In addition, because
the reorganization will result in an "ownership change" (as defined in
Section 382 of the Tax Code), the availability of any NOLs remaining after
reduction for COD income to offset income of the Company after the Effective
Date will be limited. Under the Tax Code, a taxpayer is generally required to
include COD income in gross income. COD income is not includable in gross
income, however, if it arises in a case under the Bankruptcy Code. Instead, COD
income otherwise includable in gross income is generally applied to reduce
certain tax attributes in the following order: NOLs, general business credit
carryovers, minimum tax credit carryovers, capital loss carryovers, the
taxpayer's basis in property and foreign tax credit carryovers. Discharge under
the reorganization plan of certain of the General Unsecured Claims, in
particular the Senior Notes, will result in the realization of COD income, which
will reduce the tax attributes of the Company by the difference between the fair
market value of the consideration received by the creditors and the amount of
the discharged indebtedness.
(16) RELATED PARTY TRANSACTIONS
Pursuant to a Termination, Consulting and Release Agreement, dated as of
February 12, 1997, among the Company, Vincent J. Naimoli and Anchor Industries
International, Inc. ("Anchor"), his affiliated corporation, the parties agreed
to terminate Mr. Naimoli's management services relationship with the Company,
and cancel the prior Management and Option Agreement, as amended, under which
Mr. Naimoli's services had been performed as the Company's then Chairman of the
Board and Chief Executive Officer, except for certain provisions of the
Management and Option Agreement relating to options, registration rights and
certain indemnification.
The Termination, Consulting and Release Agreement provides for Mr. Naimoli
to receive vested benefits which had accrued prior to termination, and
Mr. Naimoli agreed to act as a consultant to the Company for three years after
termination. The Company charged selling, general and administrative expense for
all of the fees and benefits related to the Agreement amounting to in excess of
$3,000 in the second quarter of 1997.
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<PAGE>
On June 19, 1997, the Company applied to the Court for an Order authorizing
the rejection of the Agreement, and on July 16, 1997, Mr. Naimoli filed an
objection to the Company's motion. The matter is currently pending in the Court.
Subject to application "Plan of Reorganization and the Bankruptcy Code,
under the Agreement, stock options that would be so available to him, would be
those available if he were a participant in such Plans, and may include benefits
to his selected beneficiaries. The Nonqualified Retirement Benefit Agreement
provides that if Mr. Naimoli's services terminate within two years following a
change in control of the Company (as defined in the Management and Option
Agreement), he is to receive the benefits thereunder within 30 days of such
termination in a lump sum cash payment equal to the "actuarial equivalent" of
the benefits he would have received under such Agreement. Under the Management
and Option Agreement, as restated as of August 16, 1995, Mr. Naimoli is given
during the term of the Agreement, medical and dental insurance benefits for both
his family and him on the terms and with the benefits as are from time-to-time
provided to other senior executive officers, provided however, that such
benefits are without cost to Mr. Naimoli and his family. Moreover, such
Agreement requires the Company to purchase and maintain during Mr. Naimoli's
life, a life insurance policy on his life in the face amount of $2,000, of which
Mr. Naimoli's beneficiaries are entitled to receive the benefit proceeds.
Subject to application "Plan of Reorganization and the Bankruptcy Code, in
the event of voluntary termination of the Agreement by the Company, or if Anchor
provides notice, during the period beginning on the 30th day following and
ending on the 90th day following the occurrence of a Change in Control (as
defined), that it intends to terminate the Agreement, the Company is to pay to
Anchor a lump sum cash payment equal to (a) the number 3 multiplied by (b) the
sum of (1) the highest annual compensation in effect under the Agreement during
the one-year period preceding the occurrence of the Change in Control and
(2) the average amount earned under the Agreement's bonus provisions during the
three years preceding the occurrence of the Change in Control and continue to
provide Anchor and Mr. Naimoli with all of the other benefits that Anchor and
Mr. Naimoli would otherwise be entitled to pursuant to the terms of the
Agreement, including, without limitation, the stock options granted under the
Agreement.
Pursuant to a Registration Rights Agreement, dated as of August 16, 1993,
as amended as of August 16, 1994, Anchor has been granted certain registration
rights in respect of the common stock issuable upon exercise of stock options,
including, at the Company's cost, up to one requested registration of such
shares after November 30, 1996, provided at least 5.0% of the outstanding shares
of the Company as of August 16, 1993 are included in such registration, and such
shares may not be otherwise freely sold. In addition, the Registration Rights
Agreement grants certain other incidental registration rights to Anchor.
Mr. Naimoli, beneficially owned, through Anchor, 2,800.28 shares of the
common stock and 413.9987 shares of the preferred stock of Doehler-Jarvis
(representing 13.4% and 2.6%, respectively, of the shares of common stock and
preferred stock of Doehler-Jarvis outstanding immediately prior to the
acquisition). In addition, Mr. Naimoli directly owned $300 principal amount of
11 7/8% Notes and, through Anchor, indirectly owned $500 principal amount of
11 7/8% Notes of Doehler-Jarvis immediately prior to the acquisition. Upon
consummation of the acquisition, Anchor received approximately $11,700 in the
aggregate in exchange for its equity ownership in Doehler-Jarvis. In connection
with a tender offer by the Company for the 11 7/8% Notes of Doehler-Jarvis,
Mr. Naimoli and Anchor received approximately $875 in the aggregate in
consideration of their consent to the amendments to the 11 7/8% Notes Indenture
and tender of their 11 7/8% Notes, plus accrued interest to the date of
repurchase.
As of September 30, 1997, Mr. Naimoli and members of his immediate family
and affiliated entities beneficially owned an aggregate of $2,525 principal
amount of the Company's 12% Notes due 7/15/04 and $50 principal amount of the
Company's 11 1/8% Notes due August 1, 2005.
Mr. Naimoli is a stockholder of Nice and Easy Travel & Co., Inc. ("Nice and
Easy"), a travel agency, which agreed to act as exclusive travel agent and to
arrange travel services in such capacity for the Company and its employees and
representatives, beginning in December 1994. It had been agreed that with
respect to travel services rendered to the Company by Nice and Easy, the latter
rebates to the Company five percent through February 10, 1995 and three percent
thereafter of annual billings to the Company for travel business. During the
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<PAGE>
years ended September 30, 1997 and 1996, Nice and Easy billed the Company,
$2,100 and $1,130, respectively for travel services and rebated $28 and $34 to
the Company in 1997 and 1996, respectively.
In October 1995, the Board of Directors of the Company approved the lease
of a private suite at the Tropicana Field in St. Petersburg, Florida for Tampa
Bay Devil Rays baseball. Mr. Naimoli is the Managing General Partner of Tampa
Bay Devil Rays, Ltd. Management agreed with two other partners to share in the
cost of the suite, thereby reducing the suite cost to $20 per annum. In
connection with the transaction, the Board determined that the transaction was
fair and on terms comparable to those which would be obtained from a third party
in an arm's-length transaction.
The Company paid in 1997 to The Blackstone Group, LP, an investment banking
firm of which Mr. Hoffman, a Director of the Company, is a partner, $54 for
expenses and $75 as an up-front fee for additional advice rendered in
structuring alternatives to enhance shareholder value and to pay designated
success fees in the event such alternatives are effected and consummated
successfully. The Company also was billed $1,941 in 1995 for financial advice
rendered in developing the Company's bid for Doehler-Jarvis.
For fiscal 1998, directors who are not employees of the Company receive
compensation at the rate of $25 per annum plus $1 for attendance at each meeting
of the Company's Board of Directors and $1 for each meeting of the Audit
Committee and Compensation Committee they attend. During 1997, 25% or more of
such amounts was paid in common stock of the Company. The issuance of common
stock for director's services ceased in September 1997 due to the bankruptcy.
Officers are not separately compensated for serving as Directors of the Company.
See Footnote 28 for Compensation of New Directors following the Company's
emergence from bankruptcy.
(17) COMMITMENTS AND CONTINGENT LIABILITIES
Environmental Matters
The Company's operations are subject to extensive and rapidly changing
federal and state environmental regulations governing waste water discharges and
solid and hazardous waste management activities. The Company is a party to a
number of matters involving both Federal and State regulatory agencies relating
to environmental protection matters, some of which relate to waste disposal
sites including Superfund sites. The most significant site is the Alsco-Anaconda
Superfund Site (the "Site") (Gnadenhutten, Ohio).
("Alsco"), a predecessor of Harvard, was the former owner and operator of a
manufacturing facility located in Gnadenhutten, Ohio. The Alsco division of
Harvard was sold in August 1971 to Anaconda Inc. Subsequently, Alsco became
Alsco-Anaconda, Inc., a predecessor to an entity now merged with and survived by
the Atlantic Richfield Company ("ARCO"). The facility, when acquired by ARCO's
predecessor, consisted of an architectural manufacturing plant, office
buildings, a wastewater treatment plant, two sludge settling basins and a sludge
pit. The basins and pit were used for treatment and disposal of substances
generated from its manufacturing processes. The basins, pit and adjacent wooded
marsh were proposed for inclusion on EPA's National Priorities List in October
1984. Those areas were formally listed by the EPA as the "Alsco-Anaconda
Superfund Site" in June 1986.
On December 28, 1989, EPA issued a unilateral administrative order pursuant
to Section 106 of CERCLA, to Harvard and ARCO for implementation of the remedy
at the Alsco-Anaconda Superfund Site. Litigation between Harvard and ARCO
subsequently commenced in the United States District Court for the Northern
District of Ohio regarding allocation of response costs. Pursuant to a
Settlement Agreement dated January 16, 1995, Harvard agreed to pay ARCO $6,250
(as its share of up to $25,000 of the cleanup and environmental costs at the
Alsco-Anaconda Superfund Site). In twenty equal quarterly installments with
accrued interest at the rate of 9% per annum, of which nine installments were
paid through May 7, 1997. In return, ARCO assumed responsibility for cleanup
activities at the site and agreed to indemnify Harvard against any environmental
claims below the cap. If cleanup costs should exceed $25,000, the parties will
be in the same position as if the litigation was not settled. Based on
information provided by ARCO, Harvard believes that ARCO has completed 100% of
the cleanup of the 4.8-acre National Priorities List site and 80% of the cleanup
of the property adjacent to the National Priorities List site. Total costs are
expected to be in the range of $19,000. Due to the Chapter 11 Cases, payments to
ARCO, pursuant to the Settlement Agreement, have been suspended. ARCO
Environmental
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Remediation, LLC, ARCO's successor, made a claim in the Chapter 11 Cases for all
amounts that ARCO is owed under the Settlement Agreement or, in the alternative,
for all amounts that ARCO has expended or may expend for cleanup of the site.
The Company has agreed to assume the Settlement Agreement with the modification
that the Company will pay ARCO $575 in full satisfaction of its claim. This
payment was made in December, 1998.
The Company's Harman subsidiary has been named as one of several PRPs by
EPA pursuant to CERCLA concerning environmental contamination at the Vega Alta,
Puerto Rico Superfund site (the "Vega Alta Site"). Other named PRPs include
subsidiaries of General Electric Company ("General Electric"), Motorola, Inc.
("Motorola"), and The West Company, Inc. ("West Company") and the Puerto Rico
Industrial Development Corporation ("PRIDCO"). PRIDCO owns the industrial park
where the PRPs were operating facilities at the time of alleged discharges.
Another party, Unisys Corporation, was identified by General Electric as an
additional PRP at the Superfund Site as a successor to the prior operator at one
of the General Electric facilities. Unisys Corporation was not initially
designated as a PRP by EPA, although it was named as a PRP in conjunction with
the settlement proceedings and consent decree discussed below.
There are currently two phases of administrative proceedings in progress.
The first phase, involves a Unilateral Order by EPA that the named PRPs
implement the Vega Alta Site remedy chosen by EPA, consisting of the replacement
of the drinking water supply to local residents and installation and operation
of a groundwater treatment system to remediate groundwater contamination. In
addition, EPA sought recovery of costs it had expended at the Vega Alta Site.
Motorola, West Company and Harman completed construction of the EPA remedy
pursuant to a cost-sharing arrangement. On December 29, 1998, the Bankruptcy
Court approved the Company's Assumption and Modification of the Settlement
Agreement whereby the Company paid General Electric a total of $300 in
settlement of its claim.
Effective June 30, 1993, the PRPs reached a settlement among themselves.
Harman, together with Motorola and West Company, completed the agreed-upon work
for the first phase of administrative proceedings, as outlined above, which
included final construction and initial testing of the cleanup system. In
addition, Harman, Motorola and West Company each agreed to pay General Electric
the sum of $800 in return for General Electric's agreement to assume liability
for, and indemnify and hold Harman and the others harmless against, EPA's cost
recovery claim, to undertake operation and maintenance of the cleanup system and
to construct, operate and maintain any other proposed system that may be
required by EPA, and to conduct any further work required concerning further
phases of work at the Vega Alta Site. Harman's settlement payment to General
Electric was being made in 20 equal quarterly installments, which commenced in
January 1995, with 9% interest per annum. However, due to the current bankruptcy
proceedings, payments have been suspended pending direction from the Court.
Harman, West Company and Motorola retained liability for any cleanup activities
that may in the future be required by EPA at their respective facilities due to
their own actions, for toxic tort claims and for natural resource damage claims.
Pursuant to a letter dated January 31, 1994 and subsequent notices since
that date, Harman and the other PRPs have been put on notice of potential claims
for damages, allegedly suffered by the owners and operators of farms located in
the vicinity of the Vega Alta Site. If Harman were to be found liable in any
future lawsuit, some of the alleged damages (e.g., personal injury, property and
punitive damages) would not be covered by the settlement agreement with General
Electric. In a letter to General Electric's counsel, counsel for the owners and
operators alleged estimated losses of approximately $400,000 "based primarily on
lost income stream," purportedly based on certain assumptions concerning the
value of the property, its potential for development and groundwater
contamination issues. At this time, however, Harman has no information that
would support such unindemnified claims, and believes the claims to be
speculative.
On August 25, 1997, the Company was notified by the Michigan Department of
Environmental Quality ("MDEQ") that it is a responsible person as defined in the
Michigan Natural Resources and Environmental Protection Act. On October 15,
1998, the Bankruptcy Court issued an order expunging MDEQ's claim because it was
filed after the bar date. MDEQ may bring an action for injunctive relief in the
future.
By letter dated June 4, 1996, the American Littoral Society ("ALS"), a
public interest group operated through the Environmental Law Clinic of the
Widener University School of Law, sent a notice letter to the
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Company pursuant to the Clean Water Act threatening suit based on past and
anticipated future discharges to the Schuykill River in excess of the limits
established in the National Pollutant Discharge Elimination System permit
("NPDES") for the Pottstown, Pennsylvania plant. Doehler-Jarvis' Pottstown plant
has been and is currently operating under an expired but still effective NPDES
permit. The plant's wastewater treatment system (or use "equipment") is not
capable of achieving routine compliance with certain discharge limitations,
including limits for phenol, oil, grease and total dissolved solids. The
Pottstown plant has been attempting to solve this problem by arranging to convey
its effluent to the Pottstown Public Owned Treatment Works ("Pottstown POTW").
In March 1997, the Company entered into a consent decree with ALS whereby the
Pottstown plant is required to construct a wastewater recycling system by
December 31, 1997. In addition, the Company agreed to pay a civil penalty of
$1,000 and $125 penalty from a parallel consent decree. The Company has met its
construction schedule but the $1,125 in penalties has not been paid but is a
prepetition liability.
As of September 30, 1998, and in addition to the above matters, the Company
has received information requests, or notifications from EPA, state agencies,
and private parties alleging that the Company is a PRP pursuant to the
provisions of CERCLA or analogous state laws; or is currently participating in
the remedial investigation or closure activities at 22 other sites. In
accordance with the Company's policies and based on consultation with legal
counsel, the Company has provided environmental related accruals of $8,533 as of
September 30, 1998. Furthermore, the Company does not expect to use a material
amount of funds for capital expenditures related to currently existing
environmental matters. Various environmental matters are currently being
litigated, however, and potential insurance recoveries, other than those noted,
are unknown at this time.
While it is not feasible to predict the outcome of all pending
environmental suits and claims, based on the most recent review by management of
these matters and after consultation with legal counsel, management is of the
opinion that the ultimate disposition of these matters will not have a material
adverse effect on the financial position or results of operations of the
Company.
Legal Proceedings
In June 1995, a group of former employees of the Company's subsidiary,
Harman Automotive-Puerto Rico, Inc., commenced an action against the Company and
individual members of management in the Superior Court of the Commonwealth of
Puerto Rico seeking approximately $48,000 in monetary damages and unearned wages
relating to the closure by the Company of the Vega Alta, Puerto Rico plant
previously operated by such subsidiary. Claims made by the plaintiffs in such
action include the following allegations: (i) such employees were discriminated
against on the basis of national origin in violation of the laws of Puerto Rico
in connection with the plant closure and that, as a result thereof, the Company
is alleged to be obligated to pay unearned wages until reinstatement occurs, or
in lieu thereof, damages, including damages for mental pain and anguish;
(ii) during the years of service, plaintiffs were provided with a one-half hour
unpaid meal break, which is alleged to violate the laws of Puerto Rico,
providing for a one-hour unpaid meal break and demand to be paid damages and
penalties and request seniority which they claim was suspended without
jurisdiction; and (iii) plaintiffs were paid pursuant to a severance formula
that was not in accordance with the laws of Puerto Rico, which payments were
conditioned upon the plaintiffs executing releases in favor of the Company, and
that, as a result thereof, they allege that they were discharged without just
cause and are entitled to a statutory severance formula.
The Company is also a party to various claims and routine litigation
arising in the normal course of its business. Based on information currently
available, management of the Company believes, after consultation with legal
counsel, that the result of such claims and litigation, including the above
mentioned claim, will not have a material adverse effect on the financial
position or results of operations of the Company.
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(18) LEASES
Rent expense under operating leases, consisted of the following:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Rent expense............................................................... $4,354 $5,624 $3,340
</TABLE>
The following is a schedule of future annual minimum rental payments,
principally for machinery and equipment required under operating leases that
have initial or remaining noncancellable lease terms in excess of one year as of
September 30, 1998.
<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30 AMOUNT
- ---------------------------------------------------------------- ------
<S> <C>
1999............................................................ $2,275
2000............................................................ 719
2001............................................................ 666
2002............................................................ 438
2003............................................................ 53
</TABLE>
(19) RETIREMENT PLANS
The Company sponsors various defined benefit pension and savings
(principally 401(k)) plans covering substantially all employees. Expense under
these plans amounted to $10,248 in 1998 (including a curtailment loss of
$7,182), $3,619 in 1997, and $4,355 in 1996. The Company annually contributes to
the pension plans amounts that are actuarially determined to provide the plans
with sufficient assets to meet future benefit payment requirements. The Company
contributes to the savings plans amounts that are directly related to employee
contributions.
The Company sponsors a defined benefit pension plan covering all
non-bargaining unit employees. The annual benefits payable under this plan to a
covered employee at the normal retirement age (age 65) are 1% of the first $9 of
the employee's career average annual earnings, as defined in the plan, plus
1 1/2% of annual earnings in excess of $9 multiplied by the number of years of
service. Substantially all of the other defined benefit pension plans the
Company sponsors provide benefits of a stated amount for each year of service.
In addition, the Company participates in several multi-employer pension
plans for the benefit of certain union members. The Company's contributions to
these plans amounted to $349 in 1998, $459 in 1997, and $500 in 1996. Under the
Multi-Employer Pension Plan Amendments Act of 1980, if the Company were to
withdraw from these plans or if the plans were to be terminated, the Company
would be liable for a portion of any unfunded plan benefits that might exist.
Information with respect to the amount of this potential liability is not
readily available.
Pension expense for all of the Company's defined benefit pension plans
consisted of the following:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- ------
<S> <C> <C> <C>
Benefit earned.......................................................... $ 2,988 $ 2,823 $2,865
Interest on projected benefit obligations............................... 9,584 8,790 8,445
Actual return on assets................................................. (23,265) (17,378) (8,315)
Net amortization and deferral........................................... 12,806 8,318 557
Curtailment losses...................................................... 7,182 -- --
------- ------- ------
$ 9,295 $ 2,553 $3,552
------- ------- ------
------- ------- ------
</TABLE>
During 1998, the Company recorded net curtailment losses of $7,182
primarily to reflect the curtailment of defined benefit plans due to the Toledo
plant shutdown, which was recorded as an increase in cost of sales.
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The following summarizes at September 30, the funded status of the defined
benefit plans that the Company sponsors and the related amounts recognized in
the Company's consolidated balance sheets together with the assumptions
utilized.
<TABLE>
<CAPTION>
1998 1997
-------------------------- --------------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Actuarial present value of accumulated benefit
obligations:
Vested................................................. $ 106,297 $ 33,908 $ 92,835 $15,902
Non-vested............................................. 4,417 1,931 4,525 2,257
--------- --------- --------- -------
Accumulated benefit obligations........................ 110,714 35,839 97,360 18,159
Effects of salary progression.......................... 6,158 60 3,949 86
--------- --------- --------- -------
Projected benefit obligations.......................... 116,872 35,899 101,309 18,245
Plan assets.............................................. 125,915 18,869 109,455 12,487
--------- --------- --------- -------
Plan assets over (under) projected benefit obligations... 9,043 (17,030) 8,146 (5,758)
Minimum liability recognized............................. -- (10,701) -- (3,684)
Net loss not recognized.................................. 9,181 8,901 7,566 3,715
Prior service cost....................................... 451 1,860 362 55
--------- --------- --------- -------
Pension assets (liability) recognized.................... $ 18,675 $ (16,970) $ 16,074 $(5,672)
--------- --------- --------- -------
--------- --------- --------- -------
Assumptions used:
Discount rate.......................................... 7.2% 7.2% 8.0% 8.0%
Rate of return on assets............................... 9.5% 9.5% 9.5% 9.5%
Salary progression rate................................ 4.0% 5.0% 4.0% 5.0%
</TABLE>
The Company entered into a Settlement Agreement (the "Settlement
Agreement"), dated as of July 26, 1994, with the Pension Benefit Guaranty
Corporation (the "PBGC") pursuant to which the Company agreed to make
contributions to certain of its underfunded pension plans. These contributions
were in addition to the minimum statutory funding requirements with respect to
such plans. Pursuant to the Settlement Agreement, the Company made additional
contributions to its underfunded pension plans in an amount aggregating $6,000
on August 2, 1994 and $1,500 quarterly thereafter through September 30, 1997.
The Settlement Agreement, among other things, includes a covenant restricting
the Company's ability to redeem the PIK Preferred Stock and a covenant not to
create or suffer to exist a lien upon any of its assets to secure both the 12%
and 11 1/8% Senior Notes unless contemporaneously therewith effective provision
is made to equally and ratably secure the Company's potential "unfunded benefit
liabilities" (as defined in Section 4001(a)(18) of the Employee Retirement
Income Security Act). Subsequent to September 30, 1998, the settlement agreement
was terminated and the PBGC and the Company entered into a new agreement.
(20) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Certain of the Company's subsidiaries provide postretirement health care
and life insurance benefits for all salaried and for hourly retirees of certain
of its plants. The obligation, as of September 30, 1998 and 1997 was determined
by utilizing a discount rate of 7.2% and 8.0%, respectively, and a graded
medical trend rate projected at annual rates ranging ratably from 4.7% and 7.7%
in 1998 to 3.7% by the year 2000 and remain level thereafter.
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<PAGE>
Since the Company does not fund postretirement benefit plans, there are no
plan assets. Net periodic postretirement benefit cost (benefit) at September 30
is comprised of the following:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Service cost............................................................... $1,100 $1,593 $1,595
Interest on accumulated postretirement benefit obligation.................. 5,827 6,955 7,196
Net amortization and deferral.............................................. (1,337) (959) (493)
Curtailment gains.......................................................... (2,792) (8,249) --
------ ------ ------
$2,798 $ (660) $8,298
------ ------ ------
------ ------ ------
</TABLE>
During 1998, the Company recorded a curtailment gain to reflect the
curtailment of medical benefits at one plant of Doehler-Jarvis, which was
recorded as a reduction in cost of sales. During the fourth quarter of 1997 the
Company recorded curtailment gains of $8,249 to reflect the curtailment of
medical benefits at one plant and for all active salaried employees of
Doehler-Jarvis.
The accumulated postretirement benefit obligation at September 30, 1998 and
1997 consisted of the following:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Retirees.......................................................................... $57,704 $44,153
Fully eligible active plan participants........................................... 17,561 17,056
Other active plan participants.................................................... 17,025 17,224
------- -------
Accumulated postretirement benefit obligation..................................... 92,290 78,433
Unrecognized net gain............................................................. 5,337 20,796
------- -------
Accrued postretirement benefit cost............................................... 97,627 99,229
Included in accrued expenses...................................................... 2,112 2,300
------- -------
Non-current postretirement benefit obligations.................................... $95,515 $96,929
------- -------
------- -------
</TABLE>
The effect of a 1% annual increase in the assumed cost trend rates
discussed above would increase the accumulated postretirement obligation at
September 30, 1998 by approximately $11,350, and would increase the aggregate of
the service and interest cost components by approximately $1,107.
In January 1999 the Company adopted a Supplemental Employee Retirement Plan
("SERP"), the provisions of which were effective January 1, 1998. The
accompanying financial statements include a charge of $10,000 during the fourth
quarter related to the adoption of this plan.
(21) PAY-IN-KIND EXCHANGEABLE PREFERRED STOCK
Under its Certificate of Incorporation, the Pay-In-Kind ("PIK") Preferred
Stock on liquidation, winding up and dissolution ranks senior to Common Stock
and has a liquidation preference of $25.00 per share, plus accrued and unpaid
dividends, before any distribution or payment is made to the holders of Common
Stock. There are 12,000,000 shares authorized and 4,609,987 shares issued and
outstanding in both 1998 and 1997, respectively.
The PIK Preferred Stock holders are entitled to cumulative dividends at the
rate per annum of $3.5625 per share, payable at the Company's option in cash or
in additional shares of PIK Preferred Stock at the rate of 0.1425 share of PIK
Preferred Stock for each share of PIK Preferred Stock outstanding. See Note 9
for restriction on paying cash dividends.
The Company did not pay the annual dividend on PIK Preferred Stock in 1998
and 1997 and ceased accruing such dividend effective May 8, 1997 (see Note 1).
On September 30, 1996, the Company paid the annual dividend on PIK Preferred
Stock by issuing 574,987 additional shares of PIK Preferred Stock. The Company
recorded an increase of $14,844 in 1996 in its PIK Preferred Stock and a
corresponding deduction in additional paid-in-capital to recognize such dividend
and the accretion of the related difference between the fair value of such stock
at August 23, 1992 and redemption value. During 1997, the Company also recorded
$10,142 for unpaid dividends and related accretion.
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<PAGE>
On November 16, 1998, the Company was required to redeem all shares of PIK
Preferred Stock outstanding at the liquidation preference price which is
estimated to be $151,000. If the Company fails to redeem the PIK Preferred Stock
on such date, or otherwise fails to pay a dividend payment, then the number of
directors constituting the Board shall be increased by two (2) and the
outstanding shares of PIK Preferred Stock shall vote as a class, with each share
entitled to one vote, to elect two (2) Directors to fill such newly created
directorships so long as such failure continues. Due to such mandatory
redemption requirements, the PIK Preferred Stock is not reflected as part of
common shareholders' equity. Such stock was valued at fair value as of August
23, 1992, including the fair value of accrued dividends from October 1, 1991.
Such carrying value has been increased by a periodic accretion between fair
value and redemption value.
The Company, at the option of the Board, may redeem, in whole or in part,
shares of PIK Preferred Stock at the liquidation preference per share price plus
all accrued and unpaid dividends on such shares, at any time prior to the
redemption date (subject to PBGC restrictions and Financing Agreement). So long
as shares of PIK Preferred Stock are outstanding, the Company shall not declare
dividends on the Common Stock or any other securities junior to the PIK
Preferred Stock or repurchase any of such shares.
The Company may, at its option, at any time, exchange for all of its issued
and outstanding shares of PIK Preferred Stock, the Company's 14 1/4%
Subordinated Notes due November 16, 1998, if such securities are issued by the
Company for all of its issued and outstanding shares of PIK Preferred Stock.
Holders thereof will be entitled to receive $25 principal amount of Notes for
each share of PIK Preferred Stock held by them at the time of exchange and each
share of PIK Preferred Stock accrued as a dividend on such shares of PIK
Preferred Stock on the date of exchange, up to but not including the date of
exchange.
So long as any shares of PIK Preferred Stock are outstanding, the Company
shall not issue any shares of preferred stock which (i) specify a dividend rate
in excess of 14 1/4% of the liquidation preference of such preferred stock,
(ii) may be redeemed or are subject to sinking fund requirements which must be
satisfied prior to the redemption or repurchase of all outstanding shares of PIK
Preferred Stock, (iii) have a mandatory redemption date prior to January 1,
1999, or (iv) rank senior to the PIK Preferred Stock or, unless the net proceeds
of the issuance of the preferred stock are used to redeem or repurchase PIK
Preferred Stock or Exchange Notes, rank pari passu with the PIK Preferred Stock,
with respect to dividend rights and rights on liquidation, winding up and
dissolution.
See Note 28 for the Subsequent impact of the Company's Emergence from
Bankruptcy on Pay-In-Kind Exchangeable Preferred Stock.
(22) PREFERRED STOCK
There are no present plans for issuance of any shares of preferred stock.
When and if any shares of preferred stock are issued, certain rights of the
holders thereof may affect the rights of the holders of the Common Stock and PIK
Preferred Stock. See Note 21 for restrictions upon the issuance of shares of
preferred stock so long as shares of PIK Preferred Stock are outstanding.
On October 18, 1994, the Board of Directors of the Company adopted a
Shareholder Rights Plan ("Plan") which contemplates the issuance of preferred
stock purchase rights to the holders of the Company's Common Stock of record as
of October 21, 1994. As a result, there are 500,000 shares of Series A, Junior
Preferred Stock, par value $.01 per share, authorized.
The Plan calls for holders of the Company's Common Stock to receive, in the
form of a dividend, one Right for each share of Common Stock held as of the
above record date. The Plan, which is intended to deter coercive takeover
tactics, prevents a potential acquirer from gaining control of the Company
without offering a fair price to all holders of Common Stock. The Rights were to
have expired on October 31, 2004.
Each Right issued will, initially, entitle shareholders to buy one
one-hundredth of a share of newly authorized preferred stock of the Company for
$64. However, the Right will be exercisable only if a person or group (other
than shareholders owning at least 10 percent but less than 20 percent of the
Company's Common Stock outstanding on the date the Board of Directors authorizes
the dividend) acquires beneficial ownership or commences a tender or exchange
offer that will result in that person or group becoming a beneficial owner of 26
percent-or-more of the Company's Common Stock.
70
<PAGE>
Initially, each Right not owned by a 15-percent-or-more shareholder or
related parties will entitle its holder to purchase one share of the Company's
preferred stock at $64 or whatever is the then-current exercise price of the
Rights.
Upon the occurrence of certain events, the Right can be used to purchase
shares of the Company's Common Stock, or under certain circumstances to be
determined by the Board of Directors, for cash, other property, or securities
with a value of twice that of the Rights current price.
In addition, if after any person or group has become a 15 percent-or-more
shareholder, the Company is involved in a merger or other business combination
with another person in which the Company does not survive, or in which the
Common Stock is changed or exchanged, or the Company sells 50 percent or more of
its assets or earning power to another person, each Right will then entitle its
holder to purchase, at the Right's then-current price, common stock of such
other person having a value equal to twice the Right's price.
In the event of a tender or exchange offer for all outstanding shares of
the Company that is approved by a majority of the Board's independent Directors,
those not affiliated with any 15 percent-or-more shareholder, the provision
relating to 15 percent-or-more beneficial ownership of the Company's shares will
not apply.
The Company will, generally, be entitled to redeem the Rights for $0.01 per
Right at any time until 10 days, subject to extension, following a public
announcement that a 15 percent position has been acquired. The Preferred Stock
Purchase Rights have been registered with the Securities and Exchange Commission
on Form 8-A.
See Note 28 for the Subsequent impact of the Company's Emergence from
Bankruptcy on Preferred Stock.
(23) COMMON STOCK
Dividends on the Common Stock are subject to restrictions in the Company's
Financing Agreement and, so long as any PIK Preferred Stock is outstanding, the
Certificate of Incorporation provides that no dividends shall be declared on
Common Stock or any securities junior to the PIK Preferred Stock or repurchase
of any such shares. Such holders have no preemptive or other right to subscribe
for or purchase additional shares of capital stock.
See Note 28 for the Subsequent impact of the Company's Emergence from
Bankruptcy on Common Stock.
(24) STOCK OPTIONS
On November 24, 1998 the Company's plan of reorganization became effective
and all stock options authorized, granted or exercised were cancelled along with
the Old Common Stock.
However, for historical purposes, the following information is presented
outlining the plans in existence prior to the Company's emergence from
reorganization.
On January 19, 1994, the Board of Directors approved Stock Option Plans,
and on August 4, 1994 approved certain modifications thereto, which provides for
up to 400,000 shares of the Company's Common Stock to be granted to members of
the Board of Directors (other than the Company's Chairman and Chief Executive
Officer) and key employees. Options under both plans were granted at the fair
market value on the date of grants and have an exercise period of ten years.
Options under the Director's plan vest 100% at the date of grant while the key
employee's plan become exercisable at 25% or 33 1/3% per year after a one-year
waiting period.
On August 4, 1994, the Board of Directors granted to Anchor options to
purchase 17,000 shares of Common Stock which became exercisable immediately at
$13.75 per share and granted Anchor an aggregate of 300,000 additional stock
options to purchase 300,000 shares of Common Stock at $14.00 per share, which
become exercisable as follows: 100,000--8/16/95; 100,000--8/16/96; 100,000
- --8/16/97. Such options are exercisable if the closing price of the Company's
Common Stock equals or exceeds $20.00 per share for 15 of 30 trading days prior
to August 16, 1995 for the first 100,000 options; and $30.00 and $40.00 per
share for any 30 trading days subsequent to August 16, 1995 and 1996,
respectively, and prior to August 16, 1996 and August 16, 1997, respectively. On
August 16, 1995 such condition was met and the first 100,000 options became
exercisable. No options became exercisable during 1996, 1997 and 1998. On August
16, 2002 any options outstanding will be
71
<PAGE>
exercisable without regard to the per share price of Common Stock if Anchor is
continuing to provide services to the Company at such date.
A summary of the Company's stock option activity is as follows:
OPTION SHARES
<TABLE>
<CAPTION>
EXERCISE PRICE
KEY RANGE-PER
EMPLOYEES DIRECTORS ANCHOR TOTAL SHARE
--------- --------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Balance 9/30/95.................................. 201,250 28,000 569,096 798,346 $ 6.00 to $17.25
Granted 1996..................................... 75,800 8,000 -- 83,800 $11.25 to $28.00
Exercised........................................ 19,450 -- -- 19,450 $8.00
Cancelled........................................ 71,250 -- -- 71,250 $ 8.00 to $28.00
------- ------- ------- -------
Balance 9/30/96.................................. 186,350 36,000 569,096 791,446 $ 6.00 to $28.00
Granted 1997..................................... 68,500 8,000 -- 76,500 $ .8125 to $8.00
Exercised........................................ -- -- -- --
Cancelled........................................ 31,375 -- -- 31,375 $ 8.00 to $28.00
------- ------- ------- -------
Balance 9/30/97.................................. 223,475 44,000 569,096 836,571 $ 6.00 to $28.00
Grant 1998....................................... -0- -0- -0- -0- -0-
Exercised........................................ -0- -0- -0- -0- -0-
Cancelled........................................ -0- -0- -0- -0- -0-
------- ------- ------- -------
Balance 9/30/98.................................. 223,475 44,000 569,096 836,571 $ 6.00 to $28.00
------- ------- ------- -------
------- ------- ------- -------
Exercisable at
September 30:
1996........................................ 77,800 34,000 369,096 480,896 $ 6.00 to $28.00
1997........................................ 108,200 42,000 369,096 519,296 $ 6.00 to $28.00
1998........................................ 108,200 42,000 369,096 519,296 $ 6.00 to $28.00
</TABLE>
The Company has elected to continue to measure compensation cost for its
stock option plans using the intrinsic value based method of accounting. No pro
forma disclosure of net loss is presented since it is immaterial.
(25) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash and Cash Equivalents, Accounts Receivable and Accounts
Payable. The carrying value amount approximates fair value because of the
short maturity of these instruments.
Long-Term Debt. The fair value of the Company's long-term debt is
estimated based upon the quoted market prices for the same or similar
issues or on the current rates offered to the Company for debt of the same
remaining maturities.
PIK Preferred Stock. The fair value was determined by quoted market
price.
72
<PAGE>
The estimated fair value of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30 SEPTEMBER 30
-------------------- --------------------
1998 1998 1997 1997
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents.............................. $ 11,624 $ 11,624 $ 9,212 $ 9,212
Accounts receivable.................................... 57,046 57,046 76,190 76,190
Accounts payable....................................... 25,098 25,098 32,267 32,267
DIP financing (including current portion).............. 39,161 39,161 87,471 87,471
Senior notes........................................... 309,728 140,543 309,728 114,000
Long-term debt (including current portion)............. -0- -0- 14,087 14,087
PIK preferred stock.................................... 124,637 -0- 124,637 6,339
</TABLE>
(26) GUARANTOR SUBSIDIARIES
Both the 12% Notes and the 11 1/8% Notes are guaranteed on a senior
unsecured basis, pursuant to guaranties (the Guaranties) by all of the Company's
wholly-owned direct and certain of its wholly-owned indirect domestic
subsidiaries (the Guarantors). Both Notes are unconditionally guaranteed,
jointly and severally, on a senior unsecured basis, by each of the Guarantors
under such Guarantor's guaranty (a Guaranty). Each Guaranty by a Guarantor is
limited in amount to an amount not to exceed the maximum amount that can be
guarantied by that Guarantor without rendering the Guaranty, as it relates to
such Guarantor, voidable under applicable law relating to fraudulent conveyance
or fraudulent transfer. As such, a Guaranty could be effectively subordinated to
all other indebtedness (including guarantees and other contingent liabilities)
of the applicable Guarantor, and, depending on the amount of such indebtedness,
a Guarantor's liability on its Guaranty could be reduced to zero. The Company
conducts all of its automotive business through and derives virtually all of its
income from its subsidiaries. Therefore, the Company's ability to make required
principal and interest payments with respect to the Company's indebtedness
(including the Notes) and other obligations depends on the earnings of its
subsidiaries and on its ability to receive funds from its subsidiaries through
dividends or other payments. The ability of its subsidiaries to pay such
dividends or make payments on intercompany indebtedness or otherwise will be
subject to applicable state laws.
Upon the sale or other disposition of a Guarantor or the sale or
disposition of all or substantially all of the assets of a Guarantor (in each
case other than to the Company or an affiliate of the Company) permitted by the
indenture governing the Notes, such Guarantor will be released and relieved from
all of its obligations under its Guaranty.
The following condensed consolidating information presents:
1. Condensed balance sheets as of September 30, 1998 and 1997 and condensed
statements of operations and cash flows for the years ended September 30, 1998,
1997 and 1996.
2. The Parent Company and Combined Guarantor Subsidiaries with their
investments in subsidiaries accounted for on the equity method.
3. Elimination entries necessary to consolidate the Parent Company and all
of its subsidiaries.
4. Reorganization items have been included under the Parent Company in the
accompanying condensed consolidating statements of operations and cash flows.
5. The Parent Company, pursuant to the terms of an interest bearing note
with Guarantor Subsidiaries, has included in their allocation of expenses,
interest expense of $14,377, $14,377 and $14,078 for the years ended September
30, 1998, 1997 and 1996, respectively.
The Company believes that providing the following condensed consolidating
information is of material interest to investors in the Notes and has not
presented separate financial statements for each of the Guarantors, because it
was deemed that such financial statements would not provide the investor with
any material additional information.
73
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 1998
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............... $ 10,229 $ 1,395 $ -- $ -- $ 11,624
Accounts receivable, net................ 2,217 50,990 3,839 -- 57,046
Inventories............................. 1,720 24,177 749 -- 26,646
Prepaid expenses and other current
assets............................... 1,982 3,702 17 -- 5,701
--------- ---------- --------- ------------ ----------
Total current assets................. 16,148 80,264 4,605 -- 101,017
Investment in subsidiaries................ (262,212) 14,653 -- 247,559 --
Property, plant and equipment, net........ 2,755 112,057 7,767 -- 122,579
Intangible assets, net.................... -- 2,833 -- -- 2,833
Intercompany receivables.................. 600,848 524,198 14,625 (1,139,671) --
Other assets.............................. 23,211 1,341 -- 24,552
--------- ---------- --------- ------------ ----------
Total assets.............................. $ 380,750 $ 735,346 $ 26,997 $ (892,112) $ 250,981
--------- ---------- --------- ------------ ----------
--------- ---------- --------- ------------ ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIENCY)
Current liabilities:
Current portion of Debtor-in-Possession
(DIP) loans........................... $ -- $ 39,161 $ -- $ -- $ 39,161
Creditors' Subordinated Term Loan ...... -- 25,000 -- -- 25,000
Accounts payable........................ 2,382 19,812 2,904 -- 25,098
Accrued expenses........................ 12,285 81,104 (52) -- 93,337
Income taxes payable.................... 8,144 169 132 -- 8,445
--------- ---------- --------- ------------ ----------
Total current liabilities............ 22,811 165,246 2,984 -- 191,041
Liabilities subject to compromise......... 385,665 -- -- -- 385,665
DIP loans................................. -- -- -- -- --
Long-term debt............................ -- -- -- -- --
Postretirement benefits other than
pensions................................ 81,949 13,566 -- -- 95,515
Intercompany payables..................... 351,525 779,115 9,031 (1,139,671) --
Other..................................... 23,393 39,631 329 63,353
--------- ---------- --------- ------------ ----------
Total liabilities 865,343 997,558 12,344 (1,139,671) 735,574
PIK Preferred 124,637 -- -- -- 124,637
Shareholders' equity (deficiency):
Common stock and additional paid-
in-capital........................... 32,204 16,937 10 (16,947) 32,204
Additional minimum pension liability.... (8,902) (8,902) -- 8,902 (8,902)
Foreign currency translation adjustment... (2,991) (2,991) (2,991) 5,982 (2,991)
Retained earnings (deficiency)............ (629,541) (267,256) 17,634 249,622 (629,541)
--------- ---------- --------- ------------ ----------
Total shareholders' equity
(deficiency)....................... (609,230) (262,212) 14,653 247,559 (609,230)
--------- ---------- --------- ------------ ----------
Total liabilities and shareholders' equity
(deficiency)............................ $ 380,750 $ 735,346 $ 26,997 $ (892,112) $ 250,981
--------- ---------- --------- ------------ ----------
--------- ---------- --------- ------------ ----------
</TABLE>
- ------------------
(a) Includes $309,728 senior notes payable and accrued interest which are
subject to the guaranty of the combined guarantor subsidiaries.
74
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1998
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
-------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Sales........................................ $ 8,536 $ 662,209 $19,331 $ 0 $ 690,076
-------- ---------- ------- ------- ----------
Cost of Expenses
Cost of sales.............................. 11,482 627,407 17,354 0 656,243
Selling, general and administrative........ 3,873 62,573 100 0 66,546
Amortization of goodwill................... 0 1,584 0 0 1,584
Impairment of long-lived assets &
restructuring costs..................... 5,000 5,842 0 0 10,842
Interest expense........................... 164 14,083 (16) 0 14,231
Gain on sale of operations................. (1,217) (27,456) 0 0 (28,673)
Other expense, net......................... 18,950 (14,970) 0 0 3,980
Equity in (income) loss of subsidiaries.... 39,465 (120) 0 (39,345) 0
Allocated expenses......................... (14,377) 13,144 1,233 0 0
-------- ---------- ------- ------- ----------
Total costs and expenses................ 63,340 682,087 18,671 (39,345) 724,753
-------- ---------- ------- ------- ----------
Income (loss) before income taxes and
reorganization items....................... (54,804) (19,878) 660 39,345 (34,677)
Reorganization items......................... 1,000 13,920 0 0 14,920
-------- ---------- ------- ------- ----------
Income (loss) before income taxes............ (55,804) (33,798) 660 39,345 (49,597)
-------- ---------- ------- ------- ----------
Provision for income taxes................... 0 5,667 540 0 6,207
-------- ---------- ------- ------- ----------
Net loss................................... $(55,804) $ (39,465) $ 120 $39,345 $ (55,804)
-------- ---------- ------- ------- ----------
-------- ---------- ------- ------- ----------
</TABLE>
75
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED SEPTEMBER 30, 1998
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
-------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows related to operating activities:
Loss from continuing operations before
reorganization items...................... $(40,884) $(39,465) $ 120 $ 39,345 $(40,884)
Add back (deduct) items not affecting cash
and cash equivalents:
Equity in (income) loss of subsidiaries... 39,465 (120) -- (39,345) --
Depreciation and amortization............. 391 26,122 1,391 -- 27,904
Impairment of long-lived assets and
restructuring charges................... 5,000 5,842 -- -- 10,842
Gain on sale of operations................ (1,208) (27,465) -- -- (28,673)
Loss on disposition of property, plant and
equipment and property held for sale.... -- 1,030 -- -- 1,030
Curtailment (gains)/losses................ 4,390 -- -- -- 4,390
Changes in operating assets and liabilities
of continuing operations before
reorganization items:
Accounts receivable....................... 578 11,894 (1,799) -- 10,673
Inventories............................... (12) 21,542 332 -- 21,862
Other current assets...................... (284) 1,761 (17) -- 1,460
Accounts payable.......................... 2,154 (9,891) 1,079 -- (6,658)
Accrued expenses and income tax payable... (10,482) 29,289 (240) -- 18,567
Postretirement benefits................... 1,386 -- -- -- 1,386
Other noncurrent.......................... (6,399) 17,718 (636) -- 10,683
-------- -------- ------- --------- --------
Net cash provided by (used in) continuing
operations before reorganization items...... (5,905) 38,257 230 -- 32,582
Net cash used in reorganization items......... (9,056) -- -- -- (9,056)
-------- -------- ------- --------- --------
Net cash provided by (used in) continuing
operations.................................. (14,961) 38,303 184 -- 23,526
Cash flows related to investing activities:
Acquisitions of property, plant and
equipment................................. (15) (24,448) (424) -- (24,887)
Cash flows related to discontinued
operations................................ 557 -- -- -- 557
Proceeds from sales of operations........... 4,084 23,738 -- -- 27,822
Proceeds from dispositions of property,
plant, equipment.......................... -- 72 -- -- 72
-------- -------- ------- --------- --------
Net cash provided by (used in) investing
activities................................ 4,626 (638) (424) -- 3,564
Cash flows related to financing activities:
Net borrowings (and repayments) under DIP
financing agreement....................... -- (45,810) -- -- (45,810)
Net borrowings under Unsecured Creditors
Term Loan................................. -- 25,000 -- -- 25,000
Repayments of long-term debt................ -- (88) -- -- (88)
Deferred financing costs.................... -- (3,725) -- -- (3,725)
Payment of EPA settlements.................. -- (55) -- -- (55)
Net changes in intercompany balances........ 17,240 (16,922) (318) -- --
-------- -------- ------- --------- --------
Net cash (used in) provided by financing
activities.................................. 17,240 (41,600) (318) -- (24,678)
Net increase (decrease) in cash and cash
equivalents................................. 6,905 (3,935) (512) -- (2,412)
Cash and cash equivalents beginning of
period...................................... $ 3,324 $ 5,376 $ 512 $ -- $ 9,212
-------- -------- ------- --------- --------
Cash and cash equivalents end of period....... $10,229 $ 1,441 $ 0 $ -- $ 11,624
-------- -------- ------- --------- --------
-------- -------- ------- --------- --------
</TABLE>
76
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 3,324 $ 5,376 $ 512 $ -- $ 9,212
Accounts receivable, net................. 2,795 71,355 2,040 -- 76,190
Inventories.............................. 2,475 50,662 1,081 -- 54,218
Prepaid expenses and other current
assets................................ 1,698 5,904 -- -- 7,602
--------- ---------- ------- ---------- ----------
Total current assets.................. 10,292 133,297 3,633 -- 147,222
Investment in Subsidiaries................. (48,751) 12,138 -- 36,613 --
Property, plant and equipment, net......... 3,878 119,164 9,224 -- 132,266
Intangible assets, net..................... -- 4,417 -- -- 4,417
Intercompany receivables................... 240,542 276,424 9,483 (526,449) --
Other assets............................... 20,164 3,425 -- 23,589
--------- ---------- ------- ---------- ----------
$ 226,125 $ 548,865 $22,340 $ (489,836) $ 307,494
--------- ---------- ------- ---------- ----------
--------- ---------- ------- ---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIENCY)
Current liabilities:
Current portion of DIP loans............. $ 867 $ 35,569 $ -- $ -- $ 36,436
Current portion of long-term debt........ -- 1,748 -- -- 1,748
Accounts payable......................... 228 30,214 1,825 -- 32,267
Accrued expenses......................... 16,088 55,959 188 -- 72,235
Income taxes payable..................... (1,751) 1,246 2,945 -- 2,440
--------- ---------- ------- ---------- ----------
Total current liabilities............. 15,432 124,736 4,958 -- 145,126
Liabilities subject to compromise(a)....... 317,508 79,742 69 -- 397,319
DIP loans.................................. 705 50,330 51,035
Long-term debt............................. 12,339 -- 12,339
Postretirement benefits other than
pensions................................. -- 96,929 -- -- 96,929
Intercompany payables...................... 311,955 210,284 4,210 (526,449) --
Other...................................... 3,016 23,256 965 -- 27,237
--------- ---------- ------- ---------- ----------
Total liabilities..................... 648,616 597,616 10,202 (526,449) 729,985
--------- ---------- ------- ---------- ----------
PIK Preferred.............................. 124,637 -- -- -- 124,637
--------- ---------- ------- ---------- ----------
Shareholders' equity (deficiency):
Common stock and additional paid-in-
capital............................... 32,204 73,054 10 (73,064) 32,204
Additional minimum pension liability..... (3,665) (3,659) -- 3,659 (3,665)
Foreign currency translation
adjustment............................ (1,930) (1,930) (1,930) 3,860 (1,930)
Retained earnings (deficiency)........... (573,737) (116,216) 14,058 102,158 (573,737)
--------- ---------- ------- ---------- ----------
Total shareholders' equity
(deficiency)........................ (547,128) (48,751) 12,138 36,613 (547,128)
--------- ---------- ------- ---------- ----------
$ 226,125 $ 548,865 $22,340 $ (489,836) $ 307,494
--------- ---------- ------- ---------- ----------
--------- ---------- ------- ---------- ----------
</TABLE>
- ------------------
(a) Includes $309,728 senior notes payable and accrued interest which are
subject to the guaranty of the combined guarantor subsidiaries.
77
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1997
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
--------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Sales....................................... $ 19,733 $ 763,459 $27,577 $ -- $ 810,769
--------- ---------- ------- --------- ----------
Costs and expenses:
Cost of sales............................. 20,380 751,489 25,905 -- 797,774
Selling, general and administrative....... 13,921 31,901 -- -- 45,822
Interest expense.......................... 24,093 12,378 188 -- 36,659
Amortization of goodwill.................. -- 8,448 -- -- 8,448
Other (income) expense, net............... 853 4,656 21 -- 5,530
Impairment of long-lived assets and
restructuring costs.................... 1,000 287,545 -- 288,545
Equity in (income) loss of subsidiaries... 354,293 337 -- (354,630) --
Allocated expenses........................ (21,600) 20,160 1,440 -- --
--------- ---------- ------- --------- ----------
Total costs and expenses............... 392,940 1,116,914 27,554 (354,630) 1,182,778
Income (loss) before income taxes and
reorganization items...................... (373,207) (353,455) 23 354,630 (372,009)
Reorganization items........................ 16,222 (6) -- -- 16,216
--------- ---------- ------- --------- ----------
Income (loss) before income taxes........... (389,429) (353,449) 23 354,630 (388,225)
--------- ---------- ------- --------- ----------
Provision for income taxes.................. -- 844 360 -- 1,204
--------- ---------- ------- --------- ----------
Net loss.................................. $(389,429) $ (354,293) $ (337) $ 354,630 $ (389,429)
--------- ---------- ------- --------- ----------
--------- ---------- ------- --------- ----------
</TABLE>
78
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED SEPTEMBER 30, 1997
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
--------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows related to operating activities:
Loss from continuing operations before
reorganization items............................ $(373,207) $ (354,299) $ (337) $ 354,630 $ (373,213)
Add back (deduct) items not affecting cash and
cash equivalents:
Equity in (income) loss of subsidiaries......... 354,293 337 -- (354,630) --
Depreciation and amortization................... 2,595 56,144 1,447 -- 60,186
Impairment of long-lived assets and
restructuring costs.......................... 1,000 287,545 -- -- 288,545
Loss on disposition of property, plant and
equipment and property held for sale......... 48 1,883 -- -- 1,931
Postretirement benefits......................... -- (4,138) -- -- (4,138)
Write-off of deferred debt expense.............. 1,792 -- 1,792
Senior notes interest accrued prior to
chapter 11, not paid......................... 9,728 -- 9,728
Changes in operating assets and liabilities :
Accounts receivable............................... 3,130 16,176 3,492 -- 22,798
Inventories....................................... 2,581 (11,258) 1,452 -- (7,225)
Other current assets.............................. (1,326) (4,639) -- -- (5,965)
Accounts payable.................................. (3,483) (51,761) (1,562) -- (56,806)
Accounts payable prepetition...................... 1,618 79,742 69 81,429
Accrued expenses and income taxes payable......... (6,229) (2,457) (1,568) -- (10,254)
Other noncurrent.................................. 2,059 2,999 43 -- 5,101
--------- ---------- ------- --------- ----------
Net cash provided by (used in) continuing operations
before reorganization items....................... (5,401) 16,274 3,036 -- 13,909
--------- ---------- ------- --------- ----------
Net cash used by reorganization items............... (2,870) 6 -- -- (2,864)
--------- ---------- ------- --------- ----------
Net cash provided by (used in) continuing
operations........................................ (8,271) 16,280 3,036 -- 11,045
--------- ---------- ------- --------- ----------
Cash flows related to investing activities:
Acquisition of property, plant and equipment...... (147) (35,116) (1,309) -- (36,572)
Cash flows related to net assets of discountinued
operations...................................... 713 -- -- -- 713
Proceeds from disposition of property, plant and
equipment....................................... -- 1,703 -- -- 1,703
--------- ---------- ------- --------- ----------
Net cash used in investing activities............... 566 (33,413) (1,309) -- (34,156)
--------- ---------- ------- --------- ----------
Cash flows related to financing activities:
Deferred DIP financing costs...................... (2,200) -- -- -- (2,200)
Net payments under financing / credit agreement... (445) (38,389) -- -- (38,834)
Net borrowings under DIP financing agreement...... 1,572 85,899 87,471
Proceeds from sale of stock / exercise of stock
options......................................... 31 -- -- -- 31
Repayments of long-term debt...................... -- (7,682) -- -- (7,682)
Pension fund payment pursuant to PBGC settlement
agreement....................................... (6,000) -- -- -- (6,000)
Payment of EPA settlements........................ (1,053) (517) -- -- (1,570)
Net changes in intercompany balances.............. 20,779 (21,169) 390 -- --
--------- ---------- ------- --------- ----------
Net cash provided by financing activities........... 12,684 18,142 390 -- 31,216
--------- ---------- ------- --------- ----------
Net increase (decrease) in cash and cash
equivalents....................................... 4,979 1,009 2,117 -- 8,105
Cash and cash equivalents :
Beginning of period............................... (1,655) 4,367 (1,605) -- 1,107
--------- ---------- ------- --------- ----------
End of period..................................... $ 3,324 $ 5,376 $ 512 $ -- $ 9,212
--------- ---------- ------- --------- ----------
</TABLE>
79
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1996
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
-------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Sales........................................ $ 33,360 $765,455 $26,022 $ -- $824,837
-------- -------- ------- ------- --------
Costs and expenses:
Cost of sales.............................. 20,073 733,510 22,558 -- 776,141
Selling, general and administrative........ 10,668 32,186 4 -- 42,858
Interest expense........................... 41,478 5,526 -- -- 47,004
Amortization of goodwill................... -- 15,312 -- -- 15,312
Other (income) expense, net................ 1,536 1,347 (1,345) -- 1,538
Equity in (income) loss of subsidiaries.... 41,137 (2,278) -- (38,859) --
Allocated expenses......................... (21,078) 19,857 1,221 -- --
-------- -------- ------- ------- --------
Total costs and expenses................ 93,814 805,460 22,438 (38,859) 882,853
Income (loss) before provision for income
taxes...................................... (60,454) (40,005) 3,584 38,859 (58,016)
Provision for income taxes................... 758 1,132 1,306 -- 3,196
-------- -------- ------- ------- --------
Income (loss) from continuing operations..... (61,212) (41,137) 2,278 38,859 (61,212)
-------- -------- ------- ------- --------
Loss from discontinued operations............ (7,500) -- -- -- (7,500)
-------- -------- ------- ------- --------
Net income (loss)............................ $(68,712) $(41,137) $ 2,278 $38,859 $(68,712)
-------- -------- ------- ------- --------
-------- -------- ------- ------- --------
</TABLE>
80
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED SEPTEMBER 30, 1996
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
-------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows related to operating activities:
Income (loss) from continuing operations...... $(61,212) $(41,137) $ 2,278 $38,859 $(61,212)
Add back (deduct) items not affecting cash and
cash equivalents:
Equity in (income) loss of subsidiaries.... 41,137 (2,278) -- (38,859) --
Depreciation and amortization.............. 6,204 58,446 1,008 -- 65,658
Loss on disposition of property, plant and
equipment and property held for sale..... -- 2,053 -- -- 2,053
Postretirement benefits.................... -- 5,822 -- -- 5,822
Changes in operating assets and liabilities:
Accounts receivable........................ 213 1,465 1,455 -- 3,133
Inventories................................ 248 8,245 (1,381) -- 7,112
Other current assets....................... (31) (192) 1 -- (222)
Accounts payable........................... 438 9,886 (953) -- 9,371
Accrued expenses and income taxes
payable.................................. (6,103) (25,714) 1,362 11 (30,444)
Other noncurrent........................... (5,802) 4,079 (2,857) 176 (4,404)
-------- -------- ------- ------- --------
Net cash provided by (used in)
operations............................ (24,908) 20,675 913 187 (3,133)
Cash flows related to investing activities:
Acquisition of property, plant and
equipment.................................. (291) (35,474) (4,813) -- (40,578)
Cash flows related to discontinued
operations................................. (3,332) -- -- -- (3,332)
Proceeds from disposition of property, plant
and equipment.............................. -- 909 -- -- 909
-------- -------- ------- ------- --------
Net cash provided by (used in) investing
activities.................................... (3,623) (34,565) (4,813) -- (43,001)
-------- -------- ------- ------- --------
Cash flows related to financing activities:
Proceeds from exercise of stock options....... 190 -- -- -- 190
Net borrowings under credit agreement......... 445 38,389 -- -- 38,834
Repayments of long-term debt.................. (31) (3,001) -- -- (3,032)
Pension fund payments pursuant to PBGC
settlement agreement....................... (6,000) -- -- -- (6,000)
Payment of EPA settlements.................... (2,090) (586) -- -- (2,676)
Intercompany dividends........................ -- 5,683 (5,683) -- --
Net changes in intercompany balances.......... 15,717 (20,048) 4,487 (156) --
-------- -------- ------- ------- --------
Net cash provided by (used in) financing
activities.................................... 8,231 20,437 (1,196) (156) 27,316
-------- -------- ------- ------- --------
Net increase (decrease) in cash and cash
equivalents................................... (20,300) 6,547 (5,096) 31 (18,818)
Cash and cash equivalents :
Beginning of period........................... 18,645 (2,180) 3,491 (31) 19,925
-------- -------- ------- ------- --------
End of period................................. $ (1,655) $ 4,367 $(1,605) $ -- $ 1,107
-------- -------- ------- ------- --------
-------- -------- ------- ------- --------
</TABLE>
81
<PAGE>
(27) QUARTERLY FINANCIAL DATA (UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL 1998
QUARTERS ENDED DEC. 31 MAR. 31 JUNE 30 SEPT. 30
- ----------------------------------------------------------- -------- --------- -------- ---------
<S> <C> <C> <C> <C>
Sales...................................................... $197,052 $ 206,339 $169,234 $ 117,451
Gross profit............................................... 5,330 12,248 12,873 3,382
Net loss................................................... $ (5,519) $ (3,081) $ (7,313) $ (39,891)(e)
-------- --------- -------- ---------
-------- --------- -------- ---------
Earnings per share of Common Stock (Basic and Diluted)(a)
Net Loss per share....................................... $ (0.79) $ (.44) $ (1.04) $ (5.68)
-------- --------- -------- ---------
-------- --------- -------- ---------
<CAPTION>
FISCAL 1997
QUARTERS ENDED DEC. 31 MAR. 31 JUNE 30 SEPT. 30
- ----------------------------------------------------------- -------- --------- -------- ---------
<S> <C> <C> <C> <C>
Sales...................................................... $187,261 $ 209,226 $217,914 $ 196,368
Gross profit (loss)........................................ (3,201) (746) 6,305 10,637
-------- --------- -------- ---------
Net loss................................................. $(30,168) $(168,154) $(28,291) $(162,816)(b)
-------- --------- -------- ---------
-------- --------- -------- ---------
Earnings per share of Common Stock (Basic and Diluted)(a)
Net Loss per share....................................... $ (4.90) $ (24.57)(c) $ (4.27) $ (23.17)(d)
-------- --------- -------- ---------
-------- --------- -------- ---------
</TABLE>
- ------------------
(a) Year-to-date earnings per share do not equal the sum of the quarterly
earnings per share.
(b) Includes curtailment gain.
(c) Includes an impairment charge of $134,987. See Note 13.
(d) Includes an impairment and restructuring charge of $153,558. See Note 13.
(e) Includes charges of $10,000 for deferred compensation arrangement and
$13,500 for emergence related costs. Results of operations were also
negatively impacted by the General Motors strike which occurred from
June 7, 1998 to July 31, 1998.
(28) SUBSEQUENT EVENTS (UNAUDITED)
(In Whole Dollars)
Emergence from Bankruptcy
On November 24, 1998 the Company emerged from Chapter 11 Reorganization
under the United States Bankruptcy Code.
Under the terms of the Plan of Reorganization, holders of Harvard's
Pay-In-Kind Exchangeable Preferred Stock ("PIK Preferred Stock") and holders of
Harvard's existing common stock (the "Old Common Stock") will each receive
warrants ("Warrants") to acquire, in the aggregate, approximately 5% of the New
Common Stock, with holders of PIK Preferred Stock each receiving their pro rata
share of 66.67% of the Warrants and holders of the Old Common Stock each
receiving their pro rata share of 33.33% of the Warrants. On the Effective Date,
the Old Common Stock and PIK Preferred Stock were canceled in their entirety.
In connection with its emergence from Chapter 11 bankruptcy proceedings,
the Company implemented "Fresh Start Reporting," as of November 29, 1998 (its
normal interim closing date), as set forth in Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code"
(SOP 90-7), issued by the American Institute of Certified Public Accountants.
"Fresh Start Reporting" was required because there was more than a 50% change in
the ownership of the Company. Accordingly, all assets and liabilities were
restated to reflect their respective fair values. Consolidated financial
statement amounts of post-confirmation periods will be segregated by a black
line in order to signify that such consolidated statements of operations,
stockholders' equity (deficiency) and cash flows are those of a new reporting
entity and have been prepared on a basis not comparable to the pre-confirmation
periods. The Company, in accordance with SOP 90-7, has followed the accounting
and reporting guidelines for companies operating as debtor-in-possession since
its filing for bankruptcy protection on May 8, 1997 and until its emergence
from bankruptcy protection as described above.
82
<PAGE>
The reorganization value of the Company was determined by management, with
the assistance from its independent financial professionals. The methodology
employed involved estimation of enterprise value (i.e., the market value of the
Company's debt and stockholders' equity), taking into account a discounted cash
flow analysis and an analysis of comparable, publicly traded U.S. manufacturing
companies. The discounted cash flow analysis was based on five-year cash flow
projections prepared by management and average discount rates of 5.34 percent.
The reorganization value of the Company was determined to be $275,000 as of
November 24, 1998.
Refinancings:
Upon emergence from bankruptcy, as arranged by Lehman, the Company issued
$25 million of 14 1/2% Senior Secured Notes due September 1, 2003 and entered
into a $115 million senior secured credit facility with a group of lenders, as
arranged by Lehman, and including General Electric Capital Corporation as
Administrative Agent. The Senior Credit Facility provides for up to $50 million
in term loan borrowings and up to $65 million of revolving credit borrowings.
The combined proceeds from the issuance of the Notes and initial borrowings
under the Senior Credit Facility were used to:
o refinance the senior and junior debtor-in-possession credit facilities
that provided financing to the Company while it was in bankruptcy
proceedings (together, the "DIP Credit Facilities");
o pay administrative expenses due under the Plan of Reorganization and pay
related fees and expenses;
o provide cash for working capital purposes; and
o provide funds for general corporate purposes.
The $65 million revolving credit portion of the Senior Credit Facility will
be used to finance working capital and other general corporate purposes
New Director Compensation
Pursuant to the Plan of Reorganization new directors were appointed on
November 24, 1998. The compensation of new directors will be as follows:
Cash Compensation:
Non-employee directors will receive $10,000 per year. They will also
receive, $500 for attendance at each committee meeting $500 for services as the
Chairman of any committee of the Board of Directors, $1,250 for attendance at
each meeting of the Board of Directors, and $750 for attendance at each
committee meeting which does not occur in conjunction with a Board meeting.
Grant of Stock:
An annual stock grant will be made of a number of shares of common stock of
Reorganized Harvard (the "New Common Stock") equal to $15,000 divided by the
closing price per share of New Common Stock on the date of the grant.
Grant of Options:
Each non-employee director will receive Retroactive to the Effective Date a
grant of options to purchase a yet to be determined number of shares of New
Common Stock at an exercise price based on the closing price per share of the
New Common Stock as of the Effective Date.
With respect to the options granted to each non-employee director on the
Effective Date, options to purchase 4,000 shares of New Common Stock will vest
on the Effective Date and with respect to the balance of the options so granted,
options to purchase 4,000 shares of New Common Stock will vest on each of the
first, second, third and fourth anniversaries of the Effective Date.
83
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
HARVARD INDUSTRIES, INC.
Date: January 13, 1999
By: /s/ ROGER G. POLLAZZI
Roger G. Pollazzi
Chairman of the Board,
Chief Executive Officer and Director
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
Date: January 13, 1999 By: /s/ THEODORE W. VOGTMAN
Theodore W. Vogtman
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: January 13, 1999 By: /s/ KEVIN L. B. PRICE
Kevin L. B. Price
Vice President, Controller and
Treasurer
(Principal Accounting Officer)
Date: January 13, 1999 By: /s/ JON R. BAUER
Jon R. Bauer
Director
Date: January 13, 1999 By: /s/ THOMAS R. COCHILL
Thomas R. Cochill
Director
Date: January 13, 1999 By: /s/ RAYMOND GARFIELD, JR.
Raymond Garfield, Jr.
Director
Date: January 13, 1999 By: /s/ DONALD P. HILTY
Donald P. Hilty
Director
Date: January 13, 1999 By: /s/ GEORGE A. POOLE, JR.
George A. Poole, Jr.
Director
Date: January 13, 1999 By: /s/ JAMES P. SHANAHAN, JR.
James P. Shanahan, Jr.
Director
Date: January 13, 1999 By: /s/ RICHARD W. VIESER
Richard W. Vieser
Director
</TABLE>
84
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------------------------------------------------
<S> <C>
2.1 Plan of Reorganization and related Disclosure Statement, filed with the U.S. Bankruptcy Court for the
District of Delaware on July 10, 1998 (incorporated by reference to Exhibits 99.1 and 99.2 to the
Company's Form 8-K filed with the Commission on July 24, 1998 (Commission File No. 001-01044)).
2.2 First Amended and Modified Consolidated Plan of Reorganization dated August 19, 1998, filed with the
U.S. Bankruptcy Court for the District of Delaware on August 25, 1998 (incorporated by reference to
Exhibit 2.1 to the Company's Form 8-K filed with the Commission on October 30, 1998 (Commission File
No. 001-01044)).
3.1(a) Certificate of Incorporation of the Company.
3.1(b) Certificate of Merger of the Company.
3.2 By-laws of the Company.
4.1 Form of Common Stock Certificate of the Company.
4.2 Indenture (including the Form of 14 1/2% Senior Secured Note due September 1, 2003), dated as of
November 24, 1998 between the Company, the Subsidiary Guarantors and Norwest Minnesota Bank, National
Association, as Trustee.
10.1 Settlement Agreement dated as of October 15, 1998, by and among the Company, certain of its
subsidiaries and the PBGC.
10.2 Registration Rights Agreement, dated as of November 24, 1998, between the Company and the signatories
listed therein.
10.3 Registration Rights Agreement, dated as of November 23, 1998, between the Company and Lehman Brothers
Inc., as Initital Purchaser.
10.4 Credit Agreement, dated as of November 24, 1998, between the Company, its subsidiaries, General
Electric Capital Corporation, as Administrative Agent and the lenders party thereto.
10.5 Loan Collateral Agreement, dated as of November 24, 1998, by the Company and its subsidiaries in favor
of General Electric Capital Corporation, as Administrative Agent.
10.6 Collateral Agreement, dated as of November 24, 1998, by the Company and its subsidiaries in favor of
Norwest Bank Minnesota, National Association, as Collateral Agent.
10.7 Warrant Agreement, dated as of November 24, 1998, between the Company and State Street Bank and Trust
Company, as Warrant Agent.
10.8 Harvard Industries, Inc. Nonqualified ERISA Excess Benefit Plan (incorporated by reference to
Exhibit 10.20 to the Company's Registration Statement on Form S-1 (File No. 33-96376)).
10.9 Harvard Industries, Inc. Nonqualified Additional Credited Service Plan (incorporated by reference to
Exhibit 10.21 to the Company's Registration Statement on Form S-1 (File No. 33-96376)).
10.10 Harvard Industries, Inc. 1998 Stock Incentive Plan
16 Letter re change in certifying accountant (incorporated by reference to Exhibit 16.1 to the Company's
Current Report on Form 8-K/A filed with the Commission October 7, 1998 (Commission File No.
001-01044)).
21 List of subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of PriceWaterhouseCoopers
24 Powers of Attorney (contained in the signature pages hereto).
</TABLE>
<PAGE>
CERTIFICATE OF INCORPORATION
OF
HARVARD MERGER CORPORATION
FIRST: The name of the Corporation is:
HARVARD MERGER CORPORATION
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. 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 organized under the General
Corporation Law of the State of Delaware, as from time to time amended.
FOURTH: (a) The total number of shares of capital stock which
the Corporation shall have authority to issue is 100,000,000 shares. Of these
(i) 50,000,000 shares shall be shares of Common Stock having a par value of
$0.01 per share (the "Common Stock"), and (ii) 50,000,000 shares shall be shares
of Preferred Stock, having a par value of $0.01 per share (the "Preferred
Stock"). Except as otherwise provided by law, the shares of capital stock of the
Corporation, regardless of class, may be issued by the Corporation from time to
time in such amounts, for such lawful consideration and for such corporate
purpose(s) as the Board of Directors may from time to time determine.
(b) Preferred Stock may be issued in one or more series as may
be determined from time to time by the Board of Directors. Authority is hereby
expressly granted to the Board of Directors to authorize the issuance of one or
more series of Preferred Stock, and, subject to Article FIFTH, to fix by
resolution or resolutions providing for the issue of each such series the voting
powers, designations, preferences, and relative, participating, optional,
redemption, conversion, exchange or other special rights, qualifications,
limitations or restrictions of such series, and the number of shares in each
series, to the full extent now or hereafter permitted by law.
FIFTH: The Corporation shall not create, designate, authorize
or cause to be issued any class or series of nonvoting stock. For purposes of
this Article FIFTH, any class or series of stock, including any series of
Preferred Stock, that has only such voting
<PAGE>
rights as are mandated by the General Corporation Law of the State of Delaware,
shall be deemed to be nonvoting stock subject to the restrictions of this
Article FIFTH.
SIXTH: The power of the incorporator is to terminate upon the
filing of this Certificate of Incorporation.
SEVENTH: In furtherance and not in limitation of the powers
conferred by law, subject to any limitations contained elsewhere in this
Certificate of Incorporation, the by-laws of the Corporation may be adopted,
amended or repealed by a majority of the Board of Directors of the Corporation,
but any by-laws adopted by the Board of Directors may also be amended or
repealed by the stockholders entitled to vote thereon. Election of directors
need not be by written ballot unless the by-laws shall so provide.
EIGHTH: (a) A director of the Corporation shall not be
personally liable either to the Corporation or to any of its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability for (i) any breach of the director's duty of loyalty to the
Corporation or its stockholders, or (ii) acts or omissions which are not in good
faith or which involve intentional misconduct or knowing violation of the law,
or (iii) any matter in respect of which such director shall be liable under
Section 174 of Title 8 of the General Corporation Law of the State of Delaware
or any amendment thereto or successor provision thereto, or (iv) any transaction
from which the director shall have derived an improper personal benefit. Neither
amendment nor repeal of this paragraph (a) nor the adoption of any provision of
this Certificate of Incorporation inconsistent with this paragraph (a) shall
eliminate or reduce the effect of this paragraph (a) in respect of any matter
occurring, or any cause of action, suit or claim that, but for this paragraph
(a) of this Article EIGHTH, would accrue or arise, prior to such amendment,
repeal or adoption of an inconsistent provision. If the General Corporation Law
of the State of Delaware is hereafter amended to permit further elimination or
limitation of the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware as so amended.
(b) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to, or testifies in, any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter, a "proceeding"), other than an
action by or in the right of the Corporation, by reason of the fact that such
person 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, employee
benefit plan, trust or other enterprise (hereinafter, an "Indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as
such a director, officer, employee or agent. The Indemnitee shall be indemnified
and held harmless by the Corporation to the full extent authorized by the
General Corporation Law of the State of Delaware, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
-2-
<PAGE>
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), or by other applicable law as then in effect, against all expense,
liability and loss (including attorneys' fees, judgments, fines, excise taxes
under the Employee Retirement Income Security Act of 1974, as amended from time
to time ("ERISA"), penalties and amounts to be paid in settlement) actually and
reasonably incurred or suffered by such Indemnitee in connection therewith. The
Corporation may adopt by-laws or enter into agreements with any such person for
the purpose of providing for such indemnification.
(c) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to, or testifies in, any proceeding by
or in the right of the Corporation to procure a judgment in its favor by reason
of the fact that such person 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, employee benefit plan, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the Corporation, provided 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 of the State of
Delaware 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.
(d) Any indemnification under this Article EIGHTH (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 present or former
director, officer, employee or agent is proper in the circumstances because
he/she has met the applicable standard of conduct set forth in the General
Corporation Law of the State of Delaware, as the same exists or hereafter may be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
said law permitted the Corporation to provide prior to such amendment). Such
determination shall be made with respect to a person who is a director or
officer at the time of such determination (A) by a majority vote of the
directors who were not parties to such action, suit or proceeding (the
"Disinterested Directors"), even though less than a quorum, or (B) by a
committee of Disinterested Directors designated by a majority vote of such
directors, even though less than a quorum, or (C) if there are no Disinterested
Directors or if the Disinterested Directors so direct, by independent legal
counsel in a written opinion, or (D) by the stockholders.
(e) Costs, charges and expenses (including attorneys' fees)
incurred by a director, officer, employee or agent of the Corporation in
defending a civil or criminal action, suit or proceeding shall be paid by the
Corporation in advance of the final
-3-
<PAGE>
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 all amounts so
advanced in the event that it shall ultimately be determined that such director,
officer, employee or agent is not entitled to be indemnified by the Corporation
as authorized in this Article EIGHTH. The majority of the Disinterested
Directors may, in the manner set forth above, and upon approval of such
director, officer, employee or agent of the Corporation, authorize the
Corporation's counsel to represent such person, in any action, suit or
proceeding, whether or not the Corporation is a party to such action, suit or
proceeding.
(f) Any indemnification or advance of costs, charges and
expenses under this Article EIGHTH shall be made promptly, and in any event
within 60 days upon the written request of the director, officer, employee or
agent. The right to indemnification of advances as granted by this Article
EIGHTH shall be enforceable by the director, officer, employee or agent, as the
case may be, in any court of competent jurisdiction, if the Corporation denies
such request, in whole or in part, or if no disposition thereof is made within
60 days. Such person's costs and expenses incurred in connection with
successfully establishing his/her right to indemnification, in whole or in part,
in any such action shall also be indemnified by the Corporation. It shall be a
defense to any such action (other than an action brought to enforce a claim for
the advance of costs, charges and expenses under this Article EIGHTH where the
required undertaking, if any, has been received by the Corporation) that the
claimant has not met the standard of conduct set forth in the General
Corporation Law of the State of Delaware, as the same exists or hereafter may be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
said law permitted the Corporation to provide prior to such amendment), but the
burden of proving such defense shall be on the Corporation. Neither the failure
of the Corporation (including its Board of Directors, its independent legal
counsel and its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he/she has met the applicable standard of conduct set
forth in the General Corporation Law of the State of Delaware, as the same
exists or hereafter may be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), nor the fact that there has been an actual determination by
the Corporation (including its Board of Directors, its independent legal counsel
and its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(g) The indemnification and advancement of expenses provided
by this Article EIGHTH shall not be deemed exclusive of any other rights to
which a person seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
his/her official capacity and as to action in another capacity while holding
office or while employed by or acting as agent for the Corporation, and shall
continue as to a person who has ceased to be a director, officer, employee or
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<PAGE>
agent and shall inure to the benefit of the estate, heirs, executors and
administers of such person. All rights to indemnification under this Article
EIGHTH shall be deemed to be a contract between the Corporation and each
director, officer, employee or agent of the Corporation who serves or served in
such capacity at any time while this Article EIGHTH is in effect. Any repeal or
modification of this Article EIGHTH shall not in any way diminish any rights to
indemnification of such director, officer, employee or agent or the obligations
of the Corporation arising hereunder with respect to any action, suit or
proceeding arising out of, or relating to, any actions, transactions or facts
occurring prior to the final adoption of such modification or repeal. For the
purposes of this Article EIGHTH, references to the "Corporation" include all
constituent corporations absorbed in a consolidation or merger as well as the
resulting or surviving corporation, so that any person who is or was a director,
officer, employee or agent of such a 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 EIGHTH, with respect to the resulting or surviving corporation, as he or
she would if he or she had served the resulting or surviving corporation in the
same capacity.
(h) The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was or has agreed to become 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/her and incurred by him/her or on
his/her behalf in any such capacity, or arising out of his/her status as such,
whether or not the Corporation would have the power to indemnify him/her against
such liability under the provisions of this Article EIGHTH; provided, however,
that such insurance is available on acceptable terms, which determination shall
be made by a vote of a majority of the Board of Directors.
(i) If this Article EIGHTH or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each person entitled to indemnification
under the first paragraph of this Article EIGHTH as to all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes,
penalties and amounts to be paid in settlement) actually and reasonably incurred
or suffered by such person and for which indemnification is available to such
person pursuant to this Article EIGHTH to the full extent permitted by any
applicable portion of this Article EIGHTH that shall not have been invalidated
and to the full extent permitted by applicable law.
NINTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation at
any time in the manner now or hereafter prescribed in this Certificate of
Incorporation and by the laws of the State of Delaware, and all rights conferred
by stockholders herein are granted subject to such reservation.
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<PAGE>
TENTH: The Corporation expressly elects not to be governed by
Section 203 of the General Corporation Law of the State of Delaware.
-6-
<PAGE>
IN WITNESS WHEREOF, said Corporation has caused this Certificate of
Incorporation to be signed by the sole incorporator of the Corporation, this
18th day of November, 1998. The signature below shall constitute the affirmation
or acknowledgment, under penalties of perjury, that the facts herein stated are
true.
By: /s/ Lawrence E. Rouslin
-------------------------
Lawrence E. Rouslin
Sole Incorporator
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
-7-
<PAGE>
CERTIFICATE OF MERGER BETWEEN
HARVARD INDUSTRIES, INC.
AND
HARVARD MERGER CORPORATION
Pursuant to Section 252 of the Delaware General Corporation
Law ("DGCL") and Section 607.1105 of the Florida Business Corporation Act,
Harvard Merger Corporation, a Delaware corporation (the "Surviving
Corporation"), and Harvard Industries, Inc., a Florida corporation (the "Merging
Corporation"), hereby adopt the following Certificate of Merger for the purpose
of effecting the merger (the "Merger") of the Merging Corporation into its
subsidiary, the Surviving Corporation.
ARTICLE I
The Agreement and Plan of Merger effecting the Merger of the
Merging Corporation with and into the Surviving Corporation has been approved,
adopted, certified, executed and acknowledged by each of the parties to the
Merger, the Merging Corporation and the Surviving Corporation, in accordance
with Section 252 of the DGCL, and is attached hereto and made a part of this
Certificate of Merger as Exhibit A. The executed Agreement and Plan of Merger is
on file in the offices of the Surviving Corporation located at c/o Harvard
Industries, Inc., 3 Werner Way, Lebanon, New Jersey 08833.
ARTICLE II
The name of the Surviving Corporation is Harvard Merger
Corporation which, pursuant to the Plan and Agreement of Merger, will change its
name from and after the Effective Date (as defined below) of the Merger, as
hereinafter provided, to Harvard Industries, Inc.
ARTICLE III
The effective date of the Merger shall be the date on which
this Certificate of Merger is filed with the Secretary of State of the State of
Delaware.
ARTICLE IV
The Agreement and Plan of Merger was adopted pursuant to the
Merging Corporation's First Amended and Modified Consolidated Plan under Chapter
11 of the Bankruptcy Code (the "Plan of Reorganization"), dated August 19, 1998,
which was confirmed by the United States Bankruptcy Court for the District of
Delaware on October 15, 1998. The Certificate of Merger and the Agreement and
Plan of Merger to be filed with the Secretary of State of the State of Delaware
were adopted without
<PAGE>
stockholder or Board of Director approval of the Surviving Corporation in
accordance with Section 303 of the DGCL. The Articles of Merger and the
Agreement and Plan of Merger to be filed in the State of Florida in connection
with the Merger were adopted without stockholder or Board of Director approval
of the Merging Corporation in accordance with Section 607.1008 of the Florida
Business Corporation Act.
ARTICLE V
The Merging Corporation has authorized 15,000,000 shares of
Common Stock, $.01 par value per share, 12,000,000 shares of Pay-In-Kind
Exchangeable Preferred Stock, $.01 par value per share, 500,000 shares of Series
A Junior Preferred Stock, par value $.01 per share, and 2,500,000 shares of
Preferred Stock, par value $.01 per share.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this
Certificate of Merger as of this 24 day of November, 1998.
HARVARD MERGER CORPORATION, a
Delaware corporation
By: /s/ Theodore W. Vogtman
-------------------------------
Title: Vice President
HARVARD INDUSTRIES, INC., a
Florida corporation
By: /s/ Theodore W. Vogtman
-------------------------------
Title: Executive Vice President
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated November
24, 1998, is entered into between Harvard Merger Corporation, a Delaware
corporation ("Harvard-Delaware"), and Harvard Industries, Inc., a Florida
corporation ("Harvard-Florida"), pursuant to Section 252 of the Delaware General
Corporation Law ("DGCL") and Section 607.1107 of the Florida Business
Corporation Act ("FLBCA").
Background
WHEREAS, the First Amended and Modified Consolidated Plan under Chapter
11 of the Bankruptcy Code of Harvard-Florida (the "Plan of Reorganization") was
confirmed by the United States Bankruptcy Court for the District of Delaware on
October 15, 1998; and
WHEREAS, the Plan of Reorganization contemplates that Harvard-Florida
will merge with and into Harvard-Delaware, with Harvard-Delaware being the
surviving corporation, upon the terms set forth herein;
Agreement
In consideration of the mutual agreements contained in this Agreement,
the parties hereto agree as set forth below.
1. Plan and Agreement of Merger. The Certificate of Merger and
the Agreement and Plan of Merger to be filed with the Secretary of State of the
State of Delaware were adopted without stockholder or Board of Director approval
of the Surviving Corporation in accordance with Section 303 of the DGCL. The
Articles of Merger and the Agreement and Plan of Merger were adopted without
stockholder or Board of Director approval of the Merging Corporation in
accordance with Section 607.1008 of the Florida Business Corporation Act.
2. Merger. Harvard-Florida shall be merged with and into
Harvard-Delaware (the "Merger").
3. Effective Date. The Merger shall become effective
immediately upon the later of the filing of (i) this Agreement or articles of
merger with the Secretary of State of Florida in accordance with the FLBCA and
(ii) the filing of this Agreement or a certificate of merger with the Secretary
of State of the State of Delaware in accordance with the DGCL. The time of such
effectiveness is hereinafter called the "Effective Date."
4. Surviving Corporation. Harvard-Delaware shall be the
surviving corporation of the Merger and shall continue to be governed by the
laws of the State of Delaware. On the Effective
<PAGE>
Date, the separate corporate existence of Harvard-Florida shall cease.
5. Name of Surviving Corporation. On the Effective Date, the
Certificate of Incorporation of Harvard-Delaware shall be amended to change the
name of Harvard-Delaware to "Harvard Industries, Inc."
6. Certificate of Incorporation. Except as provided in Section
4 hereof, the Certificate of Incorporation of Harvard-Delaware as it exists on
the Effective Date shall be the Certificate of Incorporation of the surviving
corporation, unless and until the same shall be amended or repealed in
accordance with the provisions of the laws of the State of Delaware.
7. By-Laws. The By-Laws of Harvard-Delaware as they exist on
the Effective Date shall be the By-Laws of the surviving corporation, unless and
until the same shall be amended or repealed in accordance with the provisions
thereof and the laws of the State of Delaware.
8. Board of Directors and Officers. From and after the
Effective Date the following individuals shall be the directors of the surviving
corporation:
Roger G. Polazzi - Chairman
Thomas R. Cochill
Raymond Garfield, Jr.
Donald P. Hilty
George A. Poole, Jr.
James P. Shanahan, Jr.
From and after the Effective Date the following individuals shall be the
officers of the surviving corporation:
<TABLE>
<CAPTION>
Name Positions
---- ---------
<S> <C>
Roger G. Pollazzi Chairman and Chief Executive Officer
James B. Gray President
Theodore W. Vogtman Executive Vice President, Chief Financial Officer
J. Vincent Toscano Executive Vice President of Strategic Planning/Acquisition
and Divestitures
Joseph J. Gagliardi Executive Vice President, Administration and Information
Technology
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Name Positions
---- ---------
<S> <C>
Brian D. Benninger Senior Vice President, Marketing
Gerard Tighe Senior Vice President, General Counsel
David L. Kuta Senior Vice President, Body Systems
David C. Stegemoller Senior Vice President, Powertrain
D. Craig Bowman Vice President, Law and Secretary
John J. Brock Vice President, Tax
Robert J. Clark Vice President, Human Resources
Kevin L. B. Price Vice President, Controller and Treasurer
Douglas D. Rossman Vice President, Purchasing
</TABLE>
9. Audit Committee. As of the Effective Date, there shall be
formed an audit committee (the "Audit Committee") which shall consist of five
directors of the Surviving Corporation. As of the Effective Date the Audit
Committee shall have as members the following directors:
Thomas R. Cochill
Raymond Garfield, Jr.
Donald P. Hilty
George A. Poole, Jr.
James P. Shanahan, Jr.
10. Retirement of Outstanding Harvard-Delaware Stock. On the
Effective Date, each of the 100 shares of the common stock of Harvard-Delaware
("Harvard-Delaware Common Stock") presently issued and outstanding shall be
retired, and no shares of Harvard-Delaware Common Stock or other securities of
Harvard-Delaware shall be issued in respect thereof.
11. Treatment of Stock. On the Effective Date all the shares
of capital stock and each stock option, stock warrant, and other right to
subscribe for or purchase shares of capital stock of Harvard-Florida shall be
canceled, and the holders of General Unsecured Claims (as defined in the Plan of
Reorganization) shall receive that number of shares of Harvard-Delaware Common
Stock to which they are entitled under the Plan of Reorganization.
12. Rights and Liabilities of Harvard-Delaware. At and after
the Effective Date, and all in the manner of and as more fully set forth in the
DGCL and the FLBCA, the title to all
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<PAGE>
real estate and other property, or any interest therein, owned by each of
Harvard-Florida and Harvard-Delaware shall be vested in Harvard-Delaware without
reversion or impairment; Harvard-Delaware shall succeed to and possess, without
further act or deed, all estates, rights, privileges, powers, and franchises,
both public and private, and all of the property, real, personal and mixed, of
each of Harvard-Florida and Harvard-Delaware without reversion or impairment;
Harvard-Delaware shall thenceforth be responsible and liable for all the
liabilities and obligations of each of Harvard-Florida and Harvard-Delaware; any
claim existing or action or proceeding pending by or against Harvard-Florida or
Harvard-Delaware may be continued as if the Merger did not occur or
Harvard-Delaware may be substituted for Harvard-Florida in the proceeding;
neither the rights of creditors nor any liens upon the property of
Harvard-Florida or Harvard-Delaware shall be impaired by the Merger; and
Harvard-Delaware shall indemnify and hold harmless the officers and directors of
each of the parties hereto against all such debts, liabilities and duties and
against all claims and demands arising out of the Merger.
13. Termination. This Agreement may be terminated and
abandoned by action of the respective Boards of Directors of Harvard-Florida and
Harvard-Delaware at any time prior to the Effective Date.
14. Amendment. Any provision of this Agreement may be amended
by the parties at any time prior to the Effective Date with the prior consent of
the Official Committee of Unsecured Creditors appointed in the Chapter 11 Cases
(as defined in the Plan of Reorganization).
15. Conditions. The obligations of the parties to consummate
the Merger are subject to the satisfaction of the following conditions: (i) no
action, suit or proceeding shall be pending before any court or quasi-judicial
or administrative agency of any federal, state or foreign jurisdiction or before
any arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling or charge would (a) prevent consummation of the Merger, (b) cause the
Merger to be rescinded following consummation, or (c) adversely affect the
business, assets, properties, operations (financial or otherwise), or prospects
of Harvard-Delaware as a result of the Merger (and no such injunction, judgment,
order, decree, ruling or charge shall be in effect); and (ii) the parties shall
have received all consents of third parties that have agreements with
Harvard-Florida and whose consent is required for the assumption of such
agreements by Harvard-Delaware.
16. Governing Law. This Agreement shall in all respects be
construed, interpreted and enforced in accordance with and governed by the laws
of the State of Delaware.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Plan and Agreement of Merger to be executed as of the date first written above.
HARVARD MERGER CORPORATION,
a Delaware corporation
By: /s/ Theodore W. Vogtman
-------------------------------
Title: Vice President
HARVARD INDUSTRIES, INC.,
a Florida corporation
By: /s/ Theodore W. Vogtman
-------------------------------
Title: Executive Vice President
<PAGE>
BY-LAWS
OF
HARVARD MERGER CORPORATION
(a Delaware corporation)
ARTICLE I.
Stockholders
SECTION 1. Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion, or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors and which record date: (1) in the case of determination
of stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall unless otherwise required by law, not be more than 60 nor less
than 10 days before the date of such meeting; (2) in the case of determination
of stockholders entitled to express consent to corporate action inciting without
a meeting, shall not be more than 10 days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors; and (3)
in the case of any other action, shall not be more than 60 days prior to such
other action. If no record date is fixed: (1) the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; (2) the record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action of the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation in accordance with applicable law, or, if prior action by the Board
of Directors is required by law, shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action; and
(3) the record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
<PAGE>
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
SECTION 2. Annual Meetings. The annual meeting of stockholders
for the election of directors and for the transaction of such other business as
may properly come before the meeting shall be held each year at such date and
time, and at such place within or without the State of Delaware, as shall be
designated by the Board of Directors and set forth in the notice or in a duly
executed waiver of notice thereof.
SECTION 3. Special Meetings. Special meetings of stockholders
for the transaction of such business as may properly come before the meeting may
be called by order of the Board of Directors or by stockholders holding together
at least 30% in voting power of all the shares of the Corporation entitled to
vote at the meeting, and shall be held at such date and time, and at such place
within or without the State of Delaware, as may be specified in the notice or in
the duly executed waiver of notice of such meeting. Whenever the directors shall
fail to fix such place, the meeting shall be held at the principal executive
office of the Corporation. Only such business as is stated in the written notice
of special meeting may be acted upon thereat.
SECTION 4. Notice of Meetings. Except as otherwise provided by
law, written notice of all meetings of the stockholders, stating the place, date
and hour of the meeting and the place within the city or other municipality or
community at which the list of stockholders may be examined, shall be mailed or
delivered to each stockholder not less than 10 nor more than 6O days prior to
the meeting. Notice of any special meeting shall state in general terms the
purpose or purposes for which the meeting is to be held. If mailed, such notice
shall be deemed to be given when deposited in the United States mail, postage
prepaid, directed to the stockholder at such stockholder's address as it appears
on the records of the Corporation. If, prior to the time of mailing, the
Secretary shall have received from any stockholder entitled to vote a written
request that notices intended for such stockholder are to be mailed to an
address other than the address that appears on the records of the Corporation,
notices intended for such stockholder shall be mailed to the address designated
in such request.
Notice of a special meeting may be given by the person or
persons calling the meeting, or, upon the written request of such person or
persons, by the Secretary of the Corporation on behalf of such person or
persons. If the person or persons calling a special meeting of stockholders give
notice thereof, such person or persons shall forward a copy thereof to the
Secretary. Every request to the Secretary for the giving of notice of a special
meeting of stockholders shall state the purpose or purposes of such meeting.
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<PAGE>
SECTION 5. Waiver of Notice. Notice of any annual or special
meeting of stockholders need not be given to any stockholder entitled to vote at
such meeting who files a written waiver of notice with the Secretary, duly
executed by the person entitled to notice, whether before or after the meeting.
Neither the business to be transacted at, nor the purpose of, any meeting of
stockholders need be specified in any written waiver of notice. Attendance of a
stockholder at a meeting, in person or by proxy, shall constitute a waiver of
notice of such meeting, except as provided by law.
SECTION 6. Adjournments. When a meeting is adjourned to
another date, hour or place, notice need not be given of the adjourned meeting
if the date, hour and place thereof are announced at the meeting at which the
adjournment is taken. If the adjournment is for more than 30 calendar days, or
if after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the adjourned meeting. At the adjourned meeting any business
may be transacted which might have been transacted at the original meeting.
When any meeting is convened, the presiding officer may
adjourn the meeting if (a) no quorum is present for the transaction of business,
or (b) the Board of Directors determines that adjournment is necessary or
appropriate to enable the stockholders (i) to consider fully information which
the Board of Directors determines has not been made sufficiently or timely
available to stockholders or (ii) otherwise to exercise effectively their voting
rights.
SECTION 7. Stockholder Lists. The officer who has charge of
the stock ledger of the Corporation shall prepare and make, at least 10 days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice of the
meeting or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
The stock ledger shall be the only evidence as to who the
stockholders entitled to examine the stock ledger are, the list required by this
section or the books of the Corporation, or to vote in person or by proxy at any
meeting of stockholders.
SECTION 8. Quorum. Except as otherwise provided by law or the
Corporation's Certificate of Incorporation, a quorum for the transaction of
business at any meeting or stockholders
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<PAGE>
shall consist of the holders of record of a majority in voting power of the
issued and outstanding shares of the capital stock of the Corporation entitled
to vote at the meeting, present in person or by proxy. If there be no such
quorum, the holders of a majority in voting power of such shares so present or
represented may adjourn the meeting from time to time, without further notice,
until a quorum shall have been obtained. When a quorum. is once present it is
not broken by the subsequent withdrawal of any stockholder.
SECTION 9. Organization. Meetings of stockholders shall be
presided over by the Chairman, if any, or if none or in the Chairman's absence
the Vice-Chairman, if any, or if none or in the Vice-Chairman's absence the
President, if any, or if none or in the President's absence a Vice-President or,
if none of the foregoing is present by a chairman to be chosen by the
stockholders entitled to vote who are present in person or by proxy at the
meeting. The Secretary of the Corporation, or in the Secretary's absence an
Assistant Secretary, shall act as secretary of every meeting, but if neither the
Secretary nor an Assistant Secretary is present the presiding officer of the
meeting shall appoint any person present to act as secretary of the meeting.
SECTION 10. Voting, Proxies; Required Vote. (a) At each
meeting of stockholders, every stockholder shall be entitled to vote in person
or by proxy (but no such proxy shall be voted or acted upon after three years
from its date, unless the proxy provides for a longer period), and, unless the
Certificate of Incorporation provides otherwise, shall have one vote for each
share of stock entitled to vote registered in the name of such stockholder on
the books of the Corporation on the applicable record date fixed pursuant to
these By-laws. At all elections of directors the voting may but need not be by
ballot. Except as otherwise required by law or the Certificate of Incorporation,
any action other than the election of directors shall be authorized by a
majority in voting power of shares of such class or classes present in person or
represented by proxy at the meeting.
(b) Any action required or permitted to be taken at any
meeting of stockholders may, except as otherwise required by law or the
Certificate of Incorporation, be taken without a meeting, without prior notice
and without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of record of the issued and outstanding capital
stock of the Corporation having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted, and the writing or
writings are filed with the permanent records of the Corporation. Prompt notice
of the taking of corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
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<PAGE>
(c) Where a separate vote by a class or classes, present in
person or represented by proxy, is required by law or the Certificate of
Incorporation, the affirmative vote of the majority in voting power of shares of
such class or classes present in person or represented by proxy at the meeting
shall be the act of such class, unless otherwise provided in the Corporation's
Certificate of Incorporation.
SECTION 11. Inspectors. The Board of Directors, in advance of
any meeting, may, but need not unless required by law, appoint one or more
inspectors of election to act at the meeting or any adjournment thereof. If an
inspector or inspectors are not so appointed, the person presiding at the
meeting may, but need not unless required by law, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his or her duties,
shall take and sip an oath faithfully to execute the duties of inspector at such
meeting with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock outstanding
and the voting power of each, the shares of stock represented at the meeting,
the existence of a quorum, and the validity and effect of proxies, and shall
receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result and do such acts as are proper
to conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspector or inspectors, if any, shall
make a report in writing of any challenge, question or matter determined by such
inspector or inspectors and execute a certificate of any fact found by such
inspector or inspectors.
ARTICLE II.
Board of Directors
SECTION 1. General Powers. The business, property and affairs
of the Corporation shall be managed by, or under the direction of, the Board of
Directors which may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by law or by the Certificate of Incorporation
directed or required to be exercised or done by the shareholders.
SECTION 2. Qualification, Number; Term; Remuneration. (a) Each
director shall be at least 18 years of age. A director need not be a
stockholder, a citizen of the United States or a resident of the State of
Delaware. The number of directors constituting the entire Board shall initially
consist of 6 members and hence forward shall consist of not less than 3 nor more
than 13 members, the exact number of which shall be fixed
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<PAGE>
from time to time by action of the Board of Directors, one of whom may be
selected by the Board of Directors to be its Chairman. The use of the phrase
"entire Board" herein refers to the total number of directors which the
Corporation would have if there were no vacancies or unfilled newly created
directorships. Except as provided in Section 11 of this Article II, directors
shall be elected by a plurality of the votes cast at annual meetings of
stockholders, and each director so elected shall hold office as provided by the
Certificate of Incorporation. None of the directors need be stockholders of the
Corporation.
(b) Directors who are elected at an annual meeting of
stockholders, and directors who are elected in the interim to fill vacancies and
newly created directorships, shall hold office until the next annual meeting of
stockholders and until their successors are elected and qualified or until their
earlier resignation or removal.
(c) Directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
SECTION 3. Quorum and Manner of Voting. Except as otherwise
provided by law, a majority of the entire Board shall constitute a quorum. A
majority of the directors present, whether or not a quorum is present, may
adjourn a meeting from time to time to another time and place without notice.
The vote of the majority of the directors present at a meeting at which a quorum
is present shall be the act of the Board of Directors.
SECTION 4. Place of Meetings. Meetings of the Board of
Directors may be held at any place within or without the State of Delaware, as
may from time to time be fixed by resolution of the Board of Directors, or as
may be specified in the notice of meeting.
SECTION 5. Annual Meeting. Following the annual meeting of
stockholders, the newly elected Board of Directors shall meet for the purpose of
the election of officers and the transaction of such other business as may
properly come before the meeting. Such meeting may be held without notice
immediately after the annual meeting of stockholders at the same place at which
such stockholders' meeting is held.
SECTION 6. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as the Board of Directors shall
from time to time by resolution determine. Notice need not be given of regular
meetings of the
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<PAGE>
Board of Directors held at times and places fixed by resolution of the Board of
Directors.
SECTION 7. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board, President,
Vice-Chairman or a majority of the directors then in office.
SECTION 8. Notice Of Special Meetings. A notice of the place,
date and time and the purpose or purposes of each special meeting of the Board
of Directors shall be given to each director by mailing the same at least two
days before the special meeting, or by telegraphing or telephoning the same or
by delivering the same personally not later than the day before the day of the
meeting.
SECTION 9. Organization. At all meetings of the Board of
Directors, the Chairman, if any, or if none or in the Chairman's absence or
inability to act the President or in the President' s absence or inability to
act any Vice-President who is a member of the Board of Directors, or in such
Vice-President's absence or inability to act a chairman chosen by the directors,
shall preside. The Secretary of the Corporation shall act as secretary at all
meetings of the Board of Directors when present, and, in the Secretary's
absence, the presiding officer may appoint any person to act as secretary.
SECTION 10. Resignation. Any director may resign at any time
upon written notice to the Corporation and such resignation shall take effect
upon receipt thereof by the President or Secretary, unless otherwise specified
in the resignation. Any or all of the directors may be removed, with or without
cause, by the holders of a majority in voting power of the shares of stock
outstanding and entitled to vote for the election of directors.
SECTION 11. Vacancies. Unless otherwise provided in these
By-laws, vacancies on the Board of Directors, whether caused by resignation,
death, disqualification, removal, an increase in the authorized number of
directors or otherwise, may be filled by the affirmative vote of a majority of
the remaining directors, although less than a quorum, or by a sole remaining
director, or at a special meeting of the stockholders, by the holders of shares
entitled to vote for the election of directors.
SECTION 12. Action by Written Consent. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all the directors consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors.
SECTION 13. Meetings by Conference Telephone, etc. Any one or
more members of the Board of Directors, or of any committee thereof, may
participate in a meeting of the Board of
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<PAGE>
Directors, or of such committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting by such means shall
constitute presence in person at such meeting.
ARTICLE III.
Committees
SECTION 1. Appointment. From time to time the Board of
Directors by resolution may appoint any committee or committees for any purpose
or purposes, to the extent lawful, which shall have powers as shall be
determined and specified by the Board of Directors in the resolution of
appointment. In the absence or disqualification of a member of a committee, the
member or members present at any meeting and not disqualified from voting,
whether or not such member or members constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.
SECTION 2. Procedures, Quorum and Manner of Acting. Each
committee shall fix its own rules of procedure and shall meet where and as
provided by such rules or by resolution of the Board of Directors. Except as
otherwise provided by law, the presence of a majority of the then appointed
members of a committee shall constitute a quorum for the transaction of business
by that committee and in every case where a quorum is present the affirmative
vote of a majority of the members of the committee present shall be the act of
the committee. Each committee shall keep minutes of its proceedings, and actions
taken by a committee shall be reported to the Board of Directors.
SECTION 3. Action by Written Consent. Any action required or
permitted to be taken at any meeting of any committee of the Board of Directors
may be taken without a meeting if all the members of the committee consent
thereto in writing and the writing or writings are filed with the minutes of
proceedings of the committee.
SECTION 4. Term; Termination. In the event any person shall
cease to be a director of the Corporation, such person shall simultaneously
therewith cease to be a member of any committee appointed by the Board of
Directors.
ARTICLE IV.
Officers
SECTION 1. Election and Qualifications. The Board of Directors
shall elect the officers of the Corporation, which shall include a President and
a Secretary, and may include, by
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<PAGE>
election or appointment, one or more Executive Vice Presidents, Senior Vice
Presidents or Vice-Presidents (any one or more of whom may be given an
additional designation of rank or function), a Treasurer and such Assistant
Secretaries, such Assistant Treasurers and such other officers as the Board of
Directors may from time to time deem proper. Each officer shall have such powers
and duties as may be prescribed by these By-laws and as may be assigned by the
Board of Directors or the President. Any two or more offices may be held by the
same person except the offices of President and Secretary.
SECTION 2. Term of Office and Remuneration. The term of office
of all officers shall be one year and until their respective successors have
been elected and qualified, but any officer may be removed from office, either
with or without cause, at any time by the Board of Directors. Any vacancy in any
office arising from any cause may be filled for the unexpired portion of the
term by the Board of Directors. The remuneration of all officers of the
Corporation may be fixed by the Board of Directors or in such manner as the
Board of Directors shall provide.
SECTION 3. Resignation; Removal. Any officer may resign at any
time upon written notice to the Corporation and such resignation shall take
effect upon receipt thereof by the President or Secretary, unless otherwise
specified in the resignation. Any officer shall be subject to removal, with or
without cause, at any time by vote of a majority of the entire Board of
Directors.
SECTION 4. Chairman of the Board. The Chairman of the Board of
Directors, if there be one, shall preside at all meetings of the Board of
Directors and shall have such other powers and duties as may from time to time
be assigned by the Board of Directors.
SECTION 5. President. The President shall have general
management and supervision of the property, business and affairs of the
Corporation and over its other officers; may appoint and remove assistant
officers and other agents and employees, other than any Vice-President, the
Secretary, the Treasurer, any Assistant Secretaries or Assistant Treasurers or
any officers which the Board of Directors may from time to time appoint; and may
execute and deliver in the name of the Corporation powers of attorney,
contracts, bonds and other obligations and instruments.
SECTION 6. Vice-Presidents. A Vice-President may execute and
deliver in the name of the Corporation contracts and other obligations and
instruments pertaining to the regular course of the duties of said office, and
shall have such other authority as from time to time may be assigned by the
Board of Directors or the President.
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<PAGE>
SECTION 7. Treasurer. The Treasurer shall in general have all
duties incident to the position of Treasurer and such other duties as may be
assigned by the Board of Directors or the President.
SECTION 8. Secretary, The Secretary shall in general have all
the duties incident to the office of Secretary and such other duties as may be
assigned by the Board of Directors or the President.
SECTION 9. Assistant Officers. Any assistant officer shall
have such powers and duties of the officer such assistant officer assists as
such officer or the Board of Directors shall from time to time prescribe.
ARTICLE V.
Books and Records
SECTION 1. Location. The books and records of the Corporation
may be kept at such place or places within or outside the State of Delaware as
the Board of Directors or the respective officers in charge thereof may from
time to time determine. The record books containing the names and addresses of
all stockholders, the number and class of shares of stock held by each and the
dates when they respectively became the owners of record thereof shall be kept
by the Secretary as prescribed in the By-laws and by such officer or agent as
shall be designated by the Board of Directors.
SECTION 2. Addresses of Stockholders. Notices of meetings and
all other corporate notices may be delivered personally or mailed to each
stockholder at the stockholder's address as it appears on the records of the
Corporation.
ARTICLE VI.
Certificates Representing Stock
SECTION 1. Certificates; Signatures. The shares of the
Corporation shall be represented by certificates, provided that the Board of
Directors of the Corporation may provide by resolution or resolutions that some
or all of any or all classes or series of its stock shall be uncertificated
shares. Any such resolution shall not apply to shares represented by a
certificate until such certificate is surrendered to the Corporation.
Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of stock represented by certificates and upon request every holder
of uncertificated shares shall be entitled to have a certificate, signed by or
in the name of the Corporation by the Chairman or Vice-Chairman of the Board of
Directors, or the President or Vice-President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an
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<PAGE>
Assistant Secretary of the Corporation, representing the number of shares
registered in certificate form. Any and all signatures on any such certificate
may be facsimiles. In case any officer, transfer agent, or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
The name of the holder of record of the shares represented thereby, with the
number of such shares and the date of issue, shall be entered on the books of
the Corporation.
SECTION 2. Transfers of Stock. Upon compliance with
contractual or other provisions, if any, restricting the transfer or
registration of transfer of shares of stock, shares of capital stock shall be
transferable on the books of the Corporation only by the holder of the record
thereof in person, or by duly authorized attorney, upon surrender and
cancellation of certificates for a like number of shares, properly endorsed, and
the payment of all taxes due thereon.
SECTION 3. Fractional Shares. The Corporation may, but shall
not be required to, issue certificates for fractions of a share where necessary
to effect authorized transactions, or the Corporation may pay in cash the fair
value of fractions of a share as of the time when those entitled to receive such
fractions are determined, or it may issue scrip in registered or bearer form
over the manual or facsimile signature of an officer of the Corporation or of
its agent exchangeable as therein provided for full shares, but such scrip shall
not entitle the holder to any rights of a stockholder except as therein
provided.
The Board of Directors shall have power and authority to make
all such rules and regulations as it may deem expedient concerning the issue,
transfer and registration of certificates representing shares of the
Corporation.
SECTION 4. Lost, Stolen or Destroyed Certificates. The
Corporation may issue a new certificate of stock in place of any certificate
theretofore issued by it alleged to have been lost, stolen or destroyed, and the
Board of Directors may require the owner of any lost, stolen or destroyed
certificates, or his legal representative, to give the Corporation a bond
sufficient to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of any such new certificate.
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<PAGE>
ARTICLE VII.
General Provisions
SECTION 1. Dividends. Subject to the provisions of statute and
the Corporation's Certificate of Incorporation, dividends upon the shares of
capital stock of the Corporation may be declared by the Board of Directors at
any regular or special meeting. Dividends may be paid in cash, in property or in
shares of stock of the Corporation, unless otherwise provided by statute or the
Corporation's Certificate of Incorporation.
SECTION 2. Reserves. Before payment of any dividend, there may
be set aside out of any funds of the Corporation available for dividends such
sum or sums as the Board of Directors may, from time to time, in its absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors may think
conducive to the interests of the Corporation. The Board of Directors may modify
or abolish any such reserves in the manner in which it was created.
SECTION 3. Seal. The seal of the Corporation shall be in such
form as shall be approved by the Board of Directors.
SECTION 4. Fiscal Year. The fiscal year of the Corporation
shall be fixed, and once fixed, may thereafter be changed, by resolution of the
Board of Directors.
ARTICLE VIII.
Indemnification of Directors and Officers
SECTION 1. Nature of Indemnity. (a) To the fullest extent
permitted by applicable law, including the provisions of the General Corporation
Law of the State of Delaware, the Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to, or testifies in, any
threatened, pending or completed action, suit or proceeding, whether civil
criminal, administrative or investigative (hereinafter, a "Proceeding"), other
than an action by or in the right of the Corporation, by reason of the fact that
such person 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, employee
benefit plan, trust or other enterprise (hereinafter, an "Indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as
such a director, officer, employee or agent. The Indemnitee shall be indemnified
and held harmless by the Corporation to the full extent authorized by the
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<PAGE>
General Corporation Law of the State of Delaware, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), or by other applicable law as then in effect, against all expense,
liability and loss (including attorneys' fees, judgments, fines, excise taxes
under the Employee Retirement Income Security Act of 1974, as amended from time
to time ("ERISA"), penalties and amounts to be paid in settlement) actually and
reasonably incurred or suffered by such Indemnitee in connection therewith. The
Corporation may adopt by-laws or enter into agreements with any such person for
the purpose of providing for such indemnification.
(b) The Corporation shall indemnify any person who was or
is a party, or is threatened to be made a party to, or testifies in, any
proceeding by or in the right of the Corporation to procure a judgment in its
favor by reason of the fact that such person 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, employee benefit plan, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Corporation,
provided 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 of the
State of Delaware 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 2. Procedure. Any indemnification under this Article
VIII (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
present or former director, officer, employee or agent is proper in the
circumstances because he/she has met the applicable standard of conduct set
forth in the General Corporation Law of Delaware, as the same exists or
hereafter may be amended (but, in the case of any such amendment only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment). Such determination shall be made with respect to a person
who is a director or officer at the time of such determination (A) by a majority
vote of the directors who were not parties to such action, suit or proceeding
(the
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<PAGE>
"Disinterested Directors"), even though less than a quorum, or (B) by a
committee of Disinterested Directors designated by a majority vote of such
directors, even though less than a quorum, or (C) if there are no Disinterested
Directors or if the Disinterested Directors so direct, by independent legal
counsel in a written opinion, or (D) by the stockholders.
SECTION 3. Advances for Expenses. Costs, charges and expenses
(including attorneys' fees) incurred by a director, officer, employee or agent
of the Corporation in defending a civil or criminal action, suit or proceeding
shall 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 all amounts so advanced in the
event that it shall ultimately be determined that such director, officer,
employee or agent is not entitled to be indemnified by the Corporation as
authorized in this Article VIII. The majority of the Disinterested Directors
may, in the manner set forth above, and upon approval of such director, officer,
employee or agent of the Corporation, authorize the Corporation's counsel to
represent such person, in any action, suit or proceeding, whether or not the
Corporation is a party to such action, suit or proceeding.
SECTION 4. Procedure for Indemnification. Any indemnification
or advance of costs, charges and expenses under this Article VIII shall be made
promptly, and in any event within 60 days upon the written request of the
director, officer, employee or agent. The right to indemnification or advances
as granted by this Article VIII shall be enforceable by the director, officer,
employee or agent, as the case may be, in any court of competent jurisdiction,
if the Corporation denies such request, in whole or in part, or if no
disposition thereof is made within 60 days. Such person's costs and expenses
incurred in connection with successfully establishing his/her right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the Corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for the advance of costs, charges and
expenses under this Article VIII where the required undertaking, if any, has
been received by the Corporation) that the claimant has not met the standard of
conduct set forth in the General Corporation Law of the State of Delaware, as
the same
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<PAGE>
exists or hereafter may be amended (but, in the case of any such amendment only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, its independent legal counsel and its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he/she has met the
applicable standard of conduct set forth in the General Corporation Law of
Delaware, as the same exists or hereafter may be amended (but, in the case of
any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), nor the fact that there has
been an actual determination by the Corporation (including its Board of
Directors, its independent legal counsel and its stockholders) that the claimant
has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the claimant has not met the applicable
standard of conduct.
SECTION 5. Other Rights; Continuation of Right to
Indemnification. The indemnification and advancement of expenses provided by
this Article VIII shall not be deemed exclusive of any other rights to which a
person seeking indemnification or advancement of expenses may be entitled under
any law (common or statutory), by-law, agreement vote of stockholders or
disinterested directors or otherwise, both as to action in his/her official
capacity and as to action in another capacity while holding office or while
employed by or acting as agent for the Corporation, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the estate, heirs, executors and administers of such
person. All rights to indemnification under this Article VIII shall be deemed to
be a contract between the Corporation and each director, officer, employee or
agent of the Corporation who serves or served in such capacity at any time while
this Article VIII is in effect. Any repeal or modification of this Article VIII
shall not in any way diminish any rights to indemnification of such director,
officer, employee or agent or the obligations of the Corporation arising
hereunder with respect to any action, suit or proceeding arising out of, or
relating to, any actions, transactions or facts occurring prior to the final
adoption of such modification or repeal. For purposes of this Article VIII,
references to the "Corporation" include all constituent corporations absorbed in
a consolidation or merger as well as the resulting or surviving corporation, so
that any person who is or was a director, officer, employee or agent of such a
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 VIII, with respect to the
resulting or surviving corporation, as he or she would if he or she had served
the resulting or surviving corporation in the same capacity.
SECTION 6. Insurance. The Corporation shall have power to
purchase and maintain insurance on behalf of any person who is or was or has
agreed to become 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
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<PAGE>
him/her and incurred by him/her or on his/her behalf in any such capacity, or
arising out of his/her status as such, whether or not the Corporation would have
the power to indemnify him/her against such liability under the provisions of
this Article VIII, provided, however, that such insurance is available on
acceptable terms, which determination shall be made by a vote of a majority of
the Board of Directors.
SECTION 7. Savings Clause. If this Article VIII or any portion
hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify each person
entitled to indemnification under the first paragraph of this Article VIII as to
all expense, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes, penalties and amounts to be paid in settlement) actually and
reasonably incurred or suffered by such person and for which indemnification is
available to such person pursuant to this Article VIII to the full extent
permitted by any applicable portion of this Article VIII that shall not have
been invalidated and to the full extent permitted by applicable law.
ARTICLE IX.
Waiver of Notice
Whenever notice is required to be given by these By-laws or by
the Certificate of Incorporation or by law, a written waiver thereof, signed by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent to notice.
ARTICLE X.
Bank Accounts, Drafts, Contracts, Activities, Etc.
SECTION 1. Bank Accounts and Drafts. In addition to such bank
accounts as may be authorized by the Board of Directors, the primary financial
officer or any person designated by said primary financial officer, whether or
not an employee of the Corporation, may authorize such bank accounts to be
opened or maintained in the name and on behalf of the Corporation as he or she
may deem necessary or appropriate, payments from such bank accounts to be made
upon and according to the check of the Corporation in accordance with the
written instructions of said primary financial officer, or other person so
designated by the Treasurer.
SECTION 2. Contracts. The Board of Directors may authorize any
person or persons, in the name and on behalf of the Corporation, to enter into
or execute and deliver any and all deeds, bonds, mortgages, contracts and other
obligations or instruments, and such authority may be general or confined to
specific instances.
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<PAGE>
SECTION 3. Proxies, Powers of Attorney, Other Instruments. The
Chairman, the President or any other person designated by either of them shall
have the power and authority to execute and deliver proxies, powers of attorney
and other instruments on behalf of the Corporation in connection with the rights
and powers incident to the ownership of stock by the Corporation. The Chairman,
the President or any other person authorized by proxy or power of attorney
executed and delivered by either of them on behalf of the Corporation may attend
and vote at any meeting of stockholders of any company in which the Corporation
may hold stock, and may exercise on behalf of the Corporation any and all of the
rights and powers incident to the ownership of such stock at any such meeting,
or otherwise as specified in the proxy or power of attorney so authorizing any
such person. The Board of Directors, from time to time, may confer like powers
upon any other person.
SECTION 4. Financial Reports. The Board of Directors may
appoint the primary financial officer or other fiscal officer and/or the
Secretary or any other officer to cause to be prepared and furnished to
stockholders entitled thereto any special financial notice and/or financial
statement, as the case may be, which may be required by any provision of law.
ARTICLE XI.
Amendments
These By-Laws may be amended or repealed or new by-laws
adopted (a) by action of the stockholders entitled to vote thereon at any annual
or special meeting of stockholders or (b) if the Certificate of Incorporation of
the Corporation so provides, by action of the Board of Directors at a regular or
special meeting thereof. Any by-law made by the Board of Directors may be
amended or repealed by action of the stockholders at any annual or special
meeting of stockholders.
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<PAGE>
Number Shares
- ------------------ ------------------
HI
- ------------------ ------------------
HARVARD INDUSTRIES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CUSIP 417434 50 3
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES that __________________________________________________________
is the owner of _______________________________________________________________
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF THE PAR VALUE OF
$0.01 PER SHARE OF
========== HARVARD INDUSTRIES, INC. ==========
(hereinafter called the "Corporation") transferable on the books of the
Corporation in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are issued and shall be held subject to all of the provisions of the
Certificate of Incorporation and By-Laws of the Corporation and the amendments
from time to time made thereto, copies of which are or will be on file at the
principal office of the Corporation, to all of which the holder by acceptance
hereof assents.
This Certificate is not valid unless countersigned by the Transfer
Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
/s/ D. Craig Bowman [SEAL] /s/ Roger G. Pollazzi
- ------------------- -------------------------
SECRETARY CHAIRMAN OF THE BOARD
COUNTERSIGNED AND REGISTERED:
STATE STREET BANK AND TRUST COMPANY
(BOSTON) TRANSFER AGENT AND REGISTRAR,
BY
AUTHORIZED SIGNATURE
<PAGE>
HARVARD INDUSTRIES, INC.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ________ Custodian ________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants, with right under Uniform Gifts to Minors
of survivorship and not as Act ____________________
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED ______________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
--------------------------------------
| |
| |
--------------------------------------
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS
INCLUDING POSTAL ZIP CODE OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
________________________________________________________________________ Shares
of the capital stock represented by the within Certificate and do hereby
irrevocably constitute and appoint_____________________________________________
Attorney to transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
Dated: ____________________ Signature(s) Guaranteed:
_________________________________________
THE SIGNATURES SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
================================================================================
INDENTURE
dated as of November 24, 1998
by and among
HARVARD INDUSTRIES, INC.,
as Issuer,
THE SUBSIDIARY GUARANTORS
NAMED HEREIN,
as Subsidiary Guarantors,
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
=====================================
14 1/2% Senior Secured Notes Due 2003
=====================================
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- -------
310(a)(1) ........................................ 7.10
(a)(2) ........................................ 7.10
(a)(3) ........................................ N.A.
(a)(4) ........................................ N.A.
(b) ........................................ 7.8; 7.10
(c) ........................................ N.A.
311(a) ........................................ 7.11
(b) ........................................ 7.11
(c) ........................................ N.A.
312(a) ........................................ 2.5
(b) ........................................ 12.3
(c) ........................................ 12.3
313(a) ........................................ 7.6
(b)(1) ........................................ N.A.
(b)(2) ........................................ 7.6
(c) ........................................ 7.6
(d) ........................................ 7.6
314(a) ........................................ 4.19; 12.2
(b) ........................................ 11.2
(c)(1) ........................................ 12.4
(c)(2) ........................................ 12.4
(c)(3) ........................................ N.A.
(d) ........................................ 11.2;11.3
(e) ........................................ 12.5
315(a) ........................................ 7.1
(b) ........................................ 7.5; 12.2
(c) ........................................ 7.1
(d) ........................................ 7.1; 7.2
(e) ........................................ 6.11
316(a)(last sentence) ...................................... 12.6
(a)(1)(A) ........................................ 6.5
(a)(1)(B) ........................................ 6.4
(a)(2) ........................................ N.A.
(b) ........................................ 6.7
317(a)(1) ........................................ 6.8
(a)(2) ........................................ 6.9
(b) ........................................ 2.4
318(a) ........................................ 12.1
N.A. means not applicable.
- ----------
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE...........................1
SECTION 1.1. Definitions............................................1
SECTION 1.2. Incorporation by Reference of Trust Indenture Act.....25
SECTION 1.3. Rules of Construction.................................26
SECTION 1.4. One Class of Securities...............................26
ARTICLE II
THE SECURITIES......................................................27
SECTION 2.1. Terms, Form and Dating................................27
SECTION 2.2. Execution and Authentication..........................30
SECTION 2.3. Registrar and Paying Agent............................31
SECTION 2.4. Paying Agent To Hold Money in Trust...................31
SECTION 2.5. Securityholder Lists..................................32
SECTION 2.6. Transfer and Exchange.................................32
SECTION 2.7. Replacement Securities................................45
SECTION 2.8. Outstanding Securities................................45
SECTION 2.9. Temporary Securities..................................46
SECTION 2.10. Cancellation.........................................46
SECTION 2.11. Defaulted Principal and Interest.....................46
SECTION 2.12. CUSIP Numbers........................................47
ARTICLE III
REDEMPTION..........................................................47
SECTION 3.1. Notices to Trustee....................................47
SECTION 3.2. Selection of Securities To Be Redeemed................47
SECTION 3.3. Notice of Redemption..................................48
SECTION 3.4. Effect of Notice of Redemption........................49
SECTION 3.5. Deposit of Redemption Price...........................49
SECTION 3.6. Securities Redeemed in Part...........................49
SECTION 3.7. Optional Redemption...................................49
SECTION 3.8. Offer to Purchase by Application of Excess Proceeds...51
SECTION 3.9. Special PIK Redemptions...............................53
- i -
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ARTICLE IV
COVENANTS............................................................54
SECTION 4.1. Payment of Securities..................................54
SECTION 4.2. Restricted Payments....................................54
SECTION 4.3. Incurrence of Indebtedness and Issuance of
Preferred Stock.................................56
SECTION 4.4. Maintenance of Consolidated Leverage Ratio.............58
SECTION 4.5. Maintenance of Consolidated Interest Coverage Ratio....59
SECTION 4.6. Liens..................................................60
SECTION 4.7. Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.........................60
SECTION 4.8. Transactions with Affiliates...........................60
SECTION 4.9. Sale and Leaseback Transactions........................61
SECTION 4.10. Impairment of Security Interests......................61
SECTION 4.11. Additional Subsidiary Guarantors......................62
SECTION 4.12. Offer to Purchase Upon Asset Sale.....................62
SECTION 4.13. Offer to Repurchase upon Change of Control............63
SECTION 4.14. Business Activities...................................64
SECTION 4.15. Payments for Consent..................................64
SECTION 4.16. Reports...............................................65
SECTION 4.17. Further Surveys and Title Insurance...................65
SECTION 4.18. Corporate Existence...................................65
SECTION 4.19. Accounts Receivable Aging Certificate.................66
SECTION 4.20. Compliance Certificate................................66
SECTION 4.21. Maintenance of Office or Agency.......................66
SECTION 4.22. Taxes.................................................66
SECTION 4.23. Stay, Extension and Usury Laws........................66
SECTION 4.24. Maintenance of Properties and Insurance...............67
SECTION 4.25. Further Instruments and Acts..........................67
ARTICLE V
SUCCESSOR COMPANY....................................................67
SECTION 5.1. Merger, Consolidation, or Sale of Assets...............67
ARTICLE VI
DEFAULTS AND REMEDIES................................................68
SECTION 6.1. Events of Default......................................68
SECTION 6.2. Acceleration...........................................71
SECTION 6.3. Other Remedies.........................................71
SECTION 6.4. Waiver of Past Defaults................................71
- ii -
<PAGE>
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SECTION 6.5. Control by Majority....................................72
SECTION 6.6. Limitation on Suits....................................72
SECTION 6.7. Rights of Securityholders To Receive Payment...........72
SECTION 6.8. Collection Suit by Trustee.............................73
SECTION 6.9. Trustee May File Proofs of Claim.......................73
SECTION 6.10. Priorities............................................73
SECTION 6.11. Undertaking for Costs.................................73
SECTION 6.12. Waiver of Stay or Extension Laws......................74
SECTION 6.13. Company Report........................................74
ARTICLE VII
TRUSTEE..............................................................74
SECTION 7.1. Duties of Trustee......................................74
SECTION 7.2. Rights of Trustee......................................76
SECTION 7.3. Individual Rights of Trustee...........................77
SECTION 7.4. Trustee's Disclaimer...................................77
SECTION 7.5. Notice of Defaults.....................................77
SECTION 7.6. Reports by Trustee to Securityholders..................77
SECTION 7.7. Compensation and Indemnity.............................77
SECTION 7.8. Replacement of Trustee.................................78
SECTION 7.9. Successor Trustee by Merger............................79
SECTION 7.10. Eligibility; Disqualification.........................79
SECTION 7.11. Preferential Collection of Claims Against Company.....80
ARTICLE VIII
DISCHARGE OF INDENTURE...............................................80
SECTION 8.1. Discharge of Liability on Securities...................80
ARTICLE IX
AMENDMENTS...........................................................80
SECTION 9.1. Without Consent of Securityholders.....................80
SECTION 9.2. With Consent of Securityholders........................81
SECTION 9.3. Compliance with Trust Indenture Act....................83
SECTION 9.4. Revocation and Effect of Consents and Waivers..........83
SECTION 9.5. Notation on or Exchange of Securities..................83
SECTION 9.6. Trustee To Sign Amendments.............................84
- iii -
<PAGE>
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ARTICLE X
GUARANTEES...........................................................84
SECTION 10.1. Guarantees............................................84
SECTION 10.2. Limitation on Liability...............................86
SECTION 10.3. Successors and Assigns................................86
SECTION 10.4. No Waiver.............................................86
SECTION 10.5. Right of Contribution.................................86
SECTION 10.6. No Subrogation........................................86
SECTION 10.7. Additional Subsidiary Guarantors......................87
SECTION 10.8. Modification..........................................87
SECTION 10.9. Release of Subsidiary Guarantor.......................87
SECTION 10.10. Merger, Consolidation and Sale of Assets of a
Subsidiary Guarantor............................87
ARTICLE XI
COLLATERAL AND SECURITY DOCUMENTS....................................88
SECTION 11.1. Security Documents; Agreements........................88
SECTION 11.2. Opinions..............................................89
SECTION 11.3. Release and Substitution of Collateral; Amendment
of Security Documents...........................89
SECTION 11.5. Reserved..............................................94
SECTION 11.6. Authorization of Actions to be Taken by the
Trustee Under the Security Documents............94
SECTION 11.7. Authorization of Receipt of Funds by the
Trustee Under the Security Documents............95
SECTION 11.8. Release Upon Termination of the Company's
Obligations.....................................95
SECTION 11.9. Security Agreement Collateral.........................95
SECTION 11.10. Effect of Termination of Lender Obligations..........95
SECTION 11.11. Authorization of Trustee Entering Into
Intercreditor Agreement.........................96
SECTION 11.12. Authorization of Receipt of Funds by the
Trustee Under the Security Documents............96
ARTICLE XII
MISCELLANEOUS........................................................96
SECTION 12.1. Trust Indenture Act Controls..........................96
SECTION 12.2. Notices...............................................96
SECTION 12.3. Communication by Securityholders with
other Securityholders...........................97
SECTION 12.4. Certificate and Opinion as to Conditions Precedent....97
SECTION 12.5. Statements Required in Certificate or Opinion.........97
- iv -
<PAGE>
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SECTION 12.6. When Securities Disregarded...........................98
SECTION 12.7. Rules by Trustee, Paying Agent and Registrar..........98
SECTION 12.8. Reserved..............................................98
SECTION 12.9. Governing Law and Submission to Jurisdiction..........98
SECTION 12.10. No Recourse Against Others...........................98
SECTION 12.11. Successors...........................................98
SECTION 12.12. Multiple Originals...................................98
SECTION 12.13. Qualification of Indenture...........................98
SECTION 12.14. Table of Contents; Headings..........................99
Exhibit A - Form of Initial Security
Exhibit B - Form of New Security
Exhibit C - Form of Collateral Agreement
Exhibit D - Form of Second Priority Mortgage
Exhibit E - Form of Guarantor Supplement
Exhibit F - Form of Certificate of Transfer
Exhibit G - Form of Certificate of Exchange
- v -
<PAGE>
This INDENTURE, dated as of November 24, 1998, is entered by and among
HARVARD INDUSTRIES, INC., a Delaware corporation (the "Company"),
DOEHLER-JARVIS, INC., a Delaware corporation, HARVARD TRANSPORTATION
CORPORATION, a Michigan corporation, DOEHLER-JARVIS GREENEVILLE, INC., a
Delaware corporation, POTTSTOWN PRECISION CASTING, INC., a Delaware corporation,
DOEHLER-JARVIS TECHNOLOGIES, INC., a Delaware corporation, DOEHLER-JARVIS
TOLEDO, INC., a Delaware corporation, HARMAN AUTOMOTIVE, INC., a Michigan
corporation, HAYES-ALBION CORPORATION, a Michigan corporation, and THE
KINGSTON-WARREN CORPORATION, a New Hampshire corporation (collectively, the
"Subsidiary Guarantors") and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association, 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 Securityholders of the Company's 14 1/2%
Senior Secured Notes Due 2003 (the "Initial Securities") and, if and when issued
in exchange for Initial Securities as provided in the Registration Rights
Agreement, the Company's Series B 14 1/2% Senior Secured Notes Due 2003 (the
"New Securities"and, together with the Initial Securities, the "Securities"):
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.
"Acquired Debt" 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,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
"Administrative Agent" means the Administrative Agent under the Senior
Credit Facility.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Affiliate Transaction" has the meaning assigned to it in Section 4.8.
<PAGE>
2
"Amended and Restated Purchase Agreement" means the Amended and Restated
Purchase Agreement, dated November 23, 1998, among the Company, the Subsidiary
Guarantors and Lehman Brothers Inc., as Initial Purchaser.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary and Cedel that apply to such transfer and exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) by the Company or any Restricted Subsidiary other than in the
ordinary course of business (provided that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company and its
Restricted Subsidiaries taken as a whole will be governed by Section 4.13 and
Section 5.1 and not by Section 4.12), and (ii) the issue or sale by the Company
or any of its Restricted Subsidiaries of Equity Interests of any the Company's
Restricted Subsidiaries, in the case of either clause (i) or (ii), whether in a
single transaction or a series of related transactions (a) that have a fair
market value in excess of $1.0 million or (b) for Net Proceeds in excess of $1.0
million. Notwithstanding the foregoing, the following shall not be considered
"Asset Sales": (i) a transfer of assets by the Company to a Subsidiary Guarantor
or by a Restricted Subsidiary of the Company to the Company or to a Subsidiary
Guarantor; (ii) an issuance or sale of Equity Interests by a Restricted
Subsidiary of the Company to the Company or a Subsidiary Guarantor; (iii) a
Restricted Payment that is permitted by Section 4.2; (iv) the sale or transfer
of the Designated Facilities; and (v) the sale by the Company of the Capital
Stock of an Unrestricted Subsidiary.
"Asset Sale Offer" has the meaning assigned to it in Section 4.12.
"Asset Sale Offer Trigger Date" has the meaning assigned to it in Section
4.12.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Authenticating Agent" has the meaning assigned to it in Section 2.2.
"Authentication and Delivery Order" has the meaning assigned to it in
Section 2.2.
"Bankruptcy Code" means, the Bankruptcy Reform Act of 1978, as amended and
codified as 11 U.S.C. Section 101 et seq.
<PAGE>
3
"Bankruptcy Court" means the United States Bankruptcy Court for the
District of Delaware.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any committee thereof duly authorized to act on
behalf of such Board of Directors.
"Business Day" means a day other than a Legal Holiday.
"Calculation Date" has the meaning assigned to it in the definition of
"Fixed Charge Coverage Ratio" in this Section 1.1.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participation, 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 Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than one
year from the date of acquisition, (iii) certificates of deposit and eurodollar
time deposits with maturities of not more than one year from the date of
acquisition, bankers' acceptances with maturities of not more than one year from
the date of acquisition and overnight bank deposits, in each case with any
domestic commercial bank having capital and surplus in excess of $500 million
and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations
with a term of not more than seven days 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 and (v)
commercial paper having the highest rating obtainable from Moody's Investors
Service, Inc. or one of the two highest ratings from Standard & Poor's Ratings
Service Group, a division of the McGraw-Hill Companies, with maturities of not
more than 270 days from the date of acquisition.
"Cash Flow Participation Interest" has the meaning assigned to it in
Section 2.1.
"Cedel" means Cedel Bank, S.A.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries,
taken as a whole to any "person" (as such term is used in Section
<PAGE>
4
13(d)(3) of the Exchange Act; (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company; (iii) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as defined above) becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
currently exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the total of the Voting
Stock of the Company (measured by voting power rather than number of shares);
(iv) the first day on which a majority of the members of the Board of Directors
of the Company are not Continuing Directors; or (v) the Company consolidates
with, or merges with or into, any Person or sells, assigns, conveys, transfers,
leases or otherwise disposes of all or substantially all of its assets to any
Person, or any Person consolidates with, or merges with or into, the Company, in
any such event pursuant to a transaction in which any of the outstanding Voting
Stock of the Company is converted into or exchanged for cash, securities or
other property, other than any such transaction where the Voting Stock of the
Company outstanding immediately prior to such transaction is converted into or
exchanged for Voting Stock (other than Disqualified Stock) of the surviving or
transferee Person constituting a majority of the outstanding shares of such
Voting Stock of such surviving or transferee Person (immediately after giving
effect to such issuance).
"Change of Control Offer" has the meaning assigned to it in Section
4.13(a).
"Change of Control Payment" has the meaning assigned to it in Section
4.13(a).
"Change of Control Payment Date" has the meaning assigned to it in Section
4.13(a).
"CIBC Facility" means that certain $2.0 million revolving credit facility
dated June 4, 1997, by and between Trim Trends Canada and Canadian Imperial Bank
of Commerce, providing for up to $2.0 million of revolving credit borrowings, as
amended, modified, renewed, refunded, replaced or refinanced from time to time.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means all property of the Company and the Subsidiary
Guarantors, now owned or hereafter acquired, upon which a Lien is purported to
be created by any Security Document.
"Collateral Agent" means Norwest Bank, acting in its capacity as agent with
respect to the Collateral for the secured creditors under the Security
Documents, including, without limitation, the Securityholders and the Lenders
under the Senior Credit Facility, or any successor thereto.
"Collateral Agreement" means the Collateral Agreement, dated as of November
24, 1998, made by the Company and the Subsidiary Guarantors in favor of the
Trustee as secured
<PAGE>
5
party thereunder, as the same may be amended, supplemented or otherwise modified
from time to time.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Securities to be redeemed that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such Securities.
"Comparable Treasury Price" means, with respect to any redemption date for
the Securities, (i) the average of four Reference Treasury Dealer Quotations for
such redemption date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations, or (ii) if the Trustee obtains fewer than four such
Reference Treasury Dealer Quotations, the average of all such quotations.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary or non-recurring loss plus any net loss realized in
connection with an Asset Sale (to the extent such losses were deducted in
computing such Consolidated Net Income), plus (ii) provision for taxes based on
income or profits of such Person and its Restricted Subsidiaries for such
period, to the extent that such provision for taxes was included in computing
such Consolidated Net Income, plus (iii) consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
and whether or not capitalized (including, without limitation, Cash Flow
Participation Interest expense, amortization of debt issuance costs and original
issue discount, non-cash interest payments (such as the PIK Securities), the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments, if any, pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation and amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) of such Person and its
Restricted Subsidiaries for such period to the extent that such depreciation and
amortization were deducted in computing such Consolidated Net Income, minus (v)
non-cash items increasing such Consolidated Net Income for such period (other
than items that were accrued in the ordinary course of business), in each case,
on a consolidated basis and determined in accordance with GAAP. Notwithstanding
the foregoing, the provision for taxes on the income or profits of, and the
depreciation and amortization and other non-cash charges of, a Restricted
Subsidiary of the Company shall be added to Consolidated Net Income to compute
Consolidated Cash Flow of the Company only to the extent (and in same
proportion) that the Net Income of such Restricted Subsidiary was included in
calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Restricted Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
<PAGE>
6
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Restricted Subsidiary or its stockholders.
"Consolidated Interest Coverage Ratio" means, for any period, the ratio of
(i) Consolidated Cash Flow for such period to (ii) Consolidated Interest Expense
for such period.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum, without duplication, of (i) the consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid or
accrued (including, without limitation, Cash Flow Participation Interest
expense, amortization of debt issuance costs and original issue discount,
non-cash interest payments (such as the PIK Securities), the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments, if any, pursuant to Hedging Obligations), (ii) the
consolidated interest of such Person and its Restricted Subsidiaries that was
capitalized during such period (including but not limited to, the value of PIK
Securities issued during such period, if applicable) and (iii) any interest
expense on Indebtedness of another Person that is Guaranteed by such Person or
one of its Restricted Subsidiaries or secured by a Lien on assets of such Person
or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is
called upon).
"Consolidated Leverage Ratio" means the ratio of (i) the aggregate
outstanding amount of Indebtedness of each of the Company and its Restricted
Subsidiaries as of the date of calculation on a consolidated basis in accordance
with GAAP plus the aggregate liquidation preference of all outstanding
Disqualified Stock of the Company and preferred stock of the Company's
Restricted Subsidiaries (except preferred stock issued to the Company or a
Wholly Owned Subsidiary) on such date to (ii) the aggregate Consolidated Cash
Flow of the Company; provided that, for the purposes of determining the ratio
described above for (i) the fiscal quarter ending on December 31, 1998,
Consolidated Cash Flow shall be deemed equal to Consolidated Cash Flow for such
fiscal quarter multiplied by four, (ii) for the six month period ending on March
31, 1999, Consolidated Cash Flow shall be deemed equal to Consolidated Cash Flow
for such period multiplied by two and (iii) for the nine month period ending on
June 30, 1999, Consolidated Cash Flow shall be deemed equal to Consolidated Cash
Flow for such period multiplied by 1.33.
For purposes of this definition, (i) the amount of Indebtedness which is
issued at a discount shall be deemed to be the accreted value of such
Indebtedness at the end of the quarter, whether or not such amount is the amount
then reflected on a balance sheet prepared in accordance with GAAP, and (ii) the
aggregate outstanding principal amount of Indebtedness of the Company and its
Subsidiaries and the aggregate liquidation preference of all outstanding
preferred stock of the Company's Subsidiaries for which such calculation is made
shall be determined on a pro forma basis as if the Indebtedness and preferred
stock giving rise to the need to perform such calculation had been incurred and
issued and the proceeds therefrom had been applied, and all other transactions
in respect of which such Indebtedness is being incurred or preferred stock is
being issued had occurred, on the first day of the quarter. In addition to the
<PAGE>
7
foregoing, for purposes of this definition, Consolidated Cash Flow shall be
calculated on a pro forma basis after giving effect to (i) the incurrence of the
Indebtedness of such Person and its Subsidiaries and the issuance of the
preferred stock of such Subsidiaries (and the application of the proceeds
therefrom) giving rise to the need to make such calculation and any incurrence
(and the application of the proceeds therefrom) or repayment of other
Indebtedness, at any time subsequent to the beginning of the quarter and on or
prior to the date of determination, as if such incurrence or issuance (and the
application of the proceeds thereof), or the repayment, as the case may be,
occurred on the first day of the quarter (except that, in making such
computation, the amount of Indebtedness under any revolving credit facility
shall be computed based upon the average balance of such Indebtedness at the end
of each month during such period) and (ii) any acquisition (including, without
limitation, any acquisition giving rise to the need to make such calculation as
a result of such Person or one of its Subsidiaries (including any Person that
becomes a Subsidiary as a result of such acquisition) incurring, assuming or
otherwise becoming liable for Indebtedness or such Person's Subsidiaries issuing
preferred stock) at any time on or subsequent to the first day of the quarter
and on or prior to the date of determination, as if such acquisition (including
the incurrence, assumption or liability for any such Indebtedness and the
issuance of such preferred stock and also including any Consolidated Cash Flow
associated with such acquisition) occurred on the first day of the quarter,
giving pro forma effect to any cost reductions which the Company anticipates if
the Company deliver to the Trustee an Officers' Certificate executed by the
chief financial or accounting officer of the Company certifying to and
describing and quantifying with reasonable specificity the cost reductions,
non-recurring expenses and non-recurring costs expected to be attained within
the first year after such acquisition. Furthermore, in calculating Consolidated
Interest Expense for purposes of the calculation of Consolidated Cash Flow, (a)
interest on Indebtedness determined on a fluctuating basis as of the date of
determination (including Indebtedness actually incurred on the date of the
transaction giving rise to the need to calculate the Consolidated Leverage
Ratio) and which will continue to be so determined thereafter shall be deemed to
have accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness as in effect on the date of determination and (b) notwithstanding
(a) above, interest determined on a fluctuating basis, to the extent such
interest is covered by Hedging Obligations, shall be deemed to accrue at the
rate per annum resulting after giving effect to the operation of such
agreements.
"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, determined in accordance with GAAP);
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary
that is a Guarantor, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
<PAGE>
8
shall be excluded, and (iv) the cumulative effect of a change in accounting
principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Restricted Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the Issue Date in the book value of any asset
owned by such Person or a consolidated Restricted Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Restricted Subsidiaries and in
Persons that are not Restricted Subsidiaries (except, in each case, Permitted
Investments), and (z) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in accordance
with GAAP.
"Continuing Directors" means, as of the date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the Issue Date or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such board at the time of such nomination or
election.
"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 Indenture is located at Sixth
and Marquette, Minneapolis, Minnesota 55479-0069, Attention: Corporate Trust
Services or at any other time at time such other address as the Trustee may
designate from time to time by notice to the Securityholders.
"Coupon Interest" has the meaning assigned to it in Section 2.1(a)(3).
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
"Default" means any event that is or with the passage of time or the giving
of notice (or both) would be an Event of Default.
"Defaulted Interest" has the meaning assigned to it in Section 2.11.
"Definitive Security" means a certificated Security registered in the name
of the Holder thereof and issued in accordance with Section 2.6 hereof, in the
form of Exhibit A or B hereto except that such Security shall not bear the
Global Security Legend and shall not have the "Schedule of Increases or
Decreases in Global Security" attached thereto.
<PAGE>
9
"Depositary" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.3 hereof as the
Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Designated Facilities" means the assets (real and personal property) as of
the Issue Date relating to the Toledo, Tiffin and Harman businesses.
"DIP Credit Facilities" means the collective reference to the Company's
$175.0 million senior secured debtor-in-possession credit facility and the
Company's $25.0 million junior secured debtor-in-possession credit facility,
which are being refinanced by the transactions contemplated by the Senior Credit
Facility and the Securities offered under this Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Securities mature, except to the extent that such Capital Stock is
solely redeemable with, or solely exchangeable for, any Capital Stock of such
Person that is not Disqualified Stock.
"Domestic Subsidiary" means any Subsidiary of the Company organized under
the laws of the United States of America, any state, territory, possession or
the District of Columbia. As of the Issue Date, the Domestic Subsidiaries are
Doehler-Jarvis, Inc., Harvard Transportation Corporation, Doehler-Jarvis
Greeneville, Inc., Pottstown Precision Casting, Inc., Doehler-Jarvis
Technologies, Inc., Doehler-Jarvis Toledo, Inc., Harman Automotive, Inc.,
Hayes-Albion Corporation and The Kingston-Warren Corporation.
"DTC" means The Depository Trust Company.
"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).
"Event of Default" has the meaning assigned to it in Section 6.1.
"Excess Proceeds" has the meaning assigned to it in Section 4.12.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
<PAGE>
10
"Excluded Foreign Subsidiary" means, any Foreign Subsidiary in respect of
which either (i) the pledge of all of the Capital Stock of such Subsidiary as
Collateral or (ii) the guaranteeing by such Subsidiary of the Obligations,
would, in the good faith judgment of the Company, result in adverse tax
consequences to the Company or violate applicable law in any material respect.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings under any
Credit Facility) or issues preferred stock subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated but on or
prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) acquisitions that have been made
by the Company or any of its Restricted Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, Cash Flow Participation Interest expense, amortization of
debt issuance costs and original issue discount, non-cash interest payments
(such as the PIK Securities), the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), (ii) the consolidated interest of
such Person and its Restricted Subsidiaries that was capitalized during such
period (including but not limited to, the value of PIK Securities issued during
such period, if applicable), (iii) any interest expense on Indebtedness of
another Person that is Guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon)
and (iv) the product of (a) all dividend payments, whether or not in cash, on
any
<PAGE>
11
series of preferred stock of such Person or any of its Restricted Subsidiaries,
other than dividend payments on Equity Interests payable solely in Equity
Interests of the Company (other than Disqualified Stock), times (b) a fraction,
the numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis and in accordance
with GAAP.
"Foreign Subsidiary" means any Subsidiary of the Company (a) that is not a
Domestic Subsidiary or (b) whose primary asset is the Capital Stock of one or
more Foreign Subsidiaries.
"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, the statements and pronouncements of
the Financial Accounting Standards Board and such other statements by such other
entities as have been approved by a significant segment of the accounting
profession, which are applicable at the Issue Date.
"Global Security" means, individually and collectively, each of the
Restricted Global Securities and the Unrestricted Global Securities, in the form
of Exhibits A and B hereto, respectively, issued in accordance with Section 2.1,
2.6(b)(iv), 2.6(d)(ii) or 2.6(f) hereof.
"Global Security Legend" means the legend set forth in Section 2.6(g)(ii),
which is required to be placed on all Global Securities issued under this
Indenture.
"Governmental Authority" means 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.
"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, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness, including the Guarantee of
this Indenture and the Securities by each of the Subsidiary Guarantors pursuant
to this Indenture and in the form of Guarantee endorsed on the forms of Security
attached as Exhibits A and B to this Indenture and any additional Guarantee of
this Indenture and the Securities to be executed by any Restricted Subsidiary of
the Company.
"Hedging Obligations" means, with respect to any Person, the net payment
Obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements, interest rate collar agreements and agreements providing
for protection against fluctuations in commodity prices and (ii) other
agreements or arrangements in the ordinary course of business which are designed
to protect such Person against fluctuations in commodity prices, interest rates
or currency exchange rates.
<PAGE>
12
"Holder" or "Noteholder" or "Securityholder" means the Person in whose name
a Security is registered on the Registrar's books.
"Indebtedness" means, with respect to any Person, (a) any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all Indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
Indebtedness is assumed by such Person) (b) to the extent not otherwise
included, the Guarantee by such Person of any Indebtedness of any other Person,
whether or not it appears on the balance sheet of such Person; provided that the
amount of such Indebtedness shall be the lesser of the amount of Indebtedness
that is the subject of such Guarantee and the maximum liability of such Person
on such Guarantee and (c) all Indebtedness of other Persons secured by a Lien on
any asset of such Person, whether or not such Indebtedness is assumed by or is
otherwise the legal liability of such Person, provided that the amount of such
Indebtedness shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of such Indebtedness. The amount
of any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness that does not require current payments
of interest or that allows for the payment of interest in kind, and (ii) the
principal amount thereof, together with any interest thereon that is more than
30 days past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Independent Investment Banker" means one of the Reference Treasury Dealers
appointed by the Trustee after consultation with the Company.
"Indirect Participant" means a Person who holds a beneficial interest in a
Global Security through a Participant.
"Initial Security" has the meaning assigned to it in the preamble to this
Indenture.
"Intercreditor Agreement" means the intercreditor agreement dated as of the
Issue Date by and among the Trustee, the Administrative Agent, the Collateral
Agent and the Company that shall set forth the relative rights of the Lenders
under the Senior Credit Facilities and the Securityholders in respect of shared
collateral and the security interests granted pursuant to the Loan Security
Documents and the Security Documents.
"Interest Payment Dates" means each of the semi-annual interest payment
dates on March 1 and September 1 of each year, commencing March 1, 1999.
<PAGE>
13
"Interest" has the meaning assigned to it in Section 2.1(a)(3).
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees of Indebtedness or other Obligations),
advances of assets or capital contributions (excluding commission, travel and
entertainment, moving, and similar advances to officers and employees made in
the ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP. If the Company or any of its Restricted
Subsidiaries sells or otherwise disposes of any Equity Interests of any direct
or indirect Restricted Subsidiary of the Company such that, after giving effect
to any such sale or disposition, such Person is no longer a direct or indirect
Restricted Subsidiary of the Company, the Company or such Restricted Subsidiary,
as the case may be, shall be deemed to have made an Investment on the date of
any such sale or disposition equal to the fair market value of the Equity
Interests of such Restricted Subsidiary not sold or disposed of in an amount
determined as provided in the final paragraph of Section 4.2 hereof.
"Issue Date" means the date on which the Initial Securities are originally
issued.
"Kingston-Warren" means The Kingston-Warren Corporation, a New Hampshire
corporation, and a Subsidiary of the Company.
"LCPI" means Lehman Commercial Paper Inc.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Lender" means each of the institutions a party to and acting as lenders
under the Senior Credit Facility.
"Letter of Transmittal" means the letter of transmittal to be prepared by
the Issuer and sent to all Holders of Securities for use by such Holders in
connection with the Exchange Offer.
"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 any asset and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
<PAGE>
14
"Liquidated Damages" has the meaning set forth in the Registration Rights
Agreement.
"LLC Agreement" means the Limited Liability Company Agreement dated
November 27, 1995 by and between Hutchinson S.A. and Kingston-Warren.
"Loan" means, any loan made by any lender pursuant to the Senior Credit
Facility.
"Loan Collateral Agent" means, the Collateral Agent under the Loan
Collateral Agreement.
"Loan Collateral Agreement" means, the Collateral Agreement to be executed
and delivered by the Company and each Loan Guarantor, in favor of the
Administrative Agent as the same may be amended, supplemented or otherwise
modified from time to time.
"Loan Documents" means the Senior Credit Facility, the Loan Security
Documents, certain applications made by Lenders regarding letters of credit to
be issued under the Senior Credit Facility, the Loan Notes and the Intercreditor
Agreement.
"Loan Guarantor" means each Subsidiary of the Company other than Excluded
Foreign Subsidiaries.
"Loan Notes" means the collective reference to any promissory note
evidencing Loans.
"Loan Security Documents" means, collectively, the Loan Collateral
Agreement, the Mortgages and all other security hereafter delivered to the Loan
Collateral Agent granting a Lien on any property of any Person to secure the
obligations and liabilities of the Company or the Subsidiary Guarantors under
any Loan Document.
"Make-Whole Premium" has the meaning assigned to it in Section 3.7(a).
"Maturity Date" means September 1, 2003.
"Minimum Cash Flow Participation Interest Amount" has the meaning assigned
to it in Section 2.1(a)(3).
"Mortgage" means each of the mortgages and deeds of trust made by the
Company or any Subsidiary Guarantor in favor of, or for the benefit of, the
Collateral Agent for the benefit of the Securityholders, substantially in the
form of Exhibit D hereto (with such changes thereto as shall be advisable under
the law of the jurisdiction in which such mortgage or deed of trust is to be
recorded), as the same may be amended, supplemented or otherwise modified from
time to time.
<PAGE>
15
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary gain (but not loss),
together with any related provision for taxes on such extraordinary gain (but
not loss).
"Net Proceeds" means the aggregate cash proceeds or Cash Equivalents
received by the Company or any of its Restricted Subsidiaries in respect of any
Asset Sale (including, without limitation, any cash received upon the sale or
other disposition of any non-cash consideration received in any Asset Sale), net
of (A) all costs relating to such Asset Sale (including, without limitation,
legal, accounting, investment banking and brokers fees, and sales and
underwriting 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), (B)
amounts required to be applied to repayment of Indebtedness (other than
Indebtedness under the Senior Credit Facility) secured by a Lien on the asset or
assets that were the subject of such Asset Sale and (C) and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.
"New Security" has the meaning assigned to it in the preamble of this
Indenture.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Securities being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or any of its Restricted
Subsidiaries.
"Norwest Bank" means Norwest Bank Minnesota, National Association, a
national banking association.
"Obligations" has the meaning assigned to it in Section 10.1.
"Offer Amount" has the meaning ascribed in Section 3.8.
"Offer Period" has the meaning ascribed in Section 3.8.
<PAGE>
16
"Offering Memorandum" means the Offering Memorandum dated November 22, 1998
relating to the Initial Securities; provided that after the issuance of New
Securities, all references herein to "Offering Memorandum" shall be deemed
references to the prospectus contained in the registration statement relating to
the New Securities.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, any Vice-President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller or the Secretary of such Person.
"Officers' Certificate" means a certificate signed on behalf of any Person
by either the principal executive officer or the principal financial officer,
and by the treasurer or the principal accounting officer of such Person that
meets the requirements of Section 12.5 hereof.
"144A Global Security" means a global security in the form of Exhibit A
hereto bearing the Global Security Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Securities sold in reliance on Rule 144A.
"Operative Documents" mean this Indenture, the Securities, the Guarantees,
the Collateral Agreement and other Security Documents, the Registration Rights
Agreement and the Intercreditor Agreement.
"Opinion of Counsel" means an executed written opinion complying with
Section 12.5 herein from Willkie Farr & Gallagher or any other legal counsel who
is reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Participant" means, with respect to the Depositary or Cedel, a Person who
has an account with the Depositary or Cedel, respectively (and, with respect to
The Depository Trust Company, shall include Cedel).
"Paying Agent" has the meaning assigned to it in Section 2.3.
"Payment Default" has the meaning assigned to it in Section 6.1(6).
"Permitted Business" means the lines of business that the Company and its
Restricted Subsidiaries currently conduct on the date hereof or that the Company
and its Restricted Subsidiaries contemplate conducting as set forth in the
Disclosure Statement For Debtors' First Amended and Modified Consolidated Plan
under Chapter 11 of the Bankruptcy Code dated August 19, 1998, filed with the
United States Bankruptcy Court for the District of Delaware in connection with
the Plan of Reorganization and incorporated by reference and attached to the
Offering Memorandum, and businesses reasonably related thereto.
<PAGE>
17
"Permitted Debt" has the meaning assigned to it in Section 4.3.
"Permitted Investments" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company; (b) any Investment in Cash Equivalents;
(c) any Investment by the Company or any Restricted Subsidiary of the Company in
a Person engaged in a Permitted Business, if as a result of such Investment (i)
such Person becomes a Subsidiary Guarantor or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Subsidiary
Guarantor; (d) any Restricted Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with Section 4.12; (e) any acquisition of assets solely in exchange
for the issuance of Equity Interests (other than Disqualified Stock) of the
Company; (f) Investments arising in connection with Hedging Obligations that are
incurred in the ordinary course of business, for the purpose of fixing or
hedging currency, commodity or interest rate risk (including with respect to any
floating rate Indebtedness that is permitted by the terms of this Indenture to
be outstanding) in connection with the conduct of the business of the Company
and its Restricted Subsidiaries which are Subsidiary Guarantors; (g) any
Investment existing on the Issue Date and any Investment that replaces,
refinances or refunds an Investment, provided that the new Investment is in an
amount that does not exceed the amount replaced, refinanced or refunded and is
made in the same Person as the Investment replaced, refinanced or refunded; (h)
Investments in Permitted Joint Ventures that have an aggregate fair market
value, taken together with all other Investments made pursuant to this clause
(h) that are at that time outstanding, not to exceed $7.5 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 that (I) no more than $3.0 million of the aggregate amount of
Investments (with the fair market value of each Investment being measured at the
time made and without giving effect to subsequent changes in value) permitted by
this clause (h) may be made in the form of additional investments in the
Permitted Joint Ventures and (II) no more than $4.5 million of the aggregate
amount of Investments (with the fair market value of each Investment being
measured at the time made and without giving effect to subsequent changes in
value) permitted by this clause (h) may be made in the form of loans or advances
made to or on behalf of Hutchinson/Kingston-Warren LLC, pursuant to Section 6.6
of the LLC Agreement for the sole purpose of funding the working capital needs,
capital expenditures and other general corporate or partnership needs of
Hutchinson/Kingston-Warren LLC in furtherance of its stated business purpose
pursuant to Article 2 of the LLC Agreement, provided that the terms and
conditions of such loans or advances require their repayment to the Company or
Kingston-Warren or that the Company or Kingston-Warren are repaid their share of
such expenditures pursuant to the LLC Agreement; and (i) other Investments by
the Company or any of its Restricted Subsidiaries in any Person engaged in one
or more Permitted Businesses, other than those provided for in clause (h), above
having an aggregate fair market value (measured as of the date made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (i) that are at the time
outstanding, not to exceed $2.5 million.
"Permitted Joint Venture" means (i) KS-Doehler-Jarvis GmbH, a German joint
venture formed by Doehler-Jarvis, Inc. and KS Aluminum Technologie AG, and (ii)
<PAGE>
18
Hutchinson/Kingston-Warren LLC, a Delaware limited liability company formed by
Kingston-Warren and Hutchinson S.A.
"Permitted Liens" means (i) Liens securing the Senior Credit Facility and
the Securities as permitted under this Indenture; (ii) Liens on the assets of
the Company or any of the Subsidiary Guarantors to secure Hedging Obligations
with respect to Indebtedness under any Credit Facility permitted by this
Indenture to be incurred; (iii) Liens on property of a Person existing at the
time such Person is merged into or consolidated with the Company or any
Restricted Subsidiary of the Company; provided that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with the
Company; (iv) Liens on property existing at the time of acquisition thereof by
the Company or any Restricted Subsidiary of the Company, provided that such
Liens were in existence prior to the contemplation of such acquisition and only
extend to the property so acquired; (v) Liens existing on the Issue Date,
provided that any Liens in existence on the Issue Date that are Liens of
pre-petition claims, arising from the filing of a voluntary petition for relief
under Chapter 11 of the Bankruptcy Code of the Company and certain of its
Subsidiaries, or Liens to secure the DIP Credit Facilities, which Liens will not
for any reason have been extinguished and released by the Issue Date, shall not
be a "Permitted Lien" within the meaning of this definition; (vi) Liens to
secure any Permitted Refinancing Indebtedness incurred to refinance any
Indebtedness secured by any Lien referred to in the foregoing clauses (i)
through (v), as the case may be, at the time the original Lien became a
Permitted Lien; (vii) Liens in favor of the Company or any Restricted Subsidiary
that is a Subsidiary Guarantor; (viii) Liens incurred in the ordinary course of
business (including those incurred in connection with trade credit in the
ordinary course of business) of the Company or any Restricted Subsidiary of the
Company with respect to obligations that do not exceed $5.0 million in the
aggregate at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business which shall be a
"Permitted Lien" within the meaning of this definition) and (b) do not in the
aggregate materially detract from the value of the property or materially impair
the use thereof in the operation of business by the Company or such Restricted
Subsidiary; (ix) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds, deposits to secure the performance of
bids, trade contracts, government contracts, leases, letters of credit or
licenses or other obligations of a like nature incurred in the ordinary course
of business (including, without limitation, landlord Liens on leased
properties); (x) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently prosecuted, provided
that any reserve or other appropriate provision as shall be required to conform
with GAAP shall have been made therefor; (xi) Liens to secure Indebtedness
(including Capital Lease Obligations and purchase money obligations) permitted
by clauses (iii) or (iv) of the second paragraph of Section 4.3 covering only
the assets acquired with such Indebtedness; (xii) carriers', warehousemen's,
mechanics', landlords' materialmen's, repairmen's or other like Liens arising in
the ordinary course of business in respect of obligations not overdue for a
period in excess of 60 days or which are being contested in good faith by
appropriate proceedings promptly instituted and diligently prosecuted; provided
that any reserve or other appropriate provision as shall be required to conform
with GAAP shall have been made
<PAGE>
19
therefor; (xiii) easements, rights-of-way, zoning and similar restrictions and
other similar encumbrances or title defects incurred, or leases or subleases
granted to others, in the ordinary course of business, which do not in any case
materially detract from the value of the property subject thereto or do not
interfere with or adversely affect in any material respect the ordinary conduct
of the business of the Company and its Restricted Subsidiaries taken as a whole;
(xiv) Liens in favor of customs and revenue authorities to secure payment of
customs duties in connection with the importation of goods in the ordinary
course of business and other similar Liens arising in the ordinary course of
business; (xv) leases or subleases granted to third Persons not interfering with
the ordinary course of business of the Company or any of its Restricted
Subsidiaries; (xvi) Liens (other than any Lien imposed by ERISA or any rule or
regulation promulgated thereunder) incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance, and other types of social security; (xvii) other deposits made in the
ordinary course of business to secure liability (including letters of credit) to
insurance carriers in connection with insurance policies that the Senior Credit
Facility and this Indenture require the Company and its Subsidiaries to carry;
(xviii) any interest or title of a lessor or sublessor under any operating
lease; (xix) any attachment or judgment Lien not constituting an Event of
Default under clause (vii) of the first paragraph of Section 6.1; (xx) Liens
securing the CIBC Facility as permitted under this Indenture; and (xxi) Liens to
secure Indebtedness permitted by clause (ix) of the second paragraph of Section
4.3.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
premium, accrued and unpaid Interest on, any Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Securities, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Securities on terms at least as
favorable to the Securityholders as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or a Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"PIK Grid" has the meaning assigned to it in Section 2.1.
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20
"PIK Securities" has the meaning assigned to it in Section 2.1.
"Prime Treasury Dealer" has the meaning assigned to it in the definition of
"Reference Treasury Dealer" in this Section 1.1.
"Private Placement Legend" means the legend set forth in Section 2.6(g)(i)
hereof to be placed on all Securities issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Purchase Date" has the meaning assigned to it in Section 3.8.
"Receivables Aging Certificate" has the meaning assigned to it in Section
4.19.
"Released Interests" has the meaning assigned to it in Section 11.4.
"Reference Treasury Dealer" means Lehman Brothers Inc. and three other
primary U.S. Government securities dealers in New York City (each, a "Primary
Treasury Dealer") appointed by the Trustee in consultation with the Company;
provided, however, that if any of the foregoing shall cease to be a Primary
Treasury Dealer, the Company shall substitute therefor another Primary Treasury
Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such redemption date.
"Registrar" has the meaning assigned to it in Section 2.3.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of November 23, 1998 among the Company, the Subsidiary Guarantors and
Lehman Brothers Inc. whereby the Company will agree to file with the SEC the
Exchange Offer Registration Statement on the appropriate form under the
Securities Act with respect to the New Securities.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Security" means a Regulation S Temporary Global
Security or Regulation S Permanent Global Security, as appropriate.
"Regulation S Permanent Global Security" means a permanent global Security
in the form of Exhibit A hereto bearing the Global Security Legend and the
Private Placement Legend and deposited with or on behalf of and registered in
the name of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Security upon
expiration of the Restricted Period.
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21
"Regulation S Temporary Global Security" means a temporary global Security
in the form of Exhibit A hereto bearing the Regulation S Temporary Global
Security Legend and deposited with or on behalf of and registered in the name of
the Depositary or its nominee, issued in a denomination equal to the outstanding
principal amount of the Securities initially sold in reliance on Rule 903 of
Regulation S.
"Regulation S Temporary Global Security Legend" means the legend set forth
in Section 2.6(g)(iii) to be placed on all Regulation S Temporary Global
Securities.
"Released Interests" has the meaning assigned to it in Section 11.4(a).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Payments" has the meaning assigned to it in Section 4.2.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Restricted Definitive Security" means a Definitive Security bearing the
Private Placement Legend.
"Restricted Global Security" means a Global Security bearing the Private
Placement Legend.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary; provided that, on the Issue Date,
all Subsidiaries of the Company shall be Restricted Subsidiaries of the Company.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated under the Securities Act.
"SEC" means the U.S. Securities and Exchange Commission, or any successor
agency.
"Securities" means the Initial Securities and the New Securities issued or
to be issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
<PAGE>
22
"Security Documents" means, collectively, the Collateral Agreement, the
Mortgages and all other security documents hereafter delivered to the Collateral
Agent granting a Lien on any property of any Person to secure the obligations
and liabilities of the Company and the Subsidiary Guarantors any other
instruments, agreements or documents entered into or delivered in connection
with any of the foregoing, as such agreement, instruments or documents may be
amended, supplemented or otherwise modified from time to time in accordance with
the terms thereof.
"Semi-Annual Accrual Period" has the meaning assigned to it in Section 2.1.
"Senior Credit Facility" means that certain $115.0 million Credit Facility,
dated as of the Issue Date, by and among the Company, the Subsidiary Guarantors
and the several Lenders from time to time parties thereto, Lehman Brothers Inc.,
as Arranger, Lehman Commercial Paper Inc., as Syndication Agent, General
Electric Capital Corporation, as Administrative Agent and as Collateral Agent,
providing for up to $50.0 million of term loan borrowings and $65.0 million of
revolving credit borrowings and in each case, including any related notes,
guarantees, collateral documents, instruments, letters of credit and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced or refinanced from time to time.
"Senior Debt" means any Indebtedness that is not subordinated in right of
payment to the Securities or any other Indebtedness. Notwithstanding anything to
the contrary in the foregoing, Senior Debt will not include (w) any liability
for federal, state, local or other taxes owed or owing by the Company, (x) any
Indebtedness of the Company to any of its Subsidiaries or other Affiliates, (y)
any trade payables or (z) any Indebtedness that is incurred in violation of this
Indenture.
"Shelf Registration Statement" has the meaning assigned to it in the
Registration Rights Agreement.
"Special PIK Redemption" has the meaning assigned to it in Section 3.9.
"Special PIK Redemption Date" has the meaning assigned to it in Section
3.9.
"Stub Period" has the meaning assigned to it in Section 2.1.
"Subject Property" has the meaning assigned to it in Section 11.3.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or an entity described in clause (i) and
related to such Person or (b) the only general partners of which are such Person
or of one or more entities described in clause (i) and
<PAGE>
23
related to such Person (or any combination thereof). Unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" herein refer to a
Subsidiary or Subsidiaries of the Company.
"Subsidiary Guarantor" means each of the Domestic Restricted Subsidiaries
that will fully and unconditionally guarantee, jointly and severally, on a
senior basis to each Securityholder the Company's payment obligations under this
Indenture and the Securities.
"Survey" means maps or plats of an as-built survey of the sites of the
properties subject to Mortgages certified to the Collateral Agent and the Title
Insurance Company in a manner reasonably satisfactory to them, dated a date
satisfactory to the Initial Purchaser and the Title Insurance Company by an
independent professional licensed land surveyor reasonably satisfactory to the
Initial Purchaser and the Title Insurance Company, which maps or plats and the
surveys on which they are based shall be made in accordance with the Minimum
Standard Detail Requirements for Land Title Surveys jointly established and
adopted by the American Land Title Association and the American Congress on
Surveying and Mapping in 1992, and, without limiting the generality of the
foregoing, there shall be surveyed and shown on such maps, plats or surveys the
following: (A) the locations on such sites of all the buildings, structures and
other improvements and the established building setback lines; (B) the lines of
streets abutting the sites and width thereof; (C) all visible and/or recorded
access and other easements appurtenant to the sites; (D) all roadways, paths,
driveways, encroachments and overhanging projections and similar encumbrances
affecting the site, whether recorded or apparent from a physical inspection of
the sites; (E) any encroachments on any adjoining property by the building
structures and improvements on the sites; (F) if the site is described as being
on a filed map, a legend relating the survey to said map; and (G) the flood zone
designations, if any, in which the mortgaged properties are located.
"TIA" means the Trust Indenture Act of 1939 15 U.S.C. Section 77aaa-77bbbb,
as in effect on the date of this Indenture; provided, however, that, in the
event the Trust Indenture Act of 1939 is amended after such date, "TIA" means,
to the extent required by any such amendments, the Trust Indenture Act of 1939
as so amended.
"Title Insurance Company" means the title insurance company that will issue
a mortgagee's title insurance policy (or policies) or marked up unconditional
binder for such insurance that shall (A) be in an amount satisfactory to the
Initial Purchaser prior to the Issue Date; (B) insure that the Mortgage insured
thereby creates a valid second lien on such mortgaged property (C) name the
Collateral Agent, for the benefit of the Initial Purchaser and the
Securityholders, as the insured thereunder; (D) be in the form of ACTA Loan
Policy - 1970 (Amended 10/17/70 and 10/17/84) (or equivalent policies); (E)
contain such endorsements and affirmative coverage as the Initial Purchaser may
reasonably request and (F) be satisfactory to the Initial Purchaser (including
any such title companies acting as co-insurers or reinsurers, at the option of
the Initial Purchaser).
"Treasury Rate" means, with respect to any redemption date for the
Securities, (i) the yield, under the heading which represents the average for
the immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)" or any
<PAGE>
24
successor publication which is published weekly by the Board of Governors of the
Federal Reserve System and which establishes yields on actively traded United
States Treasury securities adjusted to constant maturity under the caption
"Treasury Constant Maturities", for the maturity corresponding to the Comparable
Treasury Issue (if no maturity is within three months before or after the
Maturity Date, yields for the two published maturities most closely
corresponding to the Comparable Treasury Issue shall be determined and the
Treasury Rate shall be interpolated or extrapolated from such yields on a
straight line basis, rounding to the nearest month) or (ii) if such release (or
any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date. The Treasury Rate shall be calculated on the third
Business Day preceding the redemption date.
"Trim Trends Canada" means Trim Trends Canada Limited, a company organized
under the laws of Canada, and a Subsidiary of the Company.
"Trust Officer" means any officer within the Corporate Trust Office
including any Vice President, Assistant Vice President, Secretary, Assistant
Secretary, Treasurer or Assistant Treasurer or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge and
familiarity with the particular subject.
"Trustee" means the party named as such in this Indenture until a successor
replaces it and, thereafter, means such successor.
"Uniform Commercial Code" means the New York Uniform Commercial Code as in
effect from time to time.
"Unrestricted Global Security" means a permanent global Security in the
form of Exhibit B attached hereto that bears the Global Security Legend and that
has the "Schedule of Increases or Decreases in Global Security" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Securities that do not bear the
Private Placement Legend.
"Unrestricted Definitive Security" means one or more Definitive Securities
that do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution,
but only to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Debt, (b) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary than those
that
<PAGE>
25
might be obtained at the time from Persons who are not Affiliates of the
Company, (c) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results, and (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries; provided that, notwithstanding the above, the
Company and its Restricted Subsidiaries may make payments to, provide credit or
credit support for or make investments in Unrestricted Subsidiaries to the
extent that such payments or investments are in compliance with the covenant
entitled "Restricted Payments."
"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 Company's option.
"Valuation Date" has the meaning assigned to it in Section 11.4(a)(i)(B).
"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
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" means a Restricted Subsidiary, 100% of the
outstanding Capital Stock and other Equity Interests of which is directly or
indirectly owned by the Company.
SECTION 1.2. 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:
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
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26
"obligor" on the Indenture securities means the Company and the Subsidiary
Guarantors.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by the TIA reference to another statute or defined by the SEC rule have
the meanings assigned to them by such definitions.
SECTION 1.3. 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 Company dated such date prepared in
accordance with GAAP;
(8) the principal amount of any preferred stock shall be (i) the
maximum liquidation preference of such preferred stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
preferred stock, whichever is greater; and
(9) all references to the date the Securities were originally issued
shall refer to the date the Initial Securities were originally issued.
SECTION 1.4. One Class of Securities. The Initial Securities, the New
Securities and the PIK Securities, if any, shall vote and consent together on
all matters as one class and none of the Initial Securities, the New Securities
or the PIK Securities shall have the right to vote or consent as a separate
class on any matter.
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27
ARTICLE II
THE SECURITIES
SECTION 2.1. Terms, Form and Dating. (a) Terms. (1) Initial Offering. The
Initial Securities are being offered and sold by the Company pursuant to the
Amended and Restated Purchase Agreement.
(2) Principal Amount and Maturity. The Initial Securities are being issued
in aggregate principal amount of $25,000,000 and will mature on September 1,
2003. The aggregate principal amount of Securities outstanding at any time may
not exceed $25,000,000, except with respect to PIK Securities issued pursuant to
paragraph (a)(4) of this Section 2.1.
(3) Interest. Interest on the Securities will accrue at a rate equal to the
sum of (1) 14 1/2% per annum on the principal amount of Securities outstanding
(calculated on the basis of a 360- day year comprised of twelve 30-day months)
("Coupon Interest") plus (2) Cash Flow Participation Interest (as defined below
and, together with Coupon Interest, "Interest"). "Cash Flow Participation
Interest," for any relevant period, equals the product of (1) Consolidated Cash
Flow for the six month period ending, for interest payments due March 1 of each
year, on December 31 and, for interest payments due on September 1 of each year,
on June 30 (each, a "Semi-Annual Accrual Period") prior to the next succeeding
Interest Payment Date multiplied by (2) the applicable percentage set forth for
the period ending on the Interest Payment Date indicated below:
Interest Payment Date Percentage
--------------------- ----------
March 1, 1999................................... 2.00%
September 1, 1999............................... 2.00%
March 1, 2000................................... 2.50%
September 1, 2000............................... 2.50%
March 1, 2001................................... 3.50%
September 1, 2001............................... 3.50%
March 1, 2002................................... 4.50%
September 1, 2002............................... 4.50%
March 1, 2003................................... 4.50%
September 1, 2003............................... 4.50%
If, however, the calculation of Cash Flow Participation Interest, based on
the appropriate percentages set forth above, results in an amount that is
less than $1.0 million for any two consecutive Semi-Annual Accrual Periods
taken as a whole, then Cash Flow Participation Interest will be for such
two corresponding Interest Payment Dates taken as a whole, $1.0 million
(the "Minimum Cash Flow Participation Interest Amount").
No later than 15 days prior to an Interest Payment Date or any other
date on which Cash Flow Participation Interest is payable pursuant to a
redemption of the Securities or an offer to purchase pursuant to Section
4.13 hereof, the Company shall
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28
deliver to the Trustee an Officers' Certificate stating the amount of the
Cash Flow Participation Interest payable on such upcoming Interest Payment
Date or other payment date and calculations showing how such amount was
determined.
Notwithstanding the foregoing, in the event that the period for which
Interest accrues and is due (including for the period from the Issue Date
to the first Interest Payment Date of March 1, 1999) is less than 180 days
(such a period, a "Stub Period"), then the Interest due for such Stub
Period (which may be a Semi-Annual Accrual Period) will be pro rated to
reflect the actual number of days that the Securities were outstanding for
such Stub Period (calculated on the basis of a 360 day year comprised of
twelve 30-day months), provided that the portion of Interest attributable
to Cash Flow Participation Interest (or the Minimum Cash Flow Participation
Interest Amount, if applicable) due at the end of such Stub Period (or, as
the case may be, on September 1, 1999 with respect to the period covered by
the Stub Period ending on March 1, 1999 plus the Semi-Annual Accrual Period
ending on September 1, 1999, taken together) shall similarly be pro rated
to reflect the actual number of days that the Securities were outstanding
for such Stub Period (or, with respect to the period ending on September 1,
1999, the actual number of days that the Securities were outstanding for
the period covered by such Stub Period plus the succeeding Semi-Annual
Accrual Period, taken together) (calculated on the basis of a 360 day year
comprised of twelve 30-day months). Interest on overdue principal and on
overdue installments of Interest will accrue at the rate of Interest borne
by the Securities.
Interest will be payable semi-annually in arrears on March 1 and
September 1 commencing on March 1, 1999 to Holders of record on the
immediately preceding February 15 and August 15. Interest on the Securities
will accrue from the most recent date to which Interest has been paid or,
if no Interest has been paid, from the Issue Date.
(4) PIK Securities. Notwithstanding the foregoing, (i) if the
Company's Fixed Charge Coverage Ratio is less than 2.50 to 1 for any
Semi-Annual Accrual Period, then the Company may elect to pay Cash Flow
Participation Interest on the next succeeding Interest Payment Date for
such Semi-Annual Accrual Period by the issuance of additional Securities
equal to the amount of such interest that would otherwise be due but is not
paid in cash (the "PIK Securities") determined pursuant to clause (a)(3) of
this Section 2.1. The issuance of such PIK Securities shall constitute
satisfaction in full of such obligation to pay such Cash Flow Participation
Interest.
If the Company elects, pursuant to this Section 2.1(a)(4), to issue
PIK Securities, then the Company shall deliver a notice, signed by an
Officer, to the Trustee and the Paying Agent (which notice shall be
received not less than 5 nor more than 45 days prior to the record date
preceding the Interest Payment Date on which such PIK Securities will be
issued) which shall state whether the Company elects to satisfy the
obligation to pay Cash Flow Participation Interest, in full or in part, by
the issuance of PIK Securities, in which case such notice shall include a
written order to the Trustee to
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29
record on the register on the outstanding Security, or Securities, as the
case may be, (the register on an outstanding Security, a "PIK Grid"), (i)
the date of the issuance of such PIK Securities, (ii) the aggregate
principal amount of such PIK Securities that were issued on such date and
(iii) the total amount of PIK Securities outstanding after taking into
account any Special PIK Redemption pursuant to Section 3.9. In the event
that there have been no Special PIK Redemptions, then the total amount of
PIK Securities shall be the sum of all prior issuances thereof.
In no event shall the election of the Company to pay Cash Flow
Participation Interest in cash or to satisfy the obligation to pay Cash
Flow Participation Interest by issuing PIK Securities on any Interest
Payment Date preclude the Company from making a different election with
respect to all or any portion of Cash Flow Participation Interest to be
paid on the Securities on any subsequent Interest Payment Date. If (i) the
Company elects to satisfy the obligation to pay Cash Flow Participation
Interest on the Securities in part in cash and in part by the issuance of
PIK Securities on any Interest Payment Date and (ii) more than one Security
is outstanding, then the proportion of cash to be paid and PIK Securities
to be issued on such Interest Payment Date in respect of these outstanding
Securities shall be the same for each such Security.
Within 2 business days after any issuance of PIK Securities, the Trustee
shall give notice of such issuance to the Depositary and all
Securityholders registered with the Registrar.
(b) Form and Dating. The Initial Securities and the Trustee's certificate
of authentication shall be substantially as set forth in the form of Exhibit A
hereto. The Securities may have notations, legends or endorsements required by
law, stock exchange rule or usage. Each Security shall be dated the date of its
authentication. The Securities shall be in denominations of $1,000 and integral
multiples thereof.
The terms and provisions contained in the Securities shall constitute, and
are hereby expressly made, a part of this Indenture, and the Issuers, the
Subsidiary Guarantors and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
However, to the extent any provision of any Security conflicts with the express
provisions of this Indenture, the provisions of this Indenture shall govern and
be controlling.
(c) Global Securities. Initial Securities shall be offered and sold to QIBs
in reliance on Rule 144A as provided in the Amended and Restated Purchase
Agreement and shall be issued initially in the form of one or more permanent
global Securities in definitive, fully registered form without interest coupons
and with the Global Security Legend and Private Placement Legend, as set forth
in Exhibit A (including the "Schedule of Increases or Decreases in Global
Security" attached thereto), which shall be deposited on behalf of the
purchasers of the Initial Securities represented thereby with the Trustee as
custodian for the Depositary (or with such other custodian as the Depositary may
direct), and registered in the name of the Depositary
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30
or a nominee of the Depositary, duly executed by the Company and authenticated
by the Trustee as hereinafter provided.
Each Global Security shall represent such of the outstanding Securities as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Securities from time to time endorsed
thereon and that the aggregate principal amount of outstanding Securities
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Security to reflect the amount of any increase or decrease in the aggregate
principal amount of outstanding Securities represented thereby shall be made by
the Trustee or by the Depositary at the direction of the Trustee as required by
Section 2.6(h) hereof.
(d) Book-Entry Provisions. This Section 2.1(d) shall apply only to a Global
Security deposited with or on behalf of the Depositary. The Company shall
execute and the Trustee shall, in accordance with this Section 2.1(d),
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 custodian for the Depositary.
Participants in the Depositary shall have no rights under the Indenture
with respect to any Global Security held on their behalf by the Depositary or by
the Trustee as the custodian of the Depositary or under such Global Security,
and the Depositary may be treated by the Company, the Trustee and any agent of
the Company or the Trustee as the absolute owner of such Global Security for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent
the Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Participants, 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.
SECTION 2.2. Execution and Authentication. Two Officers of the Company
shall sign Securities for the Company by manual or facsimile signature. The
Company seal, if any, shall be reproduced on the Securities and may be in
facsimile form.
If an Officer whose signature is on a Security no longer holds that office
at the time a Security is authenticated, the Security shall nevertheless be
valid.
A Security shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Security has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers of the Company (an "Authentication and Delivery Order"), authenticate
Securities for original issue up to the aggregate principal amount of
$25,000,000. The aggregate principal amount of
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31
Securities outstanding at any time may not exceed such amount except as provided
in Section 2.1(a)(2) hereof.
The Trustee may (at the expense of the Company) appoint an authenticating
agent acceptable to the Issuers to authenticate the Global Security. An
authenticating agent may authenticate Securities whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with Securityholders or an affiliate of the Company and has the
same protections under Article 7 herein.
SECTION 2.3. Registrar and Paying Agent. The Company shall maintain an
office or agency where Securities may be presented for registration of transfer
or for exchange (the "Registrar") and an office or agency where Securities may
be presented for payment (the "Paying Agent"). Initially, the Registrar and the
Paying Agent shall be, in each case, the Trustee. The Registrar shall keep a
register of the Securities and of their transfer and exchange. The Registrar may
require a Securityholder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by law
or permitted by the Indenture. The Registrar need not register the transfer of
or exchange (i) 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)
for a period beginning 15 days before a selection of Securities to be redeemed
and ending on the date of such selection or (ii) any Securities for a period
beginning 15 days before an Interest Payment Date and ending on such Interest
Payment Date. The Company may have one or more Company-registrars and one or
more additional paying agents. The term "Paying Agent" includes any such
additional paying agent.
In the event the Company shall retain any Person not a party to this
Indenture as an agent hereunder, the Company shall enter into an appropriate
agency agreement with any Registrar, Paying Agent or Company-registrar 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 Company shall notify the Trustee of the name and address of each such
agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee
shall act as such and shall be entitled to appropriate compensation therefor
pursuant to Section 7.7. The Company or any of its domestically incorporated
wholly owned Subsidiaries may act as Paying Agent.
The Company initially appoints DTC to act as Depositary with respect to the
Global Notes.
The registered Holder of a Security may be treated as the owner of it for
all purposes.
SECTION 2.4. Paying Agent To Hold Money in Trust. By at least 11:00 a.m.
(New York City time) on the date on which any principal or Interest (including
any Liquidated Damages) on any Security is due and payable, the Company shall
deposit with the Paying Agent a sum sufficient to pay such principal or Interest
(including any Liquidated Damages) when due.
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32
The Company will instruct the Paying Agent to pay Interest (except Defaulted
Interest) and Liquidated Damages, if any, to the Persons who are registered
Securityholders at the close of business on the February 15 or August 15 next
preceding the Interest Payment Date. The Company will instruct the Paying Agent
to pay principal and premium and Interest and Liquidated Damages, if any, in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that such Paying Agent shall hold
in trust for the benefit of Securityholders or the Trustee all money held by
such Paying Agent for the payment of principal of or Interest (including any
Liquidated Damages) on the Securities and shall promptly notify the Trustee in
writing of any default by the Company in making any such payment. If the Company
or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as
Paying Agent and hold it as a separate trust fund. The Company at any time may
require a Paying Agent (other than the Trustee) to pay all money held by it to
the Trustee and to account for any funds disbursed by such Paying Agent. Upon
complying with this Section, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money delivered to the
Trustee. Upon any bankruptcy, reorganization or similar proceeding with respect
to the Company, the Trustee shall serve as Paying Agent for the Securities.
SECTION 2.5. Securityholder Lists. The Trustee shall preserve in as current
a form as is reasonably practicable the most recent list available to it of the
names and addresses of Securityholders. If the Trustee is not the Registrar, the
Company shall 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 2.6. Transfer and Exchange.
(a) Transfer and Exchange of Global Securities. A Global Security may not
be transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. All Global
Securities will be exchanged by the Company for Definitive Securities if (i) the
Company delivers to the Trustee written notice from the Depositary that it is
unwilling or unable to continue to act as Depositary or that it is no longer a
clearing agency registered under the Exchange Act and, in either case, a
successor Depositary is not appointed by the Company within 120 days after the
date of such notice from the Depositary or (ii) the Company in its sole
discretion determines that the Global Securities (in whole but not in part)
should be exchanged for Definitive Securities and delivers a written notice to
such effect to the Trustee. Upon the occurrence of either of the preceding
events in (i) or (ii) above, Definitive Securities shall be issued in such names
as the Depositary shall instruct the Trustee in writing. Global Securities also
may be exchanged or replaced, in whole or in part, as provided in Sections 2.7
and 2.9 hereof. Every Security authenticated and delivered in exchange for, or
in lieu of, a Global Security or any portion thereof, pursuant to this Section
2.6 or Section 2.7 or 2.9 hereof, shall be authenticated and delivered in the
form of, and shall be, a Global Security. A Global Security
<PAGE>
33
may not be exchanged for another Security other than as provided in this Section
2.6(a), however, beneficial interests in a Global Security may be transferred
and exchanged as provided in Section 2.6(b),(c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Securities.
The transfer and exchange of beneficial interests in the Global Securities shall
be effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Securities shall be subject to restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act. Transfers
of beneficial interests in the Global Securities also shall require compliance
with either subparagraph (i) or (ii) below, as applicable, as well as one or
more of the other Beneficial Interests described in the following subparagraphs,
as applicable.
(i) Transfer of Beneficial Interests in the Same Global Security.
Interests in any Restricted Global Security may be transferred to Persons
who take delivery thereof in the form of a beneficial interest in the same
Restricted Global Security in accordance with the transfer restrictions set
forth in the Private Placement Legend. Beneficial interests in any
Unrestricted Global Security may be transferred to Persons who take
delivery thereof in the form of a beneficial interest in such Unrestricted
Global Security. No written orders or instructions shall be required to be
delivered to the Registrar to effect the transfers described in this
Section 2.6(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Securities. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.6(b)(i) above, the
transferor of such beneficial interest must deliver to the Registrar either
(A) (1) a written order from a Participant or an Indirect Participant given
to the Depositary in accordance with the Applicable Procedures directing
the Depositary to credit or cause to be credited a beneficial interest in
another Global Security in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant
account to be credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to cause
to be issued a Definitive Security in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given by the
Depositary to the Registrar containing information regarding the Person in
whose name such Definitive Security shall be registered to effect the
transfer or exchange referred to in (1) above. Upon consummation of an
Exchange Offer by the Company and the Parent in accordance with Section
2.6(f) hereof, the requirements of this Section 2.6(b)(ii) shall be deemed
to have been satisfied upon receipt by the Registrar of the instructions
contained in the Letter of Transmittal delivered by the Holder of such
beneficial interests in the Restricted Global Securities. Upon satisfaction
of all of the requirements for transfer or exchange of beneficial interests
in Global Securities contained in this Indenture and the Securities or
otherwise applicable under the Securities Act, the Trustee shall adjust the
principal amount of the relevant Global Security or Securities pursuant to
Section 2.6(h) hereof.
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34
(iii) Transfer of Beneficial Interests to Another Restricted Global
Security. A beneficial interest in any Restricted Global Security may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Security if the transfer
complies with the requirements of Section 2.6(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Security, then the transferor
must deliver a certificate in the form of Exhibit F hereto, including
the certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Global Security, then the
transferor must deliver a certificate in the form of Exhibit F hereto,
including the certifications in item (2) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Security for Beneficial Interests in an Unrestricted Global
Security. A beneficial interest in any Restricted Global Security may be
exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Security or transferred to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Security if the exchange or transfer complies with the requirements of
Section 2.6(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
New Securities or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Security proposes to exchange such beneficial
interest for a beneficial interest in an Unrestricted Global
Security, a certificate from such holder in the form of Exhibit G
hereto, including the certifications in item (1)(a) thereof; or
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35
(2) if the holder of such beneficial interest in a
Restricted Global Security proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a beneficial interest in an Unrestricted Global Security, a
certificate from such holder in the form of Exhibit F hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Security has not yet been
issued, the Company shall issue and, upon receipt of an Authentication and
Delivery Order in accordance with Section 2.2 hereof, the Trustee shall
authenticate one or more Unrestricted Global Securities in an aggregate
principal amount equal to the aggregate principal amount of beneficial
interests transferred pursuant to subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Security cannot be
exchanged for, or transferred to Persons who take delivery thereof in the
form of, a beneficial interest in a Restricted Global Security.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Securities.
(i) Beneficial Interests in Restricted Global Securities to Restricted
Definitive Securities. If any holder of a beneficial interest in a
Restricted Global Security proposes to exchange such beneficial interest
for a Restricted Definitive Security or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a Restricted
Definitive Security, then, upon receipt by the Registrar of the following
documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Security proposes to exchange such beneficial interest for a
Restricted Definitive Security, a certificate from such holder in the
form of Exhibit G hereto, including the certifications in item (2)(a)
thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit F hereto, including the certifications
in item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit F hereto, including the certifications in item (2)
thereof;
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36
(D) if such beneficial interest is being transferred pursuant to
an exemption from the registration requirements of the Securities Act
in accordance with Rule 144 under the Securities Act, a certificate to
the effect set forth in Exhibit F hereto, including the certifications
in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to the
Company or any of their Subsidiaries, a certificate to the effect set
forth in Exhibit F hereto, including the certifications in item (3)(b)
thereof; or
(F) if such beneficial interest is being transferred pursuant to
an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit F hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Security to be reduced accordingly pursuant to Section 2.6(h)
hereof, and the Company shall execute and the Trustee shall upon receipt of
an Authentication and Delivery Order authenticate and deliver to the Person
designated in the instructions a Definitive Security in the appropriate
principal amount. Any Definitive Security issued in exchange for a
beneficial interest in a Restricted Global Security pursuant to this
Section 2.6(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
(at the expense of the Company) deliver such Definitive Securities to the
Persons in whose names such Securities are so registered. Any Definitive
Security issued in exchange for a beneficial interest in a Restricted
Global Security pursuant to this Section 2.6(c)(i) shall bear the Private
Placement Legend and shall be subject to all restrictions on transfer
contained therein.
(ii) Beneficial Interests in Restricted Global Securities to
Unrestricted Definitive Securities. A holder of a beneficial interest in a
Restricted Global Security may exchange such beneficial interest for an
Unrestricted Definitive Security or may transfer such beneficial interest
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Security only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
New Securities or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
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37
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Security proposes to exchange such beneficial
interest for a Definitive Security that does not bear the Private
Placement Legend, a certificate from such holder in the form of
Exhibit G hereto, including the certifications in item (1)(b)
thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Security proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a Definitive Security that does not bear the Private Placement
Legend, a certificate from such holder in the form of Exhibit F
hereto, including the certifications in item (4) thereof,
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Securities to
Unrestricted Definitive Securities. If any holder of a beneficial interest
in an Unrestricted Global Security proposes to exchange such beneficial
interest for a Definitive Security or to transfer such beneficial interest
to a Person who takes delivery thereof in the form of a Definitive
Security, then, upon satisfaction of the conditions set forth in Section
2.6(b)(ii) hereof, the Trustee shall cause the aggregate principal amount
of the applicable Global Security to be reduced accordingly pursuant to
Section 2.6(h) hereof, and the Company shall execute and the Trustee shall
upon receipt of an Authentication and Delivery Order authenticate and (at
the expense of the Company) deliver to the Person designated in the
instructions a Definitive Security in the appropriate principal amount. Any
Definitive Security issued in exchange for a beneficial interest pursuant
to this Section 2.6(c)(iii) shall be registered in such name or names and
in such authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions from
the Depositary and the Participant or Indirect Participant. The Trustee
shall (at the expense of the Company) deliver such Definitive Securities to
the Persons in whose names such Securities are so registered. Any
Definitive Security issued in exchange for a beneficial interest pursuant
to this Section 2.6(c)(iii) shall not bear the Private Placement Legend.
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(d) Transfer and Exchange of Definitive Securities for Beneficial
Interests.
(i) Restricted Definitive Securities to Beneficial Interests in
Restricted Global Securities. If any Holder of a Restricted Definitive
Security proposes to exchange such Security for a beneficial interest in a
Restricted Global Security or to transfer such Restricted Definitive
Security to a Person who takes delivery thereof in the form of a beneficial
interest in a Restricted Global Security, then, upon receipt by the
Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Security proposes
to exchange such Security for a beneficial interest in a Restricted
Global Security, a certificate from such Holder in the form of Exhibit
G hereto, including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Security is being transferred
to a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit F hereto, including the
certifications in item (1) thereof;
(C) if such Restricted Definitive Security is being transferred
to a Non-U.S. Person in an offshore transaction in accordance with
Rule 903 or Rule 904 under the Securities Act, a certificate to the
effect set forth in Exhibit F hereto, including the certifications in
item (2) thereof;
(D) if such Restricted Definitive Security is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit F hereto, including the
certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Security is being transferred
to the Company or any of their Subsidiaries, a certificate to the
effect set forth in Exhibit F hereto, including the certifications in
item (3)(b) thereof; or
(F) if such Restricted Definitive Security is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit F hereto,
including the certifications in item (3)(c) thereof, the Trustee shall
cancel the Restricted Definitive Security, increase or cause to be
increased the aggregate principal amount of, in the case of clause (A)
above, the appropriate Restricted Global Security, in the case of
clause (B) above, the 144A Global Security, and in the case of clause
(C) above, the Regulation S Global Security.
(ii) Restricted Definitive Securities to Beneficial Interests in
Unrestricted Global Securities. A Holder of a Restricted Definitive
Security may exchange such Security for a beneficial interest in an
Unrestricted Global Security or transfer such Restricted
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39
Definitive Security to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Security only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the New Securities or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Securities proposes to
exchange such Securities for a beneficial interest in the
Unrestricted Global Security, a certificate from such Holder in
the form of Exhibit G hereto, including the certifications in
item (1)(c) thereof; or
(2) if the Holder of such Definitive Securities proposes to
transfer such Securities to a Person who shall take delivery
thereof in the form of a beneficial interest in the Unrestricted
Global Security, a certificate from such Holder in the form of
Exhibit F hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in
this Section 2.6(d)(ii), the Trustee shall cancel the Definitive
Securities and increase or cause to be increased the aggregate
principal amount of the Unrestricted Global Security.
(iii) Unrestricted Definitive Securities to Beneficial Interests in
Unrestricted Global Securities. A Holder of an Unrestricted Definitive
Security may exchange such Security for a beneficial interest in an
Unrestricted Global Security or transfer such
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Definitive Securities to a Person who takes delivery thereof in the form of
a beneficial interest in an Unrestricted Global Security at any time. Upon
receipt of a written request for such an exchange or transfer, the Trustee
shall cancel the applicable Unrestricted Definitive Security and increase
or cause to be increased the aggregate principal amount of one of the
Unrestricted Global Securities.
If any such exchange or transfer from a Definitive Security to a beneficial
interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above
at a time when an Unrestricted Global Security has not yet been issued, the
Company shall issue and, upon receipt of an Authentication and Delivery Order in
accordance with Section 2.2 hereof, the Trustee shall authenticate one or more
Unrestricted Global Securities in an aggregate principal amount equal to the
principal amount of Definitive Securities so transferred.
(e) Transfer and Exchange of Definitive Securities for Definitive
Securities.
Upon request by a Holder of Definitive Securities and such Holder's
compliance with the provisions of this Section 2.6(e), the Registrar shall
register the transfer or exchange of Definitive Securities. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Securities duly endorsed or
accompanied by a written instruction of transfer in form satisfactory to the
Registrar duly executed by such Holder or by his attorney, duly authorized in
writing. In addition, the requesting Holder shall provide any additional
certifications, documents and information, as applicable, required pursuant to
the following provisions of this Section 2.6(e).
(i) Restricted Definitive Securities to Restricted Definitive
Securities. Any Restricted Definitive Security may be transferred to and
registered in the name of Persons who take delivery thereof in the form of
a Restricted Definitive Security if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit F hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit F hereto, including the certifications in item (2) thereof;
and
(C) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit F hereto,
including the certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable.
(ii) Restricted Definitive Securities to Unrestricted Definitive
Securities. Any Restricted Definitive Security may be exchanged by the
Holder thereof for an
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41
Unrestricted Definitive Security or transferred to a Person or Persons who
take delivery thereof in the form of an Unrestricted Definitive Security
if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the New Securities or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Securities
proposes to exchange such Securities for an Unrestricted
Definitive Security, a certificate from such Holder in the form
of Exhibit G hereto, including the certifications in item (I)(d)
thereof; or
(2) if the Holder of such Restricted Definitive Securities
proposes to transfer such Securities to a Person who shall take
delivery thereof in the form of an Unrestricted Definitive
Security, a certificate from such Holder in the form of Exhibit F
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Registrar to the effect that such exchange or
transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
(iii) Unrestricted Definitive Securities to Unrestricted Definitive
Securities. A Holder of Unrestricted Definitive Securities may transfer
such Securities to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Security. Upon receipt of a request to register
such a transfer, the Registrar shall register the Unrestricted Definitive
Securities pursuant to the instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance
with the Registration Rights Agreement, the Company shall issue and, upon
receipt of an
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42
Authentication and Delivery Order in accordance with Section 2.2, the Trustee
shall authenticate (i) one or more Unrestricted Global Securities in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Securities tendered for acceptance by Persons
that certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the New
Securities and (z) they are not affiliates (as defined in Rule 144) of the
Company, and accepted for exchange in the Exchange Offer and (ii) Definitive
Securities in an aggregate principal amount equal to the principal amount of the
Restricted Definitive Securities accepted for exchange in the Exchange Offer.
Concurrently with the issuance of such Securities, the Trustee shall cause the
aggregate principal amount of the applicable Restricted Global Securities to be
reduced accordingly, and the Company shall execute and the Trustee shall
authenticate and (at the expense of the Company) deliver to the Persons
designated by the Holders of Definitive Securities so accepted Definitive
Securities in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all Global
Securities and Definitive Securities issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend. (A) Except as permitted by subparagraph
(B) below, each Global Security and each Definitive Security (and all
Securities issued in exchange therefor or substitution thereof) shall bear
the legend in substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISION OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A)
SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a)
TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 903 OR 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO
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43
THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
(B) Notwithstanding the foregoing, any Global Security or
Definitive Security issued pursuant to subparagraphs (b)(iv), (c)(ii),
(c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section
2.6 (and all Securities issued in exchange therefor or substitution
thereof) shall not bear the Private Placement Legend.
(ii) Global Security Legend. Each Global Security shall bear a legend
in substantially the following form:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") 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 IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
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."
(iii) Regulation S Temporary Global Security Legend. The Regulation S
Temporary Global Security shall bear a legend in substantially the
following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL SECURITY, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED
SECURITIES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER
THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL
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44
SECURITY SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Securities. At such time as
all beneficial interests in a particular Global Security have been exchanged for
Definitive Securities or a particular Global Security has been redeemed,
repurchased or cancelled in whole and not in part, each such Global Security
shall be returned to or retained and cancelled by the Trustee in accordance with
Section 2.10 hereof. At any time prior to such cancellation, if any beneficial
interest in a Global Security is exchanged for or transferred to a Person who
will take delivery thereof in the form of a beneficial interest in another
Global Security or for Definitive Securities, the principal amount of Securities
represented by such Global Security shall be reduced accordingly and an
endorsement shall be made on such Global Security by the Trustee or by the
Depositary at the direction of the Trustee to reflect such reduction; and if the
beneficial interest is being exchanged for or transferred to a Person who will
take delivery thereof in the form of a beneficial interest in another Global
Security, such other Global Security shall be increased accordingly and an
endorsement shall be made on such Global Security by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges. (i) To
permit registrations of transfers and exchanges, the Company shall execute
and the Trustee shall authenticate Global Securities and Definitive
Securities upon receipt of an Authentication and Delivery Order in
accordance with Section 2.2 hereof or upon receipt of a written request of
the Registrar.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Security or to a Holder of a Definitive Security for
any registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchange or
transfer pursuant to Sections 2.9, 3.6, 3.8, 4.12, 4.13 and 9.5 hereof).
(iii) The Registrar shall not be required to register the transfer of
or exchange any Security selected for redemption in whole or in part,
except the unredeemed portion of any Security being redeemed in part.
(iv) All Global Securities and Definitive Securities issued upon any
registration of transfer or exchange of Global Securities or Definitive
Securities shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Global Securities or Definitive Securities surrendered upon such
registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Securities during a period beginning at the
opening of business 15 days before the day of any selection of Securities
for redemption under Section 3.2 hereof and ending at the close of business
on the day of selection, (B) to register the transfer of or to
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45
exchange any Security so selected for redemption in whole or in part,
except the unredeemed portion of any Security being redeemed in part or (C)
to register the transfer of or to exchange a Security between a record date
and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of
any Security, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Security is registered as the absolute owner of
such Security for the purpose of receiving payment of principal of and
interest on such Securities and for all other purposes, and none of the
Trustee, any Agent or the Company shall be affected by notice to the
contrary.
(vii) The Trustee shall authenticate Global Securities and Definitive
Securities in accordance with the provisions of Section 2.2 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.6 to
effect a registration of transfer or exchange may be submitted by
facsimile.
SECTION 2.7. Replacement Securities. If any mutilated Security is
surrendered to the Trustee or the Company and the Trustee receives evidence to
its satisfaction of the destruction, loss or theft of any Security, the Company
shall issue and the Trustee, upon receipt of an Authentication and Delivery
Order, shall authenticate a replacement Security if the Trustee's requirements
are met. If required by the Trustee or the Company, an indemnity bond must be
supplied by the Securityholder that is sufficient in the judgment of the Trustee
and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Security is
replaced. The Company and the Trustee may charge for their expenses in replacing
a Security.
SECTION 2.8. Outstanding Securities. The Securities outstanding at any time
are all the Securities authenticated by the Trustee except for those cancelled
by it, those delivered to it for cancellation, those reductions in the interest
in a Global Security effected by the Trustee in accordance with the provisions
hereof, and those described in this Section as not outstanding. Except as set
forth in Section 2.9 hereof, a Security does not cease to be outstanding because
the Company or an Affiliate of the Company holds the Security; however,
Securities held by the Company or a Subsidiary of the Company shall not be
deemed to be outstanding for purposes of Section 3.7 hereof.
If a Security is replaced pursuant to Section 2.7 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the principal amount of any Security is considered paid under Section
4.1 hereof, it ceases to be outstanding and interest on it ceases to accrue.
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46
If the Paying Agent (other than an Issuer, a Subsidiary or an Affiliate of
any thereof) holds, on a redemption date or maturity date, money sufficient to
pay the principal amount of those Securities payable on that date, then on and
after that date such Securities shall be deemed to be no longer outstanding and
shall cease to accrue interest.
SECTION 2.9. Temporary Securities. Until definitive Securities are ready
for delivery, the Company may execute and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities. After
the preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at any office or agency maintained by the Company for that purpose
and such exchange shall be without charge to the Securityholder. Upon surrender
for cancellation of any one or more temporary Securities, the Company shall
execute, and the Trustee shall authenticate and deliver in exchange therefor,
one or more definitive Securities representing an equal principal amount of
Securities. Until so exchanged, the Securityholder of temporary Securities shall
in all respects be entitled to the same benefits under this Indenture as a
Securityholder of definitive Securities.
SECTION 2.10. Cancellation. The Company at any time may deliver Securities
to the Trustee for cancellation. The Registrar and the Paying Agent shall
forward to the Trustee for cancellation any Securities surrendered to them for
registration of transfer or exchange or payment. The Trustee and no one else
shall cancel and destroy all Securities surrendered for registration of transfer
or exchange, payment or cancellation in accordance with its customary practices
and procedures in effect from time to time. The Company may not issue new
Securities to replace Securities it has redeemed, paid or delivered to the
Trustee for cancellation.
SECTION 2.11. Defaulted Principal and Interest. If the Company defaults in
a payment of principal or Interest (including Liquidated Damages) on the
Securities, the Company shall pay interest on any such defaulted payments at the
rate borne by the Securities (such an amount, "Defaulted Interest") and, if the
Company defaults in the payment of any Defaulted Interest on any Interest
Payment Date or any other date on which such payments shall be due, then the
Company shall pay Defaulted Interest on these amounts. The Company may pay the
Defaulted Interest to the Persons who are Securityholders on a subsequent
special record date. The Company shall fix or cause to be fixed (or upon the
Company's failure to do so the Trustee shall fix) any such special record date
and payment date to the reasonable satisfaction of the Trustee which specified
record date shall not be less than 10 days prior to the payment date for such
Defaulted Interest and the Company 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. The Company shall notify
the Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed
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47
payment, such money when so deposited to be held in trust for the
benefit of the Person entitled to such Defaulted Interest as provided in this
Section 2.11.
SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities may use
"CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Securityholders,
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.
SECTION 2.13. Treasury Securities. In determining whether the Holders of
the required principal amount of Securities have concurred in any direction,
waiver or consent, Securities owned by the Company or any Subsidiary Guarantor,
or by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any Subsidiary Guarantor
shall be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities that the Trustee knows are so
owned shall be so disregarded.
ARTICLE III
REDEMPTION
SECTION 3.1. Notices to Trustee. If the Company elects to redeem Securities
pursuant to Section 3.7 hereof, it shall notify the Trustee in writing of the
redemption date and the principal amount of Securities to be redeemed.
The Company shall give each notice to the Trustee provided for in this
Section at least 45 days before the redemption date unless the Trustee consents
to a shorter period. Such notice shall be accompanied by an Officers'
Certificate from the Company to the effect that such redemption will comply with
the conditions herein.
SECTION 3.2. Selection of Securities To Be Redeemed. If fewer than all the
Securities then outstanding are to be redeemed, the Trustee shall select the
Securities to be redeemed in compliance with the requirements of the principal
national securities exchange, if any, on which the Securities are listed, or, if
the Securities are not so listed, by lot, pro rata or by such other method as
the Trustee shall deem fair and appropriate; provided that no Securities of
$1,000 or less shall be redeemed in part. The Trustee shall make the selection
from outstanding Securities not previously called for redemption. The Trustee
may select for redemption portions of the principal of Securities that have
denominations larger than $1,000. Securities and portions of them the Trustee
selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions
of this Indenture that apply to Securities called for redemption also apply to
portions
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of Securities called for redemption. Upon request of the Company, the Trustee
shall notify the Company of the Securities or portions of Securities to be
redeemed.
SECTION 3.3. Notice of Redemption. At least 30 days but not more than 60
days before a date for redemption of Securities, the Trustee at the expense of
the Company shall mail a notice of redemption by first-class mail to each
Securityholder at its registered address to be redeemed.
The notice shall identify the Securities to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price if such price is calculable at the time such
notice is sent or, if not, the formula for calculating such price;
(3) the name and address of the Paying Agent;
(4) that the Securities called for redemption must be surrendered to
the Paying Agent to collect the redemption price plus, to the extent not
included therein, accrued and unpaid Interest, Liquidated Damages, if any,
and Defaulted Interest, if any;
(5) if fewer than all the outstanding Securities are to be redeemed,
the identification and principal amounts of the particular Securities to be
redeemed;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment pursuant
to the terms of this Indenture, interest on those Securities (or portion
thereof) called for redemption shall cease to accrue on and after the
redemption date;
(7) whether the Securities are to be redeemed in compliance with the
requirements of the principal national securities exchange, if any, on
which the Securities are listed, or, if the Securities are not so listed,
by lot, pro rata or by such other method as the Trustee shall deem fair and
appropriate; provided that no Securities of $1,000 or less shall be
redeemed in part.
(8) the CUSIP number, if any, printed on the Securities being
redeemed; and
(9) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
The Trustee shall give the notice of redemption in the Company's name and
at the Company's expense. In such event, the Company shall compute and provide
the Trustee with the information required by this Section 3.3.
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49
SECTION 3.4. Effect of Notice of Redemption. Once notice of redemption is
mailed, Securities called for redemption shall become due and payable on the
redemption date and at the redemption price stated or calculable as set forth in
the notice. Upon surrender to the Paying Agent, such Securities shall be paid at
the redemption price stated in the notice, plus accrued and unpaid Interest and
Liquidated Damages, if any, and Defaulted Interest, if any, to the redemption
date; provided that the Company shall have deposited the redemption price and
accrued interest, if any, with the Paying Agent or the Trustee on or before
11:00 a.m. (New York City time) on the date of redemption; provided, further,
that if the redemption date falls on an Interest Payment Date, any accrued and
unpaid Interest, Liquidated Damages, if any, and Defaulted Interest, if any,
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 Securityholder shall not affect the validity of the notice to any other
Securityholder.
SECTION 3.5. Deposit of Redemption Price. By at least 11:00 a.m. (New York
City time) on the date on which amounts owing to Securityholders pursuant to
either Section 3.7(a) hereof, Section 3.7(b) hereof, Section 3.8 hereof or
Section 3.9 hereof are due and payable, the Company shall deposit with the
Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, shall
segregate and hold in trust) money sufficient to pay such amounts plus, to the
extent not included therein, accrued and unpaid Interest Liquidated Damages, if
any, and Defaulted Interest, if any, on all Securities to be redeemed on that
date other than Securities or portions of Securities called for redemption which
are owned by the Company or an affiliate and have been delivered by the Company
or such Subsidiary to the Trustee for cancellation.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such redemption price, Interest and Defaulted
Interest on the Securities to be redeemed will cease to accrue on and after the
applicable redemption date, whether or not such Securities are presented for
payment.
SECTION 3.6. Securities Redeemed in Part. Upon surrender of a Security that
is redeemed in part, the Company shall execute and the Trustee shall
authenticate for the Securityholder (at the Company's expense) a new Security
equal in a principal amount to the unredeemed portion of the Security
surrendered.
SECTION 3.7. Optional Redemption.
(a) Optional Redemption Prior to September 1, 2001. Prior to September 1,
2001, the Securities will be redeemable, in whole or in part, at the option of
the Company, upon not less than 30 and no more than 60 days' prior notice, on
any March 1, June 1, September 1 or December 1 of any year at a redemption price
equal to 100% of the principal amount thereof plus the Make-Whole Premium, plus,
to the extent not included in the Make-Whole Premium, accrued and unpaid
Interest and Liquidated Damages, if any, to the date of redemption. For purposes
of the foregoing: (i) "Make-Whole Premium" means, with respect to a Security, an
amount equal to the present value of the remaining Coupon Interest (exclusive of
any portion thereof accruing with respect to the period prior to the redemption
date) and premium payments due on such Security as if such Security were
redeemed on September 1, 2001 pursuant to the
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next succeeding paragraph, discounted to the date of redemption on a semi-annual
basis (assuming a 360-day year consisting of twelve 30-day months) at a discount
rate equal to the Treasury Rate plus 100 basis points; and (ii) if the Company
redeems any Security on June 1 or December 1 of any year, then Cash Flow
Participation Interest shall be calculated by multiplying (A) Consolidated Cash
Flow, with respect to any redemption on June 1, for the quarterly period ended
on the preceding March 31 and, with respect to any redemption on December 1, for
the quarterly period ended on the preceding September 30 by (B) the applicable
percentage, as stated in Section 2.1(a)(3), corresponding to the date next
succeeding that June 1 or December 1, as the case may be.
(b) Optional Redemption On or After September 1, 2001. On or after
September 1, 2001, the Securities are redeemable, in whole or in part, upon not
less than 30 nor more than 60 days' prior notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid Interest and Liquidated Damages, if any, thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on
September 1 of the years indicated below:
Redemption Price as a
Year Percentage of Principal Amount
---- ------------------------------
2001..................... 107.250%
2002..................... 103.625%
For purposes of the foregoing, if the Company redeems any Security (i) on March
1 or September 1 of any year, then Cash Flow Participation Interest shall be
calculated as set forth in Section 2.1(a)(3); (ii) on June 1 or December 1 of
any year, then Cash Flow Participation Interest shall be calculated by
multiplying (A) Consolidated Cash Flow, with respect to any redemption on June
1, for the quarterly period ended on the preceding March 31 and, with respect to
any redemption on December 1, for the quarterly period ended on the preceding
September 30 by (B) the applicable percentage, as stated in Section 2.1(a)(3),
corresponding to the date next succeeding that June 1 or December 1, as the case
may be; and (iii) on any date other than March 1, June 1, September 1 or
December 1 of any year, then Cash Flow Participation Interest shall be
calculated as follows: (w) for any redemption occurring between March 1 and June
1 (exclusive of March 1 and June 1), the Cash Flow Participation Interest for
the period from March 1 to the redemption date shall be calculated by
multiplying the Cash Flow Participation Interest actually paid on the Interest
Payment Date which occurred on the immediately preceding March 1 by a fraction
the numerator of which shall be the number of days from March 1 to and including
the redemption date and the denominator of which shall be 180; (x) for any
redemption occurring between June 1 and September 1 (exclusive of June 1 and
September 1), Cash Flow Participation Interest shall be the sum of (I) the Cash
Flow Participation Interest for the period from March 1 to June 1 which shall be
calculated as described in clause (w) of this paragraph and (II) the Cash Flow
Participation Interest for the period from June 1 to the redemption date which
shall be calculated by multiplying the Cash Flow Participation Interest to be
paid for the period from March 1 through June 1 by a fraction the numerator of
which shall be the number of days between June 1 and the redemption date and the
denominator of which shall be 90; (y) for any redemption
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51
occurring between September 1 and December 1 (exclusive of September 1 and
December 1), the Cash Flow Participation Interest for the period from September
1 to the redemption date shall be calculated by multiplying the Cash Flow
Participation Interest actually paid on the Interest Payment Date which occurred
on the immediately preceding September 1 by a fraction the numerator of which
shall be the number of days from such September 1 to and including the
redemption date and the denominator of which shall be 180; and (z) for any
redemption occurring between December 1 and March 1 (exclusive of December 1 and
March 1), Cash Flow Participation Interest shall be the sum of (I) the Cash Flow
Participation Interest for the period from September 1 to December 1 which shall
be calculated as described in clause (y) of this paragraph and (II) the Cash
Flow Participation Interest for the period from December 1 to the redemption
date which shall be calculated by multiplying the Cash Flow Participation
Interest to be paid for the period from September 1 through December 1 by a
fraction the numerator of which shall be the number of days from December 1 to
the redemption date and the denominator of which shall be 90.
(c) Any redemption pursuant to this Section 3.7 shall be made pursuant to
the provisions of Section 3.1 through Section 3.6 hereof.
SECTION 3.8. Offer to Purchase by Application of Excess Proceeds. In the
event that, pursuant to Section 4.12 hereof, the Company shall be required to
commence an Asset Sale Offer, it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Securities required to be
purchased pursuant to Section 4.12 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Securities tendered in response to the
Asset Sale Offer. Payment for any Securities so purchased shall be made in the
same manner as Interest payments are made pursuant to Section 2.1(a)(3).
If the Purchase Date is on or after a record date and on or before the
related Interest Payment Date, any accrued and unpaid Interest and Liquidated
Damages, if any, shall be paid to the Person in whose name a Security is
registered at the close of business on such record date, and no additional
interest shall be payable to Securityholders who tender Securities pursuant to
the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to the Trustee and to each of the Securityholders,
with a copy to the Trustee. The notice shall contain all instructions and
materials necessary to enable such Securityholders to tender Securities pursuant
to the Asset Sale Offer. The Asset Sale Offer shall be made to all
Securityholders. The notice, which shall govern the terms of the Asset Sale
Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.8 and Section 4.12 hereof and the length of time the Asset Sale Offer
shall remain open;
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52
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Security not tendered or accepted for payment shall
continue to accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any
Security accepted for payment pursuant to the Asset Sale Offer shall cease
to accrete or accrue interest after the Purchase Date;
(e) that Securityholders electing to have a Security purchased
pursuant to an Asset Sale Offer may only elect to have all of such Security
purchased and may not elect to have only a portion of such Security
purchased;
(f) that Securityholders electing to have a Security purchased
pursuant to any Asset Sale Offer shall be required to surrender the
Security, with the form entitled "Option of Securityholder to Elect
Purchase" on the reverse of the Security completed, or transfer by
book-entry transfer, to the Company, a depositary, if appointed by the
Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Securityholders shall be entitled to withdraw their election
if the Company, the Depositary or the Paying Agent, as the case may be,
receives, not later than the expiration of the Offer Period, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Securityholder, the principal amount of the Security the Securityholder
delivered for purchase and a statement that such Securityholder is
withdrawing his election to have such Security purchased;
(h) that, if the aggregate principal amount of Securities surrendered
by Securityholders exceeds the Offer Amount, the Company shall select the
Securities to be purchased on a pro rata basis (with such adjustments as
may be deemed appropriate by the Company so that only Securities in
denominations of $1,000, or integral multiples thereof, shall be
purchased); and
(i) that Securityholders whose Securities were purchased only in part
shall be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered (or transferred by book-entry
transfer).
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Securities or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Securities
tendered, and shall deliver to the Trustee an Officers' Certificate stating that
such Securities or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.8. The Company, the Depositary or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five days after the Purchase Date) mail or deliver to each tendering
Securityholder an amount equal to the purchase
<PAGE>
53
price of the Securities tendered by such Securityholder and accepted by the
Company for purchase, and the Company shall promptly issue a new Security, and
the Trustee, upon written request from the Company shall authenticate and mail
or deliver such new Security to such Securityholder, in a principal amount equal
to any unpurchased portion of the Security surrendered. Any Security not so
accepted shall be promptly mailed or delivered by the Company to the
Securityholder thereof. The Company shall publicly announce the results of the
Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.8, any purchase
pursuant to this Section 3.8 shall be made pursuant to the provisions of
Sections 3.1 through 3.6 hereof.
SECTION 3.9. Special PIK Redemptions. (a) If the Company elects to pay Cash
Flow Participation Interest for a Semi-Annual Accrual Period by the issuance of
PIK Securities pursuant to Section 2.1(a)(4) hereof, then the Company shall be
required to redeem such PIK Securities on the Interest Payment Date falling
immediately after the next succeeding Semi-Annual Accrual Period (such date, the
"Special PIK Redemption Date") at a redemption price equal to 100% of the
principal amount thereof plus accrued and unpaid Interest and Liquidated
Damages, if any, on such PIK Securities, to the Special PIK Redemption Date
(such redemption, the "Special PIK Redemption") if, but only if, (A) the
Company's Fixed Charge Coverage Ratio for the four full fiscal quarters
immediately preceding such Special PIK Redemption Date would have been at least
2.50 to 1 determined on a pro forma basis after giving effect to such Special
PIK Redemption as if such Special PIK Redemption had occurred at the beginning
of the applicable four-quarter reference period and (B) such Special PIK
Redemption is permitted by the Senior Credit Facility.
(b) In the event of a Special PIK Redemption, the Company shall deliver a
notice, signed by an Officer, to the Trustee and the Paying Agent (which notice
shall be received not less than 5 nor more than 45 days prior to the record date
preceding the Interest Payment Date which shall also be such Special PIK
Redemption Date) which shall include a written order to the Trustee to record on
the PIK Grid for the Security or, if more than one Security is outstanding at
that time, for each Security, (i) the date of the Special PIK Redemption, (ii)
the aggregate principal amount of PIK Securities to be redeemed on the Special
PIK Redemption Date and (iii) the total amount of PIK Securities outstanding
after taking into account this and any prior Special PIK Redemption.
Within 2 business days of any Special PIK Redemption, the Trustee shall
give notice of such Special PIK Redemption to the Depositary and all
Securityholders registered with the Registrar as of the record date preceeding
the Interest Payment Date that is such Special PIK Redemption Date.
SECTION 3.10. Mandatory Redemption. The Company shall not be required to
make mandatory redemptions or sinking fund payments with regard to the
Securities, except as, and to the extent, set forth in Sections 3.8 and 3.9
hereof.
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54
ARTICLE IV
COVENANTS
SECTION 4.1. Payment of Securities. The Company shall promptly pay the
principal, Interest and Liquidated Damages, if any, on the Securities on the
dates and in the manner provided in the Securities and in this Indenture.
Principal and Interest (including Liquidated Damages) shall be considered paid
on the date due if on or before 11:00 a.m. (New York City time) on such date the
Trustee or the Paying Agent (or, if the Company or a Subsidiary is the Paying
Agent, the segregated account or separate trust fund maintained by the Company
or such Subsidiary pursuant to Section 2.4) holds in accordance with this
Indenture money sufficient to pay all principal and Interest (including
Liquidated Damages) then due and the Trustee or the Paying Agent (or, if the
Company or a Subsidiary is the Paying Agent, the Company or such Subsidiary), 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 Company 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 as provided in Section 2.11.
Notwithstanding anything to the contrary contained in this Indenture, the
Company or the Paying Agent may, to the extent it is required to do so by law,
deduct or withhold income or other similar taxes imposed by the United States of
America or other domestic or foreign taxing authorities from principal or
Interest payments hereunder.
SECTION 4.2. Restricted Payments. The Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or
pay any dividend or make any other payment or distribution on account of the
Company's or any of its Restricted Subsidiaries' Equity Interests (including,
without limitation, any payment in connection with any merger or consolidation
involving the Company) or to the direct or indirect holders of the Company's or
any of its Restricted Subsidiaries' Equity Interests in their capacity as such
(other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company and other than dividends and distributions
payable to the Company or any Restricted Subsidiary); (ii) purchase, redeem or
otherwise acquire or retire for value (including without limitation, in
connection with any merger or consolidation involving the Company) any Equity
Interests of the Company or any direct or indirect parent of the Company or
other Affiliate of the Company (other than a Subsidiary of the Company); (iii)
make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated to
the Securities; or (iv) make any Restricted Investment (all such payments and
other actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of and after giving
effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and
<PAGE>
55
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.3 hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company or any of its Restricted
Subsidiaries after the Issue Date (excluding Restricted Payments permitted by
clauses (ii), (iii) or (iv) of the next succeeding paragraph), is less than the
sum of (i) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first fiscal quarter
immediately following the Issue Date to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are available at
the time of such Restricted Payment (or, if such Consolidated Net Income for
such period is a deficit, less 100% of such deficit), plus (ii) 100% of the
aggregate net cash proceeds received by the Company as a contribution to its
common equity capital or from the issue or sale since the Issue Date of Equity
Interests of the Company (other than Disqualified Stock), or of Disqualified
Stock or debt securities of the Company that have been converted into such
Equity Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Restricted Subsidiary of the Company and
other than Disqualified Stock or convertible debt securities that have been
converted into Disqualified Stock), plus (iii) to the extent not already
included in Consolidated Net Income of the Company for such period without
duplication, if any Restricted Investment that was made by the Company or any of
its Restricted Subsidiaries after the Issue Date is sold for cash or otherwise
liquidated or repaid for cash, or if any Unrestricted Subsidiary which is
designated as an Unrestricted Subsidiary subsequent to the Issue Date is sold
for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash
return of capital with respect to such Restricted Investment or Unrestricted
Subsidiary (less the cost of disposition, if any) and (B) the initial amount of
such Restricted Investment or designated amount of such Unrestricted Subsidiary.
So long as no Default or Event of Default has occurred and is continuing or
would be caused thereby, the foregoing provisions shall not prohibit: (i) the
payment of any dividend within 60 days after the date of declaration thereof, if
at said date of declaration such payment would have complied with the provisions
of this Indenture; (ii) the redemption, repurchase, retirement, defeasance or
other acquisition of any Indebtedness which is subordinated to the Securities or
Equity Interests of the Company in exchange for, or out of the net cash proceeds
of the substantially concurrent sale (other than to a Restricted Subsidiary of
the Company) of, other Equity Interests of the Company (other than any
Disqualified Stock); provided that the amount of any such net cash proceeds that
are utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (c) (ii) of the preceding
paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of
Indebtedness which is subordinated to the Securities with the net cash proceeds
from an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of
any dividend or distribution by a Restricted Subsidiary of the Company to the
holders of its common Equity Interests so long as the Company or another
Restricted Subsidiary receives at least its pro rata share of such dividend or
<PAGE>
56
distribution in accordance with its Equity Interests; (v) the repurchase,
redemption or other acquisition or retirement for value of any Equity Interests
of the Company that are held by any member of the Company's (or any of its
Restricted Subsidiaries) management pursuant to any management equity
subscription agreement or stock option agreement, provided that the aggregate
price paid for all such repurchased, redeemed, acquired or retired Equity
Interests shall not exceed $500,000 in any twelve-month period; and (vi)
distributions required under the Plan of Reorganization but only in the manner
and to the extent contemplated thereby.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Restricted
Subsidiary of the Company, pursuant to the Restricted Payment. The fair market
value of any non-cash Restricted Payment shall be determined by the Board of
Directors of the Company whose resolution with respect thereto shall be
delivered to the Trustee, such determination to be based upon an opinion or
appraisal issued by an investment banking firm of national standing or by an
appraisal firm of national standing, if such fair market value exceeds or
reasonably may exceed $1.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this Section 4.2 were
computed, together with a copy of any fairness opinion or appraisal required by
this Indenture.
SECTION 4.3. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and the
Company shall not issue any Disqualified Stock and shall not permit any of its
Restricted Subsidiaries to issue any shares of preferred stock; provided,
however, that the Company may incur Indebtedness (including Acquired Debt) and
issue shares of Disqualified Stock and any Restricted Subsidiary may incur
Acquired Debt if (i) the Company's Fixed Charge Coverage Ratio for the Company's
most recently ended four full fiscal quarters immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified Stock is
issued would have been at least 2.75 to 1, determined on a pro forma basis, as
if the additional Indebtedness had been incurred, or the Disqualified Stock had
been issued, as the case may be, at the beginning of such four-quarter period
and (ii) the Company is in compliance with Section 4.4 hereof.
The provisions of the first paragraph of this covenant shall not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt") so long as no Default has occurred and is continuing or would
be caused thereby:
(i) the incurrence by the Company or its Restricted Subsidiaries of
Indebtedness under the Senior Credit Facility and letters of credit (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Restricted Subsidiaries
thereunder); provided that the sum of the aggregate principal amount of all
Indebtedness of the Company and its Restricted
<PAGE>
57
Subsidiaries outstanding under the Senior Credit Facility after giving
effect to such incurrence, including all Permitted Refinancing Indebtedness
incurred to refund, refinance or replace any other Indebtedness incurred
pursuant to this clause (i) does not exceed an amount equal to $125.0
million less, without duplication, (X) the aggregate amount of all
repayments, optional or mandatory, of the principal of any Indebtedness
under the term loan portion of the Senior Credit Facility that have been
made by the Company and its Restricted Subsidiaries since the Issue Date,
(Y) the aggregate amount of PIK Securities issued and outstanding pursuant
to this Indenture to a maximum amount equal to the Minimum Cash Flow
Participation Amount, and (Z) the aggregate amount of Asset Sale proceeds
applied by the Company and its Restricted Subsidiaries to permanently
reduce the availability of revolving credit Indebtedness under the Senior
Credit Facility pursuant to Section 4.12; it being understood that the
total committed facilities with respect to any refinancing of the Senior
Credit Facility may exceed the actual aggregate principal amount of
Indebtedness outstanding at the time of such refinancing so long as the
total of such commitments does not exceed the limitations set forth in this
clause (i);
(ii) the incurrence by the Company of Indebtedness represented by the
Securities and the PIK Securities issued pursuant to this Indenture and the
incurrence by the Subsidiary Guarantors of the Guarantees;
(iii) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace Indebtedness incurred pursuant to this
clause (iii), not to exceed $5.0 million at any time outstanding;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness;
(v) the incurrence by the Company of Indebtedness owing to and held by
any Restricted Subsidiary or Indebtedness of a Restricted Subsidiary which
is a Subsidiary Guarantor owing to and held by the Company or another
Restricted Subsidiary which is a Subsidiary Guarantor; provided, however,
that (a) if the Company is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in full in cash
of all Obligations with respect to the Securities and this Indenture, (b)
if a Restricted Subsidiary of the Company is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of such Restricted Subsidiary's Guarantee and
(c)(1) any subsequent event or issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person other than the
Company or a Restricted Subsidiary of the Company and (2) any sale or other
transfer of any such Indebtedness to a Person that is not either the
Company or a Subsidiary Guarantor shall
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58
be deemed, in each case, to constitute an incurrence of such Indebtedness
by the Company or such Restricted Subsidiary, as the case may be, that was
not permitted by this clause (v);
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred in the normal course
of business and consistent with past business practices for the purpose of
fixing or hedging currency, commodity or interest rate risk (including with
respect to any floating rate Indebtedness that is permitted by the terms of
this Indenture to be outstanding in connection with the conduct of their
respective businesses and not for speculative purposes);
(vii) the guarantee by the Company or any of the Subsidiary Guarantors
of Indebtedness of the Company or a Restricted Subsidiary of the Company
that was permitted to be incurred by another provision of this Section 4.3;
(viii) the incurrence by Trim Trends Canada of Indebtedness under the
CIBC Facility, provided that the aggregate principal amount of all
Indebtedness of Trim Trends Canada outstanding under the CIBC Facility,
after giving effect to such incurrence, including all permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (viii), does not exceed an
amount equal to $2.0 million; and
(ix) the incurrence by the Company of additional Indebtedness in an
aggregate principal amount at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (ix), not to exceed $2.5
million.
For purposes of determining compliance with this Section 4.3, in the event
that an item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (ix) above as of
the date of incurrence thereof or is entitled to be incurred pursuant to the
first paragraph of this covenant as of the date of incurrence thereof, the
Company shall, in its sole discretion, classify such item of Indebtedness as of
the date of incurrence thereof in any manner that complies with this covenant
and such item of Indebtedness shall be treated as having been incurred pursuant
to only one of such clauses or pursuant to the first paragraph hereof. Accrual
of interest, accrual of dividends, 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.
SECTION 4.4. Maintenance of Consolidated Leverage Ratio. So long as the
Securities are outstanding, the Company, will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly permit the Consolidated
Leverage Ratio as of the last day of any period of four consecutive fiscal
quarters of the Company ending with any fiscal quarter set forth below to exceed
the ratio set forth below opposite such fiscal quarter:
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59
Fiscal Quarter Consolidated Leverage
- -------------- ---------------------
December 31, 1998............................... 4.50
March 31, 1999.................................. 4.50
June 30, 1999................................... 4.50
September 30, 1999.............................. 4.50
December 31, 1999............................... 4.00
March 31, 2000.................................. 4.00
June 30, 2000................................... 4.00
September 30, 2000 and thereafter until
the Maturity Date............................... 3.50
SECTION 4.5. Maintenance of Consolidated Interest Coverage Ratio. So long
as the Securities are outstanding, the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly permit the
Consolidated Interest Coverage Ratio for any period of four consecutive fiscal
quarters of the Company ending with any fiscal quarter set forth below to be
less than the ratio set forth below opposite such fiscal quarter:
Consolidated Coverage
Fiscal Quarter Interest Ratio
- -------------- --------------
December 31, 1998............................... 2.00
March 31, 1999.................................. 2.00
June 30, 1999................................... 2.00
September 30, 1999.............................. 2.00
December 31, 1999............................... 2.25
March 31, 2000.................................. 2.25
June 30, 2000................................... 2.25
September 30, 2000.............................. 2.25
December 31, 2000 and thereafter until
the Maturity Date............................... 2.75
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60
SECTION 4.6. Liens. The Company will not, and will not permit any of its
Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer
to exist or become effective any Lien of any kind securing Indebtedness,
Attributable Debt, or trade payables (other than Permitted Liens) upon any of
their property or assets, now owned or hereafter acquired, unless all payments
due under this Indenture and the Securities are secured on an equal and ratable
basis with the obligations so secured until such time as such obligations are no
longer secured by a Lien.
SECTION 4.7. Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary of the Company to (i)(X) pay dividends or make any other
distributions to the Company 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 (Y) pay any Indebtedness owed to the Company or any
of its Restricted Subsidiaries, (ii) make loans or advances to the Company or
any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) the Senior
Credit Facility as in effect as of the Issue Date, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the Senior
Credit Facility as in effect on the Issue Date, (b) this Indenture and the
Securities, (c) applicable law, (d) any instrument governing Indebtedness or
Capital Stock of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of this Indenture to
be incurred, (e) by reason of customary non-assignment provisions in leases
entered into in the ordinary course of business, (f) capital leases, mortgage
financings or purchase money obligations for property acquired in the ordinary
course of business that impose encumbrances or restrictions on the property so
acquired, (g) Indebtedness of Subsidiary Guarantors, provided that such
Indebtedness was permitted to be incurred pursuant to this Indenture, or (h)
Permitted Refinancing Indebtedness, provided that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced.
SECTION 4.8. Transactions with Affiliates. The Company will not, and will
not permit any of its Restricted Subsidiaries to, make any payment to, or sell,
lease, transfer or otherwise dispose of any properties or assets to, or purchase
any property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or Guarantee with, or for the
benefit of, any Affiliate of any such Person (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that
are no less
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61
favorable to the Company or the relevant Restricted Subsidiary than those that
would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to
the Trustee (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $1.0
million, a resolution of its Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of the
disinterested members of its Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $2.5 million, an opinion as to the fairness
to the Securityholders of such Affiliate Transaction from a financial point of
view issued by an investment banking firm of national standing or an appraisal
firm of national standing; provided that none of the following shall be deemed
to be Affiliate Transactions: (1) any employment agreement entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of business
of the Company or such Restricted Subsidiary, as the case may be, (2)
transactions between or among the Company and/or its Subsidiary Guarantors on
terms that are no less favorable to the Company and/or such Subsidiary Guarantor
than those that would have been obtained in a comparable transaction by the
Company and/or such Subsidiary Guarantor with an unrelated Person, (3) any sale
or other issuance of Equity Interests (other than Disqualified Stock) of the
Company or of Equity Interests of any Restricted Subsidiary to the Company or
any other Restricted Subsidiary, (4) Restricted Payments that are permitted by,
and Investments that are not prohibited by, Section 4.2 hereof, (5) fees and
compensation paid to members of the Board of Directors of the Company and of its
Restricted Subsidiaries in their capacity as such, to the extent such fees and
compensation are reasonable and customary, (6) advances to employees for moving,
entertainment and travel expenses, drawing accounts and similar expenditures in
the ordinary course of business; and (7) fees and compensation paid to, and
indemnity provided on behalf of, officers, directors or employees of the Company
or any of its Restricted Subsidiaries, as determined by the Board of Directors
of the Company or of any such Restricted Subsidiary, to the extent such fees and
compensation are reasonable and customary, shall not be deemed to be Affiliate
Transactions.
SECTION 4.9. Sale and Leaseback Transactions. The Company will not, and
will not permit any of its Restricted Subsidiaries to, enter into any sale and
leaseback transaction; provided that the Company may enter into a sale and
leaseback transaction if (i) the Company could have incurred Indebtedness in an
amount equal to the Attributable Debt relating to such sale and leaseback
transaction pursuant to (A) the Fixed Charge Coverage Ratio test set forth in
the first paragraph of Section 4.3 hereof and (B) the covenant described above
under Section 4.4 hereof, (ii) the gross cash proceeds of such sale and
leaseback transaction are at least equal to the fair market value (as determined
in good faith by the Board of Directors and set forth in an Officers'
Certificate delivered to the Trustee) of the property that is the subject of
such sale and leaseback transaction and (iii) the transfer of assets in such
sale and leaseback transaction is permitted by, and the Company applies the
proceeds of such transaction in compliance with, the second paragraph of Section
4.12 hereof.
SECTION 4.10. Impairment of Security Interests. Subject to the
Intercreditor Agreement, neither the Company nor any of its Subsidiaries will
take or omit to take any action
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that would adversely affect or impair the security interests granted to the
Collateral Agent, in favor of the Trustee and Securityholders, with respect to
the Collateral. Neither the Company nor any of its Subsidiaries shall grant to
any Person, or permit any Person to retain (other than the Collateral Agent) any
interest whatsoever in the Collateral, other than the security interest of the
Senior Credit Facility and Permitted Liens as permitted under Section 4.6
hereof. Neither the Company nor any of its Subsidiaries will enter into any
agreement that requires the proceeds from any sale of Collateral to be applied
to repay, redeem, defease or otherwise acquire or retire Indebtedness of any
Person, other than as permitted by this Indenture (under Section 4.6 hereof),
the Securities, the Intercreditor Agreement and the Collateral Agreement.
SECTION 4.11. Additional Subsidiary Guarantors. If the Company or any of
its Restricted Subsidiaries shall acquire or create another Restricted
Subsidiary after the Issue Date, then such newly acquired or created Restricted
Subsidiary will (i) execute a supplemental indenture in form and substance
satisfactory to the Trustee providing that such Restricted Subsidiary will
become a Subsidiary Guarantor under this Indenture and the Collateral Agreement,
(ii) will issue a Guarantee or endorse the Securities on the same terms and
conditions as the Guarantees that will be issued by each Subsidiary Guarantor
pursuant to this Indenture and the Collateral Agreement and (iii) deliver an
Opinion of Counsel to the effect, inter alia, that such supplemental indenture
has been duly authorized and executed by such Restricted Subsidiary.
SECTION 4.12. Offer to Purchase Upon Asset Sale. The Company shall not, and
shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale
unless (i) the Company or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) of the assets issued or sold
or otherwise disposed of and (ii) at least 85% of the consideration therefor
received by the Company or such Restricted Subsidiary, as the case may be, is in
the form of cash or Cash Equivalents; provided that the amount of (x) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet) of the Company or any Restricted Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Securities or any guarantee thereof) that are assumed by the transferee of
any such assets pursuant to a customary novation agreement that releases the
Company or such Restricted Subsidiary from further liability and (y) any
securities, notes or other obligations received by the Company or any such
Restricted Subsidiary from such transferee that are immediately converted by the
Company or such Restricted Subsidiary into cash (to the extent of the cash
received) shall be deemed to be cash for purposes of this provision.
Notwithstanding the above, (i) the Company shall not be permitted to make any
Asset Sale of Kingston-Warren and (ii) the Company shall comply with the
applicable requirements of Section 314(d) of the TIA regarding, and as a
condition to, the release of Collateral.
Within 180 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to repay
Indebtedness under the Senior Credit Facility (and, in the case of borrowings
under the revolving credit portion of the Senior Credit Facility, to
correspondingly permanently reduce the commitments with respect thereto),
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(b) to the acquisition of a controlling interest in another business, provided
that (i) on a pro forma basis after giving effect to such acquisition, the
Company's Consolidated Leverage Ratio as of the last day of the period of four
consecutive fiscal quarters preceding such acquisition is no higher than it
would have been without giving pro forma effect to such acquisition and (ii)
such other business engages in a Permitted Business or (c) the making of a
capital expenditure or the acquisition of other tangible long-term assets, in
each case, in Permitted Businesses. Any Net Proceeds from Asset Sales that are
not applied or invested as provided in the first sentence of this paragraph will
be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $2.0 million, the Company will be required to make an offer to
all Securityholders (an "Asset Sale Offer") to purchase the maximum principal
amount of Securities 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 thereon, if any, to the
date of purchase, in accordance with Section 3.8 hereof (the first date the
aggregate of all such Net Proceeds is equal to $2.0 million or more shall be
deemed an "Asset Sale Offer Trigger Date"). To the extent that the aggregate
amount of Securities tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Securities surrendered
by Securityholders thereof exceeds the amount of Excess Proceeds, the Trustee
shall select the Securities to be purchased on a pro rata basis. Upon completion
of such offer to purchase, the amount of Excess Proceeds shall be reset at zero.
Each Asset Sale Offer will be mailed to the record Securityholders as shown
on the register of Securityholders within 25 days following the Asset Sale Offer
Trigger Date, with a copy to the Trustee, and shall comply with the procedures
set forth in this Indenture. Upon receiving notice of the Asset Sale Offer,
Securityholders may elect to tender their Securities in whole or in part in
integral multiples of $1,000 in exchange for cash.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Securities pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the Asset Sale
provisions of this Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached their
obligations under the Asset Sale provisions of this Indenture by virtue thereof.
SECTION 4.13. Offer to Repurchase upon Change of Control. (a) Upon the
occurrence of a Change of Control, each Securityholder shall have the right to
require the Company to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of such Securityholder's Securities pursuant to the
offer described in this Section 4.13 (the "Change of Control Offer") at an offer
price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid Interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). The calculation of the portion of
unpaid Interest represented by Cash Flow Participation Interest shall be made in
the same manner as set forth in Section 3.7 hereof. Within 10 days following any
Change of Control, the Company shall mail a notice to the Trustee describing the
transaction or transactions that constitute the Change of Control and
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offering to repurchase Securities on the date specified in such notice, which
date shall be no earlier than 30 days and no later than 60 days from the date
such notice is mailed (the "Change of Control Payment Date"), pursuant to the
procedures required by this Indenture and described in such notice. The Company
shall comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Securities
as a result of a Change of Control.
(b) On a Change of Control Payment Date, the Company shall, to the extent
lawful, (i) accept for payment all Securities or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all
Securities or portions thereof so tendered and (iii) deliver or cause to be
delivered to the Trustee the Securities so accepted together with an Officers'
Certificate stating the aggregate principal amount of Securities or portions
thereof being purchased by the Company. The Paying Agent shall promptly mail to
each Securityholder so tendered the Change of Control Payment for such
Securities, and the Trustee shall promptly authenticate and mail (or cause to be
transferred by book entry) to each Securityholder a new Security equal in
principal amount to any unpurchased portion of the Securities surrendered, if
any; provided that each such new Security shall be in a principal amount of
$1,000 or an integral multiple thereof. The Company shall publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not other provisions of this Indenture are applicable.
(c) Notwithstanding anything to the contrary in this Section 4.13, the
Company shall not be required to make a Change of Control Offer upon a Change of
Control (i) if a third party makes the Change of Control Offer in a manner, at
the times and otherwise in compliance with the requirements set forth in this
Section 4.13 and Section 3.8 hereof and purchases all Securities validly
tendered and not withdrawn under such Change of Control Offer or (ii) the
Company exercises its option to purchase all the Securities upon a Change of
Control as described in Section 3.7 hereof.
SECTION 4.14. Business Activities. The Company will not, and the Company
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
engage in any line of business other than a Permitted Business, except to such
extent as would not be material to the Company and its Restricted Subsidiaries
taken as a whole.
SECTION 4.15. Payments for Consent. The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, pay or
cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any Securityholder 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 or is paid to all
Securityholders that consent, waive or agree to amend in the time frame set
forth in the solicitation documents relating to such consent, waiver or
agreement.
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SECTION 4.16. Reports. Whether or not the Company is required by the rules
and regulations of the SEC, so long as any Securities are outstanding, the
Company will furnish to each of the Securityholders (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the SEC on Forms 10-Q and 10-K if the Company were required to file such
financial information, including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" that describes the financial
condition and results of operations of the Company and any consolidated
Restricted Subsidiaries and, with respect to the annual information only,
reports thereon by the Company's independent public accountants (which shall be
firm(s) of established national reputation) and (ii) all information that would
be required to be filed with the SEC on Form 8- K if the Company were required
to file such reports. All such information and reports shall be filed with the
SEC on or prior to the dates on which such filings would have been required to
be made had the Company been subject to the rules and regulations of the SEC. In
addition, whether or not required by the rules and regulations of the SEC, the
Company shall file a copy of all such information and reports with the SEC for
public availability within the time periods specified in the SEC's rules and
regulations (unless the SEC will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request.
For so long as any Securities remain outstanding, the Company and the
Subsidiary Guarantors shall furnish to the Securityholders and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
SECTION 4.17. Further Surveys and Title Insurance. To the extent that, on
the Issue Date, the Company shall not have delivered Surveys of the properties
subject to the Mortgages to the Collateral Agent and the Title Insurance
Company, then the Company shall use commercially reasonable efforts to do so
within 45 days of the Issue Date and shall use commercially reasonable efforts
to have the Title Insurance Company, within 10 days thereafter, omit
corresponding survey exceptions on the relevant title insurance policies issued
and issue those endorsements to such title insurance policies (such as survey
and access) that cannot be issued without such surveys.
SECTION 4.18. Corporate Existence. Subject to Article 5 hereof, the Company
shall do, or cause to be done, all things necessary to preserve and keep in full
force and effect (i) its corporate existence, and the corporate existence of
each of its Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Subsidiary, respectively, and (ii) the rights (charter and statutory),
licenses and franchises of the Company and its Subsidiaries; provided, however,
that the Company shall not be required to preserve any such right, license or
franchise, or the corporate existence of any of its Subsidiaries, if the Board
of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Securityholders.
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SECTION 4.19. Accounts Receivable Aging Certificate. The Company shall
deliver to the Trustee within thirty days after each of March 31, June 30,
September 30 and December 31 of each fiscal year a certificate dated the last
day covered by such quarterly period, signed by the Controller, Treasurer or
Chief Financial Officer of the Company and listing the number and dollar amount
of accounts receivable aged from invoice date as follows: 1 to 30 days, 31 to 60
days, 61 to 90 days and 91 days or more, accompanied by such supporting detail
and documentation as shall be requested by the Trustee in its reasonable
discretion (each such certificate, a "Receivables Aging Certificate"). Each
Receivables Aging Certificate shall also show the percentage of total accounts
receivable which are 91 days or more past due from the date of invoice;
provided, that if such percentage is greater than or equal to 10%, the Trustee
shall notify all Securityholders in writing of such fact and provide to each
Securityholder a copy of such Receivables Aging Certificate.
SECTION 4.20. Compliance Certificate. The Company shall deliver to the
Trustee within 90 days after the end of each fiscal quarter of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company whether or not the signers
know of any Default or Event of Default that occurred during such period. If
they do, the certificate shall describe the Default or Event of Default, its
status and what action the Company is taking or proposes to take with respect
thereto. The Company and each of the Subsidiary Guarantors also shall, to the
extent required, comply with TIA Section 314(a)(4).
SECTION 4.21. Maintenance of Office or Agency. The Company shall maintain
the office or agency required under Section 2.3. The Company shall give prior
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the address of the Trustee set forth in Section 12.2.
SECTION 4.22. Taxes. The Company shall pay, and shall cause each of their
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Securityholders.
SECTION 4.23. Stay, Extension and Usury Laws. Each of the Company and the
Subsidiary Guarantors covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Company and each Subsidiary Guarantor
(to the extent that they may lawfully do so) hereby expressly waive all benefit
or advantage of any such law, and covenant that they shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law had been enacted.
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SECTION 4.24. Maintenance of Properties and Insurance. Subject to Article
V, the Company shall cause all material properties owned by or leased to it or
any Restricted Subsidiary and used or useful in the conduct of its business or
the business of any Restricted Subsidiary to be maintained and kept in normal
condition, repair and working order and supplied with all necessary equipment
and shall cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times, provided, however, that
nothing in this Section 4.24 shall prevent the Company or any Restricted
Subsidiary from discontinuing the use, operation or maintenance of any of such
properties, or disposing of any of them, if such discontinuance or disposal is,
in the judgment of the Board of Directors of the Company or the Restricted
Subsidiary concerned, or of an Officer (or other agent employed by the Company
or of any Restricted Subsidiary) of the Company or such Restricted Subsidiary
having managerial responsibility for any such property, desirable in the conduct
of the business of the Company or any Restricted Subsidiary as, in the judgment
of the Company, may be necessary.
SECTION 4.25. Further Instruments and Acts. Upon reasonable request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
ARTICLE V
SUCCESSOR COMPANY
SECTION 5.1. Merger, Consolidation, or Sale of Assets. The Company will
not, directly or indirectly, consolidate or merge with or into (whether or not
the Company is the surviving corporation), or sell, assign, transfer, convey or
otherwise dispose of all or substantially all of its properties or assets in one
or more related transactions, to another Person unless:
(i) the Company is the surviving corporation or the Person formed by
or surviving any such consolidation or merger (if other than the Company)
or to which such sale, assignment, transfer, conveyance or other
disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia;
(ii) the Person formed by or surviving any such consolidation or
merger (if other than the Company) or the Person to which such sale,
assignment, transfer, conveyance or other disposition shall have been made
assumes all the obligations of the Company under the Securities and this
Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee;
(iii) immediately before and after such transaction no Default or
Event of Default shall have occurred; and
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(iv) except in the case of a merger of the Company with or into a
Subsidiary Guarantor, the Company or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, conveyance or other disposition shall have been made
(A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will, immediately after such
transaction after giving pro forma effect thereto and any related financing
transactions as if the same had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
the first paragraph of Section 4.3 hereof. The Company may not, directly or
indirectly, lease all or substantially all of its properties or assets, in
one or more related transactions, to any other Person.
Upon any consolidation or merger, or any sale or lease of the assets of the
Company as, or substantially as, an entirety in accordance with this Section
5.1, the entity formed by such consolidation or into which the Company shall
have been merged or to which such sale or lease shall have been made shall
succeed to and be substituted for the Company with the same effect as if it had
been named in this Indenture as a party hereto and thereafter from time to time
such successor entity may exercise each and every right and power of the Company
under this Indenture in the name of the Company or in its own name; and any act
or proceeding by any provision of this Indenture required or permitted to be
done by the Board of Directors or any Officer of the Company may be done with
like force and effect by the like board or officer of any entity that shall at
the time be the successor of the Company hereunder. In the event of the sale by
the Company of its assets as, or substantially as, an entirety upon the terms
and conditions of this Section 5.1, the Company shall be released from all its
liabilities and obligations under this Indenture and the Securities, but the
predecessor Company in the case of a lease of all its assets or substantially
all its assets will not be released from the obligation to pay the principal and
premium of and Interest and Liquidated Damages, if any, on the Securities.
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.1. Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in any payment of Interest or Liquidated
Damages, if any, on any Security when the same becomes due and payable, and
such default continues for a period of 30 days;
(2) the Company defaults in the payment of the principal of or
premium, if any, on any Security when the same becomes due and payable at
its Maturity Date, upon declaration or otherwise;
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(3) the Company fails to comply with Article V or the Company or a
Restricted Subsidiary fails to comply with Section 4.2 hereof or Section
4.3 hereof, and such default continues for a period of 30 days;
(4) the Company or any of its Restricted Subsidiaries fails to comply
with Section 4.12 hereof or Section 4.13 hereof;
(5) the Company or any of its Restricted Subsidiaries, as the case may
be, fails to comply with any of its agreements in the Securities, the
related Guarantees, this Indenture, the Collateral Agreement or the other
Security Documents (other than those referred to in clauses (1), (2), (3)
or (4) of this Section 6.1) and such failure continues for 60 days after
the notice specified below;
(6) the Company or any of its Restricted Subsidiaries default under
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money borrowed
(or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists,
or is created after the Issue Date, which default (i) is caused by a
failure to pay principal of or premium, if any, or Interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (ii)
results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has been so
accelerated, aggregates without duplication $1.0 million or more;
(7) the Company or any of its Restricted Subsidiaries fails to pay
final judgments aggregating in excess of $1.0 million (excluding amounts
covered by insurance), which judgments are not paid, discharged, stayed,
vacated or bonded pending appeal by a reputable financial intermediary with
an investment grade rating for a period of 60 days from the entry thereof;
(8) the Company or a Restricted Subsidiary of the Company 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 in which it is the debtor;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property; or
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(D) makes a general assignment for the benefit of its creditors;
(E) generally are not paying their debts as they become due;
or takes any comparable action under any foreign laws relating to
insolvency;
(9) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Restricted
Subsidiary of the Company in an involuntary case;
(B) appoints a Custodian of the Company or any Restricted
Subsidiary or for any assets that constitute a substantial part of the
assets of the Company or that constitute all or substantially all of
the assets of a Restricted Subsidiary; or
(C) orders the winding up or liquidation of the Company or any
Restricted Subsidiary of the Company;
(or any similar relief is granted under any foreign laws) and the order,
decree or relief remains unstayed and in effect for 60 days;
(10) except as permitted under this Indenture and the Collateral
Agreement, any Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force
and effect for 30 days after notice or any Subsidiary Guarantor, or any
Person acting on behalf of any Subsidiary Guarantor, shall deny or
disaffirm its obligations under its Guarantee; or
(11) except as permitted by the Collateral Agreement, the other
Security Documents, this Indenture or any amendments hereto or thereto, any
of the Collateral Agreement or the other Security Documents ceases to be in
full force and effect or ceases to be effective, in all material respects,
to create the Lien on the Collateral in favor of the Securityholders for 30
days after notice.
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (6) of this Section 6.1 and any event which
with the giving of notice or the lapse of time would become an Event of Default
under clause (3), (5), (9), (10) and (11) of this Section 6.1 and what action
the Company is taking or proposes to take with respect thereto.
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SECTION 6.2. Acceleration. If an Event of Default occurs and is continuing,
the Trustee by notice to the Company, or the Securityholders of at least 25% in
aggregate principal amount of the outstanding Securities by notice to the
Company and the Trustee, may declare the principal of and accrued but unpaid
Interest and Liquidated Damages, if any, on all the Securities to be due and
payable. Upon such a declaration, such principal and Interest and Liquidated
Damages, if any, shall be due and payable immediately. If an Event of Default
specified in Section 6.1(8) or (9) with respect to the Company or a Restricted
Subsidiary occurs and is continuing, the principal of and accrued Interest and
Liquidated Damages, if any, 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 Securityholders of a majority in
aggregate principal amount of the outstanding Securities by notice to the
Trustee may rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except nonpayment of principal or Interest and
Liquidated Damages, if any, that has become due solely because of acceleration
and the Trustee has been paid all amounts due to it pursuant to Section 7.7. No
such rescission shall affect any subsequent Default or impair any right
consequent thereto.
SECTION 6.3. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are, to the extent
permitted by law, cumulative.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment or the premium that the Company would have had
to pay if the Company then had elected to redeem the Securities pursuant to
Section 3.7 hereof, an equivalent premium shall also become and be immediately
due and payable to the extent permitted by law upon the acceleration of the
Securities. If an Event of Default occurs prior to September 1, 2001 by reason
of any willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding the prohibition on redemption of the
Securities prior to September 1, 2001, then the premium specified in this
Indenture with respect to the next succeeding call date shall also become
immediately due and payable to the extent permitted by law upon the acceleration
of the Securities.
SECTION 6.4. Waiver of Past Defaults. Securityholders of not less than a
majority in aggregate principal amount of the then outstanding Securities by
notice to the Trustee may on behalf of the Securityholders of all of the
Securities waive an existing Default or Event of Default and its consequences
hereunder, except a continuing Default or Event of Default in the payment of the
principal and premium of and Interest and Liquidated Damages, if any, on the
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Securities (including in connection with an offer to purchase pursuant to this
Indenture), provided, however, that the Securityholders of a majority in
aggregate principal amount of the then outstanding Securities may rescind an
acceleration and its consequences, including any related payment default that
resulted from such acceleration. Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or impair any right consequent thereon.
SECTION 6.5. Control by Majority. Upon provision of reasonable indemnity to
the Trustee satisfactory to the Trustee, Securityholders of a majority in
principal amount of the then outstanding Securities may direct the time, method
and place of conducting any proceeding for exercising any remedy available to
the Trustee or exercising any trust or power conferred on it. However, the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture that the Trustee determines may be unduly prejudicial to the rights of
other Securityholders or that may involve the Trustee in personal liability.
However, the Trustee, which shall be entitled to receive and may conclusively
rely on Opinions of Counsel, may refuse to follow any direction that conflicts
with law or this Indenture or, subject to Section 7.1, that the Trustee
determines is unduly prejudicial to the rights of other Securityholders or would
involve the Trustee to personal liability; provided, however, that the Trustee
may take any other action deemed proper by the Trustee that is not inconsistent
with such direction.
SECTION 6.6. Limitation on Suits. A Securityholder may not pursue any
remedy with respect to this Indenture or the Securities unless:
(i) the Securityholder gives to the Trustee previous written notice
stating that an Event of Default is continuing;
(ii) the Securityholders of at least 25% in aggregate principal amount
of the Securities then outstanding make a written request to the Trustee to
pursue the remedy;
(iii) such Securityholder or Securityholders offer to the Trustee
security or indemnity satisfactory to the Trustee against any loss,
liability or expense;
(iv) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(v) the Securityholders of a majority in aggregate principal amount of
the Securities then outstanding do not give the Trustee a direction
inconsistent with the written request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.7. Rights of Securityholders To Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Securityholder to
receive payment of
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principal and premium of and Interest and Liquidated Damages, if any, on the
Securities held by such Securityholder, 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 Securityholder.
SECTION 6.8. Collection Suit by Trustee. If an Event of Default specified
in Section 6.1(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 Company
and the Subsidiary Guarantors for the whole amount then due and owing (together
with interest on any unpaid interest to the extent lawful) and the amounts
provided for in Section 7.7.
SECTION 6.9. Trustee May File Proofs of Claim. The Trustee may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and the Securityholders allowed in
any judicial proceedings relative to the Company, its creditors or its property
and, unless prohibited by law or applicable regulations, may vote on behalf of
the Securityholders 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 Securityholder to make payments to the Trustee and,
in the event that the Trustee shall consent to the making of such payments
directly to the Securityholders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and its counsel, and any other amounts due the Trustee under Section
7.7.
SECTION 6.10. Priorities. If the Trustee collects any money or property
pursuant to this Article VI, it shall pay out the money or property in the
following order:
FIRST: to the Trustee for amounts due under Section 7.7;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal, Make-Whole Premium, if any, Interest and
Liquidated Damages, if any, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for
principal and Interest and Liquidated Damages, if any, respectively; and
THIRD: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 6.10. At least 15 days before such
record date, the Trustee shall mail to each Securityholder and the Company 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
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suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in the suit, having due regard to the
merits and good faith of the claims or defenses made by the party litigant. This
Section 6.11 does not apply to a suit by the Trustee, a suit by a Securityholder
pursuant to Section 6.7 or a suit by Securityholders of more than 10% in
aggregate principal amount of the outstanding Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the extent
it may lawfully do so) shall not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and shall not hinder, delay or impede the execution
of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 6.13. Company Report. The Company shall deliver to the Trustee
annually a statement regarding compliance with this Indenture, and the Company
shall, upon becoming aware of any Default or Event of Default or Proceeding by a
Government Authority, to deliver to the Trustee a statement specifying such
Default or Event of Default or such Proceeding.
ARTICLE VII
TRUSTEE
SECTION 7.1. Duties of Trustee. 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:
(i) 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
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, in the case of any such certificates or
opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture.
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(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:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section 7.1;
(ii) 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
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
(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) Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law. The Trustee shall not be liable for
interest on any money received by it except as the Trustee may agree with the
Company.
(f) 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.
(g) 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 7.1 and to the provisions of the TIA.
(h) The Trustee shall not be bound to make any investigation into facts or
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture or other
paper or document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit, and, if
the Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine books, records and premises of the Company,
personally or by agent or attorney.
(i) Any request or direction of the Company mentioned in this Indenture
shall be sufficiently evidenced by a written request or order of the Company and
any resolution of the Board of Directors may be sufficiently evidenced by a copy
of the resolution certified by the Secretary or Assistant Secretary of the
Company to have been duly adopted by the Board of Directors and to be in full
force and effect on the date of such certification.
(j) The Trustee shall not be responsible for the recording, rerecording,
filing of UCC Statements or UCC Continuation Statements.
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(k) The permissive right of the Trustee to do things enumerated in this
Indenture shall not be construed as a duty, and the Trustee shall not be
answerable for other than its gross negligence or willful misconduct.
(l) With respect to Collateral upon an Event of Default, the Trustee shall
use its best efforts to appoint an agent or agents for collecting, preserving,
disposing, liquidating and otherwise servicing Collateral, but the Trustee shall
not have any responsibility or liability for an agent's action or inaction, as
long as the Trustee has used reasonable care in the selection of the agent. If
within a reasonable time after an Event of Default, the Trustee is unable to
obtain the appointment of an agent or agents, the Trustee shall given notice to
the Securityholders and shall have no further duty with respect to the
Collateral for which an agent is not appointed, except duties, if any, arising
pursuant to a direction given in accordance with Section 7.2(f).
SECTION 7.2. Rights of Trustee. The Trustee may conclusively 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 shall be entitled
to and 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, attorneys, custodians or nominees
and shall not be responsible for the misconduct or negligence or supervision of
any agent, attorney, custodian or nominee 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.
(e) The Trustee may consult with counsel of its selection, and the advice
or opinion of counsel with respect to matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Securityholders pursuant to this Indenture, unless such Securityholders
shall have offered to the Trustee security or indemnity satisfactory to it
against the costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction.
(g) The Trustee shall not be charged with knowledge of any Default or Event
of Default with respect to the Securities unless either (1) a Trust Officer
shall have actual knowledge of such Default or Event of Default or (2) written
notice of such Default or Event of
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Default shall have been given to the Trustee by the Company or any other obligor
on the Securities or by any Securityholder.
(h) If the Trustee is acting as Paying Agent or Registrar hereunder, the
rights and protections of the Trustee under this Article VII shall also apply to
the Trustee as Paying Agent or Registrar.
SECTION 7.3. Individual Rights of Trustee. The Trustee in its individual or
any other capacity may become the owner or pledgee of Securities and may
otherwise deal with the Company or its respective Affiliates with the same
rights it would have if it were not Trustee. Any Paying Agent or Registrar may
do the same with like rights. However, the Trustee must comply with Sections
7.10 and 7.11.
SECTION 7.4. Trustee's Disclaimer. The Trustee shall not be responsible for
and makes no representation as to the validity or adequacy of this Indenture or
the Securities, it shall not be accountable for the Company's use of the
proceeds from the Securities, and it shall not be responsible for any statement
of the Company or any Subsidiary Guarantor 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 7.5. Notice of Defaults. If a Default or an Event of Default occurs
and is continuing and if it is actually known to a Trust Officer of the Trustee,
the Trustee shall mail to each Securityholder notice of the Default within 30
days after it is 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 or
Interest on any Security, the Trustee may withhold the notice if and so long as
a committee of its Trust Officers in good faith determines that withholding the
notice is not opposed to the interests of Securityholders.
SECTION 7.6. Reports by Trustee to Securityholders. As promptly as
practicable after each April 15 beginning with April 15, 1999, and in any event
prior to July 15 in each year, the Trustee shall mail to each Securityholder a
brief report dated as of such April 15 that complies with TIA Section 313(a).
The Trustee also shall comply with TIA Section 313(b). The Trustee shall
promptly deliver to the Company a copy of any report it delivers to
Securityholders pursuant to this Section 7.6.
A copy of each report at the time of its mailing to Securityholders shall
be filed by the Trustee with the SEC and each stock exchange (if any) on which
the Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.7. Compensation and Indemnity. The Company shall pay to the
Trustee from time to time such compensation for its services as the Company and
the Trustee shall from time to time agree in writing. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses, disbursements and advances, incurred or
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made by it, including costs of collection, in addition to such compensation for
its services, except any such expense, disbursement or advance as may arise from
its negligence, wilful misconduct or bad faith, unless the Trustee shall have
complied with the applicable standard of care required by the TIA. Such expenses
shall include the reasonable compensation and reasonable expenses, disbursements
and advances of the Trustee's agents, counsel, accountants and experts. The
Trustee shall provide the Company reasonable notice of any expenditure not in
the ordinary course of business; provided that prior approval by the Company of
any such expenditure shall not be a requirement for the making of such
expenditure nor for reimbursement by the Company thereof. The Company shall
indemnify each of the Trustee and any predecessor Trustees and their officers,
directors, employees and agents against any and all loss, damage, claim,
liability or expense (including reasonable attorneys' fees and expenses)
including taxes (other than taxes applicable to the Trustee's compensation
hereunder) incurred by it in connection with the acceptance or administration of
this trust and the performance of its duties hereunder. The Trustee shall notify
the Company promptly of any claim for which it may seek indemnity. Failure by
the Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. At the sole discretion of the Trustee, the Company shall
defend the claim and the Trustee may have separate counsel, and the Company will
pay the reasonable fees and expenses of such counsel. The Company need not
reimburse any expense or indemnify against any loss, liability or expense
incurred by the Trustee through the Trustee's own wilful misconduct, negligence
or bad faith, unless the Trustee shall have complied with the applicable
standard of care required by the TIA.
To secure the Company's payment obligations in this Section 7.7, 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 on particular Securities.
The Company's payment obligations pursuant to this Section 7.7 shall
survive the resignation or removal of the Trustee and discharge of this
Indenture. When the Trustee incurs expenses after the occurrence of a Default
specified in Section 6.1(7) or (8) with respect to the Company, the expenses are
intended to constitute expenses of administration under the Bankruptcy Law.
SECTION 7.8. Replacement of Trustee. The Trustee may resign at any time
with 30 days notice to the Company. The Securityholders of a majority in
principal amount of the Securities then outstanding, may remove the Trustee with
30 days written notice to the Trustee and the Company and may appoint a
successor Trustee. The Company shall remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the Trustee
or its property; or
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(iv) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Securityholders
of a majority in principal amount of the Securities and such Securityholders do
not reasonably promptly appoint a successor Trustee, or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Securityholders. The
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee, subject to the lien provided for in Section 7.7.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the
Securityholders 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
7.8, the Company's obligations under Section 7.7 shall continue for the benefit
of the retiring Trustee.
SECTION 7.9. Successor Trustee by Merger. If the Trustee consolidates with,
merges or converts into, or transfers all or substantially all its corporate
trust business or assets to, another corporation or banking association, the
resulting, surviving or transferee corporation without any further act shall be
the successor Trustee, provided that such corporation shall be eligible under
this Article VII and TIA Section 310(a).
In case at the time such successor or successors by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Securities so authenticated; and in
case at that time any of the Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Securities or in this Indenture, provided that the certificate of the
Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times
satisfy the requirements of TIA Section 310(a). The Trustee shall have a
combined capital and
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surplus of at least $50,000,000 as set forth in its most recent published annual
report of condition. The Trustee shall comply with TIA Section 310(b); provided,
however, that there shall be excluded from the operation of TIA Section
310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Company are
outstanding if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with Section TIA 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE VIII
DISCHARGE OF INDENTURE
SECTION 8.1. Discharge of Liability on Securities. When (i) the Company
delivers to the Trustee all outstanding Securities (other than Securities
replaced pursuant to Section 2.7) for cancellation or (ii) all outstanding
Securities have become due and payable, whether at maturity or as a result of
the mailing of a notice of redemption pursuant to Article III hereof or the
Securities will become due and payable at their Maturity Date within 91 days, or
the Securities are to be called for redemption within 91 days under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company, and, in each case of
this clause (ii), the Company irrevocably deposits or causes to be deposited
with the Trustee funds sufficient to pay at its Maturity Date or upon redemption
all outstanding Securities, including interest thereon to maturity or such
redemption date (other than Securities replaced pursuant to Section 2.7 or
delivered to the Trustee for cancellation), and if in either case the Company
pays all other sums payable hereunder by the Company, then this Indenture shall,
cease to be of further effect and all the Subsidiary Guarantees shall be
discharged and released and all rights of the Trustee or the Securityholders
under any of the Security Documents shall terminate. The Trustee shall
acknowledge satisfaction and discharge of this Indenture and the discharge and
release of the Subsidiary Guarantees and the termination of such rights under
the Security Documents on demand of the Company accompanied by an Officers'
Certificate and an Opinion of Counsel stating that all conditions precedent
provided for herein relating to satisfaction and discharge of this Indenture
have been complied with.
ARTICLE IX
AMENDMENTS
SECTION 9.1. Without Consent of Securityholders. The Company, the
Subsidiary Guarantors and the Trustee may amend this Indenture or the Securities
without notice to or consent of any Securityholder:
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(i) to cure any ambiguity, omission, defect or inconsistency, whether
wholly within this Indenture or as compared to any of the Security
Documents;
(ii) to comply with Article V;
(iii) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are as described in Section 163(f)(2)(B) of the Code;
iv) to make such other changes or provisions that would provide any
additional rights or benefits to Securityholders or that do not adversely
affect the rights of Securityholders under this Indenture, the Securities,
the Guarantees, the Collateral Agreement or the other Security Documents,
including to add additional Subsidiary Guarantors hereunder, to add
additional security for the Securities, to add to the covenants of the
Company for the benefit of the Securityholders or to surrender any right or
power herein conferred upon the Company;
(v) to comply with, or allow for compliance with, any requirements of
the SEC in connection with qualifying this Indenture under the TIA or
giving effect to the security arrangements contemplated hereby; to give
effect to the provisions of the Security Documents and this Indenture,
including with regard to the release of all or a portion of the Collateral
in accordance with such provisions;
(vi) to give effect to the release of any Subsidiary Guarantor in
accordance with the terms of this Indenture; and
(vii) to evidence the acceptance of the appointment of any successor
Trustee.
After an amendment under this Section 9.1 becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section 9.1.
SECTION 9.2. With Consent of Securityholders. Except as provided in
Sections 9.2(b) and 9.2(c) hereof, the Company, the Subsidiary Guarantors and
the Trustee may amend or supplement this Indenture or the Securities with the
written consent of the Securityholders of at least a majority in principal
amount of the Securities then outstanding voting as a single class (including
consents obtained in connection with a tender offer or exchange for Securities).
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(b) Notwithstanding Section 9.2(a) hereof, without the consent of each
Securityholder affected, an amendment or waiver to this Indenture may not (with
respect to any Securities held by a non-consenting Securityholder):
(i) reduce the principal amount of Securities whose Securityholders
must consent to an amendment, supplement or waiver;
(ii) reduce the principal of or change the fixed maturity of any
Security or alter the provisions with respect to the redemption of the
Securities (other than provisions relating to Section 3.8, 4.12 and 4.13
hereof;
(iii) reduce the rate of, amounts due under or change the time for
payment of Interest on any Security;
(iv) waive a Default or Event of Default in the payment of principal
or premium, if any, of or Interest and Liquidated Damages, if any, on the
Securities (except a rescission of acceleration of the Securities by the
Securityholders of at least a majority in aggregate principal amount of the
Securities and a waiver of the payment default that resulted from such
acceleration);
(v) make any Security payable in money other than that stated in this
Indenture and the Securities;
(vi) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Securityholders to receive
payments of principal or premium, if any, of or Interest and Liquidated
Damages, if any, on the Securities;
(vii) waive a redemption payment with respect to any Securities (other
than a payment required by one of the covenants described above under
Sections 4.12 and 4.13 hereof;
(viii) make any changes that would affect the ranking of the
Securities and the Guarantees, except in accordance with the terms of this
Indenture and the Collateral Agreement;
(ix) release any Subsidiary Guarantor from its obligations under the
Guarantees, the Collateral Agreement and this Indenture, except in
accordance with the terms of the Collateral Agreement and this Indenture;
(x) amend or modify any provisions of this Indenture, the Collateral
Agreement and other Security Documents, the Securities and the Guarantees
relating to the Collateral in any manner adverse to Securityholders; or
(xi) make any change in this Section 9.2(b).
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(c) Notwithstanding Sections 9.2(a) and 9.2(b) hereof, without the consent
of the Securityholders holding at least two-thirds in principal amount of the
Securities then outstanding, an amendment or waiver may not make any changes to
Section 4.3 hereof, Section 4.2 hereof, Section 4.6 and Section 4.13 hereof if
such amendment or waiver would adversely affect the rights of Securityholders.
It shall not be necessary for the consent of the Securityholders under this
Section 9.2 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
The Company shall deliver to the Trustee annually a statement regarding
compliance with this Indenture, and the Company shall, upon becoming aware of
any Default or Event of Default by a Governmental Authority, to deliver to the
Trustee a statement specifying such Default or Event of Default or such
Proceeding.
After an amendment under this Section 9.2 becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section 9.2.
SECTION 9.3. Compliance with Trust Indenture Act. Every amendment to this
Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Consents and Waivers. A consent to an
amendment or a waiver by a Securityholder shall bind the Securityholder and
every subsequent Securityholder of that Security or portion of the Security that
evidences the same debt as the consenting Securityholder's Security, even if
notation of the consent or waiver is not made on the Security. After an
amendment or waiver becomes effective, it shall bind every Securityholder.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were 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 Securityholders
after such record date. No such consent shall be valid or effective for more
than 120 days after such record date.
SECTION 9.5. Notation on or Exchange of Securities. If an amendment changes
the terms of a Security, the Trustee may require the Securityholder 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 Securityholder. Alternatively,
if the Company so determines, the Company in exchange for the Security shall
issue and the Trustee shall authenticate a new Security that reflects the
changed terms. Failure to make the appropriate notation or to issue a new
Security shall not affect the validity of such amendment.
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SECTION 9.6. Trustee To Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article IX 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 satisfactory to it and to
receive, and shall be fully protected in relying upon, in addition to the
documents required by Section 12.4, an Officers' Certificate and an Opinion of
Counsel stating that such amendment complies with the provisions of this Article
IX.
ARTICLE X
GUARANTEES
SECTION 10.1. Guarantees. The Subsidiary Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantee to each Securityholder and
to the Trustee and its successors and assigns (a) the full and punctual payment
of principal, Make-Whole Premium, Interest, Liquidated Damages, if any, and
Defaulted Interest, if any, with respect to the Securities when due, whether at
maturity, by acceleration, by redemption or otherwise, and all other monetary
obligations of the Company under this Indenture (including obligations to the
Trustee) and the Securities and (b) the full and punctual performance within
applicable grace periods of all other obligations of the Company under this
Indenture and the Securities (all the foregoing being hereinafter collectively
called the "Obligations"). The Subsidiary Guarantors further agree that the
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from the Subsidiary Guarantors, and that the Subsidiary
Guarantors will remain bound under this Article X notwithstanding any extension
or renewal of any Obligation.
The Subsidiary Guarantors waive presentation to, demand of, payment from
and protest to the Company of any of the Obligations and also waive notice of
protest for nonpayment. The Subsidiary Guarantors waive notice of any default
under the Securities or the Obligations. The obligations of the Subsidiary
Guarantors under this Section 10.1 shall not be affected by (a) the failure of
any Securityholder or the Trustee to assert any claim or demand or to enforce
any right or remedy against the Company or any other Person under this
Indenture, the Securities or any other agreement or otherwise; (b) any extension
or renewal of any Obligation; (c) any rescission, waiver, amendment,
modification or supplement of any of the terms or provisions of this Indenture
(other than this Article X), the Securities or any other agreement, unless such
rescission, waiver, amendment, modification or supplement expressly affects the
obligations of any Subsidiary Guarantor under this Section 10.1; (d) the release
of any security held by any Securityholder or the Trustee for the Obligations or
any of them; (e) the failure of any Securityholder or Trustee to exercise any
right or remedy against any other guarantor of the Obligations; or (f) any
change in the ownership of the Company.
The Subsidiary Guarantors further agree that their Guarantees herein
constitute a guarantee of payment, performance and compliance when due (and not
a guarantee of collection) and waive any right to require that any resort be had
by any Securityholder or the Trustee to any security held for payment of the
Obligations.
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Except as set forth in this Indenture, the obligations of the Subsidiary
Guarantors 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, setoff, counterclaim, recoupment or termination whatsoever or by reason
of the invalidity, illegality or unenforceability of the Obligations or
otherwise. Without limiting the generality of the foregoing, except as set forth
in this Indenture, the obligations of the Subsidiary Guarantors herein shall not
be discharged or impaired or otherwise affected by the failure of any
Securityholder or the Trustee to assert any claim or demand or to enforce any
remedy under this Indenture, the Securities or any other agreement, by any
waiver or modification of any thereof, by any default, failure or delay, willful
or otherwise, in the performance of the 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 the Subsidiary Guarantors or would
otherwise operate as a discharge of the Subsidiary Guarantors as a matter of law
or equity.
The Subsidiary Guarantors further agree that their Guarantees herein shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any Obligation is rescinded or must otherwise
be restored by any Securityholder or the Trustee upon the bankruptcy or
reorganization of the Company or otherwise, unless such Guarantee has been
released in accordance with Section 10.9.
In furtherance of the foregoing and not in limitation of any other right
which any Securityholder or the Trustee has or may have at law or in equity
against the Subsidiary Guarantors by virtue hereof, upon the failure of the
Company to pay any Obligation when and as the same shall become due, whether at
maturity, by acceleration, by redemption or otherwise, or to perform or comply
with any other Obligation, the Subsidiary Guarantors hereby promise to and will,
upon receipt of written demand by the Trustee, forthwith pay, or cause to be
paid, in cash, to the Securityholders or the Trustee an amount equal to the sum
of (i) the unpaid principal amount of such Obligations, (ii) accrued and unpaid
Interest on such Obligations (but only to the extent not prohibited by law) and
(iii) all other monetary Obligations of the Company to the Securityholders and
the Trustee.
The Subsidiary Guarantors agree that, as between the Subsidiary Guarantors,
on the one hand, and the Securityholders and the Trustee, on the other hand, (x)
the maturity of the Obligations guaranteed hereby may be accelerated as provided
in Article VI for the purposes of the Guarantee herein, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the Obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such Obligations as provided in Article VI, such Obligations
(whether or not due and payable) shall forthwith become due and payable by the
Subsidiary Guarantors for the purposes of this Section.
The Subsidiary Guarantors also agree to pay any and all costs and expenses
(including reasonable attorneys' fees and expenses) incurred by the Trustee or
any Securityholder in enforcing any rights under this Section.
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SECTION 10.2. Limitation on Liability. Any term or provision of this
Indenture to the contrary notwithstanding, the obligations of each Subsidiary
Guarantor are limited to the maximum amount as will result in the Obligations of
such Subsidiary Guarantor under the Subsidiary Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law.
SECTION 10.3. Successors and Assigns. This Article X shall inure to the
benefit of the successors and assigns of the Trustee and the Securityholders
and, in the event of any transfer or assignment of rights by any Securityholder
or the Trustee, the rights and privileges conferred upon that party in this
Indenture and in the Securities shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions of this
Indenture.
SECTION 10.4. No Waiver. Neither a failure nor a delay on the part of
either the Trustee or the Securityholders in exercising any right, power or
privilege under this Article X 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 Securityholders herein expressly specified are cumulative and not exclusive
of any other rights, remedies or benefits which either may have under this
Article X at law, in equity, by statute or otherwise.
SECTION 10.5. Right of Contribution. Each Subsidiary Guarantor hereby
agrees that to the extent that a Subsidiary Guarantor shall have paid more than
its proportionate share of any payment made hereunder, such Subsidiary Guarantor
shall be entitled to seek and receive contribution from and against any other
Subsidiary Guarantor hereunder who has not paid its proportionate share of such
payment. Each Subsidiary Guarantor's right of contribution shall be subject to
the terms and conditions of Section 10.6. The provisions of this Section shall
in no respect limit the obligations and liabilities of any Subsidiary Guarantor
to the Trustee and the Securityholders and each Subsidiary Guarantor shall
remain liable to the Trustee and the Securityholders for the full amount
guaranteed by such Subsidiary Guarantor hereunder.
SECTION 10.6. No Subrogation. Notwithstanding any payment or payments made
by any of the Subsidiary Guarantors hereunder, no Subsidiary Guarantor shall be
entitled to be subrogated to any of the rights of the Trustee or any
Securityholder against the Company or any other Subsidiary Guarantor or any
collateral security or guarantee or right of offset held by the Trustee or any
Securityholder for the payment of the Obligations, nor shall any Subsidiary
Guarantor seek or be entitled to seek any contribution or reimbursement from the
Company or any other Subsidiary Guarantor in respect of payments made by such
Subsidiary Guarantor hereunder, until all amounts owing to the Trustee and the
Securityholders by the Company on account of the Obligations are paid in full.
If any amount shall be paid to any Subsidiary Guarantor on account of such
subrogation rights at any time when all of the Obligations shall not have been
paid in full, such amount shall be held by such Subsidiary Guarantor in trust
for the Trustee and the Securityholders, segregated from other funds of such
Subsidiary Guarantor, and shall, forthwith upon receipt by such Subsidiary
Guarantor, be turned over to the Trustee in the exact form received by such
Subsidiary Guarantor (duly indorsed by such Subsidiary Guarantor to the Trustee,
if required), to be applied against the Obligations.
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SECTION 10.7. Additional Subsidiary Guarantors. Until such time as all
Guarantees by the Subsidiary Guarantors under this Indenture shall have been
released in accordance with Section 10.9, the Company shall cause each
Subsidiary that becomes a Borrower (as defined in the Senior Credit Facility)
under the Senior Credit Facility (other than a Foreign Subsidiary) to execute
and deliver a supplement to this Indenture providing that such Subsidiary will
be a Subsidiary Guarantor hereunder. Each such supplement shall be substantially
in the form of Exhibit E attached hereto. Subsidiaries that are Subsidiary
Guarantors on the date any such supplement is executed by an additional
Subsidiary shall not be required to become parties to such supplement and hereby
agree to the execution and delivery by any additional Subsidiary of any such
supplement.
SECTION 10.8. Modification. No modification, amendment or waiver of any
provision of this Article X, nor the consent to any departure by the Subsidiary
Guarantors 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; it
being understood that the release of the Guarantees of Subsidiary Guarantors
pursuant to Section 10.9 shall not be an amendment or waiver of any provision of
this Article X and shall not require any action on the part of the Trustee. No
notice to or demand on the Subsidiary Guarantors in any case shall entitle the
Subsidiary Guarantors to any other or further notice or demand in the same,
similar or other circumstances.
SECTION 10.9. Release of Subsidiary Guarantor. Upon the sale or other
disposition of all of the assets of any Subsidiary Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the Capital
Stock of such Subsidiary Guarantor, in each case in accordance with the terms of
Section 10.10, such Subsidiary Guarantor (in the event of a sale or other
disposition, by way of such a merger, consolidation or otherwise of all the
Capital Stock of such Subsidiary Guarantor) shall be automatically released from
all its obligations under this Indenture and the Subsidiary Guarantee without
any action on the part of the Trustee or the Securityholders. The Trustee shall
receive written notice of the release of any Subsidiary Guarantor if such
release is effected other than under Section 10.10.
SECTION 10.10. Merger, Consolidation and Sale of Assets of a Subsidiary
Guarantor. No Subsidiary Guarantor may directly or indirectly, consolidate or
merge with or into (whether or not the Subsidiary Guarantor is the surviving
corporation), or sell, assign, transfer, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions, another Person unless:
(i) the Person formed by or surviving any such consolidation or merger
(if other than the Subsidiary Guarantor) or the Person to which such sale,
assignment, transfer, conveyance or other disposition shall have been made
assumes all the obligations of the Subsidiary Guarantor under the
Securities and this Indenture pursuant to a supplemental indenture in a
form reasonably satisfactory to the Trustee;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing; and
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(iii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, sale, lease, or merger complies with the foregoing clause
(ii).
Upon a sale or other disposition of all, or substantially all, of the
assets of any Subsidiary Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the Capital Stock of any
Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the Capital Stock of such Subsidiary Guarantor) or the corporation acquiring
the property (in the event of a sale or other disposition of all of the assets
of such Subsidiary Guarantor) will be released and relieved of any liabilities
and obligations under its Guarantee; provided that the Net Proceeds of such sale
or other disposition are applied in accordance with Section 4.12 hereof and the
Intercreditor Agreement.
Notwithstanding the foregoing, each Subsidiary Guarantor may consolidate
with or merge into or sell its assets to the Company or another Subsidiary
Guarantor.
ARTICLE XI
COLLATERAL AND SECURITY DOCUMENTS
SECTION 11.1. Security Documents; Agreements. The due and punctual payment
of the principal and premium, if any, of and Interest, Liquidated Damages, if
any, and Defaulted Interest, if any, on the Securities when and as the same
shall be due and payable, whether on an Interest Payment Date, at maturity, by
acceleration, repurchase, redemption or otherwise, (to the extent permitted by
law), and the performance of all other obligations under this Indenture,
including, without limitation, the obligations of the Company set forth in
Section 7.7 hereof, shall be secured as provided in the Collateral Agreement and
the other Security Documents.
The Trustee, the Company and the Subsidiary Guarantors hereby consent and
agree that, with respect to that portion of the Collateral in which the security
interest is being perfected by possession, the Administrative Agent shall hold
the Collateral for the benefit of the Trustee in accordance with the terms of
the Intercreditor Agreement, for the purpose of perfecting the Trustee's
security interest therein. The Trustee hereby consents and agrees that, upon
acquiring knowledge that upon the occurrence of the Substitution Event (as
defined in the Intercreditor Agreement), the Trustee shall promptly make a
request to the Administrative Agent for a written acknowledgment of the payment
in full in cash of the Lender Obligations (as defined in the Intercreditor
Agreement) and the termination of any commitments by the Lenders to extend
credit under the Senior Credit Facility, pursuant to Section 8 of the
Intercreditor Agreement.
Each Securityholder, by accepting the Securities, consents and agrees to
the terms of the Security Documents and the Intercreditor Agreement (including,
without limitation, the
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provisions providing for foreclosure and release of Collateral) as the same may
be in effect or may be amended from time to time in accordance with their terms
and authorizes and directs the Trustee, with respect to each of the Security
Documents and the Intercreditor Agreement, to perform its obligations and
exercise its rights thereunder in accordance therewith.
The Trustee and each Securityholder, by accepting the Securities,
acknowledge that (i) as more fully set forth in the Security Documents, the
Collateral as now or hereafter constituted shall be held for the equal and
ratable benefit of all of the Securityholders under the Security Documents, and
(ii) as more fully set forth in the Intercreditor Agreement, the rights and
interests of the Administrative Agent and the Lenders under the Senior Credit
Facility are prior to the rights and interests of the Securityholders in the
Collateral and (iii) that the Lien of this Indenture and the Security Documents
in respect of the Trustee and the Securityholders is subject to and qualified
and limited in all respects by the Security Documents and the Intercreditor
Agreement and actions that may be taken thereunder.
As among the Securityholders, the Collateral as now or hereafter
constituted shall be held for the equal and ratable benefit of the
Securityholders without preference, priority or distinction of any thereof over
any other by reason of difference in time of issuance, sale or otherwise, as
security for the Securities.
SECTION 11.2. Opinions. Promptly after the execution and delivery of this
Indenture, the Company shall deliver the opinion(s) required by Section
314(b)(1) of the TIA. Subsequent to the execution and delivery of this
Indenture, to the extent required by the TIA, the Company shall furnish to the
Trustee within three months after each anniversary of the Issue Date, an Opinion
of Counsel, dated as of such date, stating either that (i) in the opinion of
such counsel, all action has been taken with respect to any filing, re-filing,
recording or re-recording with respect to the Collateral as is necessary to
maintain the Lien on the Collateral in favor of the Securityholders or (ii) in
the opinion of such counsel, that no such action is necessary to maintain such
Lien.
SECTION 11.3. Release and Substitution of Collateral; Amendment of Security
Documents. (a) The parties hereto hereby agree and acknowledge that the
Collateral may be released by the Trustee at any time in accordance with the
provisions of the Collateral Agreement and the Loan Collateral Agreement and, in
any such case, the Collateral so released shall automatically be released as
Collateral for the Securities without any action on the part of the Trustee or
the Securityholders. For purposes of the TIA, the release of any Collateral from
the terms of the Security Documents will not be deemed to impair the security
under this Indenture in contravention of the provisions hereof or affect the
Lien of the Security Documents if and to the extent the Collateral is released
pursuant to the Security Documents or upon the termination of the Senior Credit
Facility. To the extent applicable, the Company shall cause TIA Section 314(d)
relating to the release of property or securities from the Lien of the Security
Documents and relating to the substitution therefor of any property or
securities to be subjected to the Lien of the Security Documents to be complied
with.
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(b) Notwithstanding the foregoing, the Company and each Restricted
Subsidiary, as the case may be, so long as the following is permitted by the
Security Documents, may
(i) sell, lease or otherwise dispose of in the ordinary course of
business free from the Liens of the Security Documents, any machinery,
equipment, furniture, apparatus, tools or implements, materials or supplies
or other similar property ("Subject Property") which, in their reasonable
opinion, may have become obsolete or unfair for use in the conduct of its
businesses or the operation of the Collateral upon replacing the same with,
or substituting for the same, new Subject Property constituting Collateral
not necessarily of the same character but being of a least equal value as
the Subject Property so disposed of as long as such new Subject Property
becomes subject to the Liens of the Security Documents;
(ii) abandon, sell, assign, transfer, license or otherwise dispose of
in the ordinary course of business any personal property the use of which
is no longer necessary or desirable in the proper conduct of the business
of the Company and is not material to the conduct of the business of the
Company and its Subsidiaries taken as a whole;
(iii) grant in the ordinary course of business, rights-of-way and
easements over or in respect of any of the Company's or such Subsidiary's
real property, provided that such grant will not, in the reasonable opinion
of the Company's Board of Directors, impair the usefulness of such property
in the conduct of the Company's business;
(iv) sell, transfer or otherwise dispose of inventory in the ordinary
course of business;
(v) sell, collect, liquidate, factor or otherwise dispose of accounts
receivable in the ordinary course of business;
(vi) make cash payments (including for the scheduled repayment of
Indebtedness) from cash that is at any time part of the Collateral in the
ordinary course of business that are not otherwise prohibited by this
Indenture and the Security Documents; and
(vii) release any Collateral in accordance with the terms of the
Senior Credit Facility and the Security Documents or as otherwise permitted
by the Administrative Agent under the Senior Credit Facility, pursuant to
the Intercreditor Agreement;
in each case, without the delivery of any opinions or certificates upon any such
release; provided that the Company shall deliver to the Trustee, within 15 days
after each of the six-month periods ended March 1 and September 1 in each year
an Officers' Certificate to the effect that all releases of Collateral pursuant
to this Section 11.3(b) by the Company or any Subsidiary, as the case may be,
during the preceding six-month period were in the ordinary course of the
Company's or such Subsidiary's business and that all proceeds therefrom were
used by the Company or such Subsidiary as permitted herein.
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(c) The fair value of Collateral released from the Liens of the Security
Documents pursuant to Section 11.3(b) or (d) hereof shall not be considered in
determining whether the aggregate fair value of Collateral released from the
Liens of the Security Documents in any calendar year exceeds the 10% threshold
specified in Section 314(d)(l) of the TIA; provided that the Company's right to
rely on this sentence at any time is conditioned upon the Company having
furnished to the Trustee the certificates described in Section 11.3(b) hereof
that were required to be furnished to the Trustee at or prior to such time. It
is expressly understood that Section 11.3(b) and this Section 11.3(c) relate
only to the Company's obligations under the TIA and shall not restrict or
otherwise affect the Company's and its Subsidiaries' rights or abilities to
release Collateral pursuant to the terms of the Senior Credit Facility, the
Intercreditor Agreement and the Security Documents or as otherwise permitted by
the Lenders under the Senior Credit Facility.
(d) Notwithstanding Sections 4.12, 11.1 and 11.3, (i) Collateral may be
released from the Lien of the Security Documents to the extent that the sale,
transfer or disposition of the item of Collateral in question would not
constitute an Asset Sale provided that the Company complies with Section 11.4(b)
prior to the release of such Lien; and (ii) the Designated Facilities may be
released from the Lien of the Security Documents.
(e) If any of the Collateral shall be sold, transferred or otherwise
disposed of by any Grantor (as defined in the Collateral Agreement) in a
transaction permitted by this Indenture, then the Collateral Agent, at the
request and sole expense of such Grantor, shall execute and deliver to such
Grantor all releases or other documents reasonably necessary or desirable for
the release of the Liens created hereby on such Collateral.
SECTION 11.4. Procedures Regarding Release of Collateral.
(a) Procedures Regarding Release of Collateral Pursuant to an Asset Sale.
In connection with an Asset Sale and upon compliance by the Company with the
conditions set forth under clauses (i) through (iv) of this Section 11.4(a) as
well as the conditions set forth under the Loan Security Documents, the
Intercreditor Agreement and the applicable provisions of the Trust Indenture Act
set forth in Section 11.4(c) in respect of any release of items of Collateral,
the Collateral Agent shall release items of Collateral (the "Released
Interests") from the Lien of the Security Documents and, pursuant to the
Collateral Agreement, shall reconvey the Released Interests to the Company and
its Subsidiaries, as applicable.
(i) Written Notice. The Company shall deliver to the Trustee a written
statement executed by a duly authorized officer of the Company requesting
the release of Released Interests that provides the following:
(A) a description of the proposed Released Interests in
sufficient detail to identify them;
(B) a specification of the purchase price received for such
Released Interests on a date within 30 days of such notice (the
"Valuation Date");
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(C) a statement that the purchase price received is at least
equal to the fair market value of the Released Interests;
(D) a statement that the release of such Released Interests would
not be expected to interfere with the Collateral Agent's ability to
realize the value of the remaining Collateral and will not impair the
maintenance and operation of the remaining Collateral; and
(E) a certification that such Asset Sale complies with the terms
and conditions of the Loan Security Documents and the Security
Documents with respect thereto.
(ii) Officers' Certificate. The Company shall deliver to the Trustee
an Officer's Certificate that certifies as to the following:
(A) that the Asset Sale covers only the Released Interests;
(B) pursuant to the first paragraph of Section 4.12 hereof, that
the Company or the Restricted Subsidiary, as the case may be, shall
receive consideration at the time that the Asset Sale is consummated
at least equal to the fair market value of the assets issued or sold
or otherwise disposed of, attaching a resolution or unanimous written
consent of the Board of Directors of the Company to that effect;
(C) that all Net Proceeds from the sale of the Released Interests
will be or are being applied at the same time as the delivery of the
Officers' Certificate to the Collateral Agent pursuant to the second
paragraph of Section 4.12 hereof, according to the provisions of the
Loan Security Documents, the Security Documents and the Intercreditor
Agreement;
(D) there is no Default or Event of Default in effect or
continuing on the date of the Officers' Certificate, the Valuation
Date or the date of such Asset Sale; and
(E) the release of the items of Collateral will not result in a
Default or Event of Default under this Indenture, the Security
Documents, the Senior Credit Facility or the Loan Security Documents.
(iii) Excess Proceeds. Excess Proceeds, if any, that are required to
be delivered to the Collateral Agent pursuant to this Indenture and the
Intercreditor Agreement and to the Administrative Agent pursuant to the
Senior Credit Facility and the Intercreditor Agreement shall have been so
delivered or are being delivered at the same time as the delivery of the
Officers' Certificate referred to in clause (ii) above.
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(iv) Opinion of Counsel. The Company shall deliver to the Collateral
Agent an Opinion of Counsel to the effect that the conditions to the
release of the Released Interests have been met.
(b) Procedures Regarding Release of Collateral That Does Not Constitute an
Asset Sale. In connection with the sale or disposition of an asset that shall
not constitute an Asset Sale and upon compliance by the Company with the
conditions set forth under clauses (i) through (iv) of this Section 11.4(b), as
applicable, as well as the conditions set forth under the Loan Security
Documents, the Intercreditor Agreement and the applicable provisions of the
Trust Indenture Act set forth in Section 11.4(c) in respect of any release of
items of Collateral, the Collateral Agent will release the Released Interests
from the Lien of the Security Documents and, pursuant to the Collateral
Agreement, shall reconvey the Released Interests to the Company and its
Subsidiaries, as applicable; provided that notwithstanding the above, the
Company shall not be required to follow the procedures set forth in this Section
11.4(b) with regard to the sale of Designated Facilities.
(i) Written Notice. The Company shall deliver to the Trustee a written
statement executed by a duly authorized Officer of the Company requesting
the release of Released Interests that provides the following:
(A) a description of the proposed Released Interests in
sufficient detail to identify them;
(B) a specification of the purchase price received for such
Released Interests the Valuation Date;
(C) a statement that the purchase price received is at least
equal to the fair market value of the Released Interests;
(D) a statement that the release of such Released Interests would
not be expected to interfere with the Collateral Agent's ability to
realize the value of the remaining Collateral and will not impair the
maintenance and operation of the remaining Collateral; and
(E) a certification that such sale of an asset, which does not
constitute an Asset Sale, complies with the terms and conditions of
the Loan Security Documents and the Security Documents with respect
thereto.
(ii) Officers' Certificate. The Company shall deliver to the Trustee
an Officer's Certificate that certifies as to the following:
(A) that such sale of an asset, which does not constitute an
Asset Sale, covers only the Released Interests;
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(B) that all Net Proceeds from the sale of the Released Interests
will be or are being applied at the same time as the delivery of the
Officers' Certificate to the Collateral Agent pursuant to the
provisions of the Loan Security Documents, the Security Documents and
the Intercreditor Agreement.
(C) there is no Default or Event of Default in effect or
continuing on the date of the Officers' Certificate, the Valuation
Date or the date of such asset sale; and
(D) the release of the items of Collateral will not result in a
Default or Event of Default under this Indenture, the Security
Documents, the Senior Credit Facility or the Loan Security Documents.
(iii) Excess Proceeds. Excess Proceeds, if any, that are required to
be delivered to the Collateral Agent pursuant to this Indenture and the
Intercreditor Agreement and to the Administrative Agent pursuant to the
Senior Credit Facility and the Intercreditor Agreement shall have been so
delivered or are being delivered at the same time as the delivery of the
Officers' Certificate referred to in clause (ii) above.
(iv) Opinion of Counsel. The Company shall deliver to the Collateral
Agent an Opinion of Counsel to the effect that the conditions to the
release of the Released Interests have been met.
(c) Compliance with the TIA. Subject to Section 11.3(b), the Company shall
furnish to the Trustee prior to each proposed release of Collateral all
documents required by TIA Section 314(d), if any. The Trustee may, to the extent
permitted by Sections 7.1 and 7.2 hereof, accept as conclusive evidence of
compliance with the foregoing provisions the appropriate statements contained in
such documents. Any certificate or opinion required by TIA Section 314(d), if
applicable, may be made by an Officer of the Company except in cases where TIA
Section 314(d) requires that such certificate or opinion be made by an
independent engineer, appraiser or other expert within the meaning of TIA
Section 314(d).
SECTION 11.5. Reserved.
SECTION 11.6. Authorization of Actions to be Taken by the Trustee Under the
Security Documents. The Trustee shall act upon the written direction of the
Securityholders with regard to all voting, consent and other rights granted to
the Securityholders under the Security Documents. Subject to the provisions of
the Security Documents, the Trustee may, in its sole discretion and without the
consent of the Securityholders, on behalf of the Securityholders, take all
actions it deems necessary or appropriate in order to (a) enforce any of its
rights or any of the rights of the Securityholders under the Security Documents
and (b) receive any and all amounts payable from the Collateral in respect of
the obligations of the Company and the Subsidiary Guarantors hereunder. Subject
to the provisions of the Security Documents and the Intercreditor Agreement, the
Trustee shall have the power to institute and to maintain such suits and
proceedings as it may deem expedient to prevent any impairment of the Collateral
by any acts
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that may be unlawful or in violation of the Security Documents or this
Indenture, and such suits and proceedings as the Trustee may deem expedient to
preserve or protect its interest and the interests of the Securityholders in the
Collateral (including power to institute and maintain suits or proceedings to
restrain the enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid if the enforcement of, or compliance with, such enactment, rule or order
would impair the security interest hereunder or be prejudicial to the interests
of the Securityholders or the Trustee).
SECTION 11.7. Authorization of Receipt of Funds by the Trustee Under the
Security Documents. The Trustee is authorized to receive any funds for the
benefit of the Securityholders distributed under the Security Documents and to
make further distributions of such funds to the Securityholders according to the
provisions of this Indenture and the Security Documents.
SECTION 11.8. Release Upon Termination of the Company's Obligations. (a) If
(i) the Company delivers an Officer's Certificate and an Opinion of Counsel
certifying that all of its obligations under this Indenture have been satisfied
and discharged by complying with the provisions of Article VIII hereof, (ii) all
outstanding Securities issued under this Indenture shall be surrendered to the
Trustee for cancellation or (iii) upon the release of the Collateral in
accordance with the terms of the Security Documents, the Trustee shall deliver
to the Collateral Agent a notice stating that the Trustee, for itself and on
behalf of the Securityholders, disclaims and has given up any and all rights it
has in or to the Collateral, and any rights it has under the Security Documents,
then, upon and after the receipt by the Collateral Agent of such notice, the
Collateral Agent shall no longer be deemed to hold the Lien in the Collateral on
behalf of the Trustee for the benefit of the Securityholders.
(b) Any release of Collateral made in compliance with this Section 11.8
shall not be deemed to impair the Lien under the Security Documents or the
Collateral thereunder in contravention of the provisions of this Indenture or
the Security Documents.
SECTION 11.9. Security Agreement Collateral. Notwithstanding anything to
the contrary contained in this Indenture, the Senior Credit Facility or the
Security Documents, to the extent that the representations, warranties and
covenants contained in this Indenture, in the Senior Credit Facility or in the
Security Documents with respect to Collateral are at any time incorrect (in the
case of representations or warranties) or are not complied with (in the case of
covenants), then in each case so long as the aggregate fair market value of all
Collateral under the Security Documents with respect to which such
representations or warranties are incorrect, or covenants are not complied with,
does not exceed $10,000,000 the existence of such circumstances shall be deemed
not to be a violation of this Indenture or constitute a Default under Article
VI.
SECTION 11.10. Effect of Termination of Lender Obligations. If the rights
of the Senior Secured Parties (as defined in the Intercreditor Agreement) in
respect of the Collateral shall have been terminated, then, pursuant to Section
8 of the Intercreditor Agreement, the rights
<PAGE>
96
and interests of the Securityholders shall no longer be junior to the rights and
interests of the Lenders under the Senior Credit Facility.
SECTION 11.11. Authorization of Trustee Entering Into Intercreditor
Agreement. The Trustee is authorized to enter into the Intercreditor Agreement
on behalf of the Securityholders to provide for, among other things, (a) the
allocation of rights between the Administrative Agent and the Trustee with
respect to the Collateral, (b) enforcement provisions and remedies with respect
thereto and (c) the release of the Collateral.
SECTION 11.12. Authorization of Receipt of Funds by the Trustee Under the
Security Documents. The Trustee is authorized to enter into the Intercreditor
Agreement on behalf of the Securityholders, to receive any funds for the benefit
of the Securityholders distributed under the Collateral Documents, and to make
further distributions of such funds to the Securityholders according to the
provisions of this Indenture and the Intercreditor Agreement. The Trustee is
further authorized to enter into such amendments to the Security Documents as
are required to create security interests in additional Collateral or to release
Collateral from the Lien created by the Security Documents as provided by the
terms of the Security Documents and this Indenture or the disposition of such
Collateral as is permitted by this Indenture.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the provision required by
the TIA shall control.
SECTION 12.2. 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 Company or the Subsidiary Guarantors:
Harvard Industries, Inc.
3 Werner Way, Suite 210
Lebanon, New Jersey 08833
Attention: Corporate Secretary
if to the Trustee:
Norwest Bank Minnesota, National Association
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Facsimile: 612-667-9825
<PAGE>
97
The Company, the Subsidiary Guarantors, or the Trustee by notice to the
others 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 12.3. Communication by Securityholders with other Securityholders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
SECTION 12.4. Certificate and Opinion as to Conditions Precedent. Upon any
request or application by the Company to the Trustee to take or refrain from
taking any action under this Indenture, the Company shall furnish to the
Trustee:
(i) 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
(ii) 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 12.5. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(i) a statement that the individual making such certificate or opinion
has read such covenant or condition;
(ii) 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;
(iii) 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
<PAGE>
98
(iv) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 12.6. When Securities Disregarded. In determining whether the
Securityholders of the required principal amount of Securities have concurred in
any direction, waiver or consent, Securities owned by the Company or an
affiliate or by any Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company shall be disregarded
and deemed not to be outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities which a Trust Officer of the Trustee actually knows
are so owned shall be so disregarded. Also, subject to the foregoing, only
Securities outstanding at the time shall be considered in any such
determination.
SECTION 12.7. 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 12.8. Reserved.
SECTION 12.9. Governing Law and Submission to Jurisdiction. THIS INDENTURE
AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
SECTION 12.10. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company or the Subsidiary Guarantors shall not have
any liability for any obligations of the Company or the Subsidiary Guarantors
under the Securities or this 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 shall waive and release all such liability. The waiver and
release shall be part of the consideration for the issue of the Securities.
SECTION 12.11. Successors. All agreements of the Company and the Subsidiary
Guarantors in this Indenture and the Securities shall bind their respective
successors in accordance with the terms hereof. All agreements of the Trustee in
this Indenture shall bind its successors.
SECTION 12.12. 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 12.13. Qualification of Indenture. The Company shall qualify this
Indenture under the TIA in accordance with the terms and conditions of the
Registration Rights Agreement and shall pay all reasonable costs and expenses
(including reasonable attorneys' fees for the Company, the Trustee and the
Securityholders) incurred in connection therewith, including, but not limited
to, costs and expenses of qualification of this Indenture and the
<PAGE>
99
Securities and printing this Indenture and the Securities. The Trustee shall be
entitled to receive from the Company any such Officers' Certificates, Opinions
of Counsel or other documentation as it may reasonably request in connection
with any such qualification of this Indenture under the TIA. Notwithstanding
anything else herein, any obligations imposed on the parties hereto by the TIA
(except for the opinion(s) contemplated in Section 11.2 hereof) shall not be
effective until such time as this Indenture becomes qualified under the TIA.
SECTION 12.14. 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.
[The rest of this page has been left blank intentionally;
the signature page follows.]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
HARVARD INDUSTRIES, INC.
By: /s/ D. Craig Bowman
---------------------------------
Name: D. Craig Bowman
Title: Vice President, Law and Secretary
DOEHLER-JARVIS, INC.
HARVARD TRANSPORTATION CORPORATION
DOEHLER-JARVIS GREENEVILLE, INC.
POTTSTOWN PRECISION CASTING, INC.
DOEHLER-JARVIS TECHNOLOGIES, INC.
DOEHLER-JARVIS TOLEDO, INC.
HARMAN AUTOMOTIVE, INC.
HAYES-ALBION CORPORATION
THE KINGSTON-WARREN CORPORATION
On behalf of each of the above
Subsidiary Guarantors
By: /s/ D. Craig Bowman
---------------------------------
Name: D. Craig Bowman
Title: Vice President
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By: /s/ Raymond S. Haverstock
---------------------------------
Name: Raymond S. Haverstock
Title: Vice President
<PAGE>
EXHIBIT A
FORM 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") 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 IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
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.
[PRIVATE PLACEMENT LEGEND]
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISION OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON WHO
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 UNDER THE
<PAGE>
2
SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE
COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
[REGULATION S TEMPORARY GLOBAL SECURITY LEGEND]
[Include if Security is a Regulation S Temporary Global Security]
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL SECURITY, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED
SECURITIES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE
HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL SECURITY
SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.
<PAGE>
3
HARVARD INDUSTRIES, INC.
14 1/2% Senior Secured Note Due 2003
No. __________
Principal Amount: $25,000,000 CUSIP NO. _______
HARVARD INDUSTRIES, INC., a Delaware corporation, promises to pay to CEDE &
COMPANY, or registered assigns, the principal sum of TWENTY FIVE MILLION DOLLARS
on September 1, 2003.
Interest Payment Dates: March 1 and September 1.
Record Dates: February 15 and August 15.
Additional provisions of this Security are set forth on the following pages
of this Security.
HARVARD INDUSTRIES, INC.
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
Dated: November __, 1998
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the Indenture.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
----------------------------------
Name:
Title:
Dated: November __, 1998
<PAGE>
14 1/2% Senior Secured Note Due 2003
1. Principal.
The Senior Secured Notes (the "Securities") are limited to $25.0 million
aggregate principal amount, subject to Section 2.1(a)(2) of the Indenture.
2. Interest.
HARVARD INDUSTRIES, INC., a Delaware corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Company"), promises to pay Interest (as defined below) on the
principal amount of this Security. Interest on the Securities will accrue at a
rate equal to the sum of (1) 14 1/2% per annum on the principal amount of
Securities outstanding (calculated on the basis of a 360-day year comprised of
twelve 30-day months) ("Coupon Interest") plus (2) Cash Flow Participation
Interest (as defined below and, together with Coupon Interest, "Interest").
"Cash Flow Participation Interest," for any relevant period, equals the product
of (1) Consolidated Cash Flow for the six month period ending, for interest
payments due March 1 of each year, on December 31 and, for interest payments due
on September 1 of each year, on June 30 (each, a "Semi-Annual Accrual Period")
prior to the next succeeding Interest Payment Date multiplied by (2) the
applicable percentage set forth for the period ending on the Interest Payment
Date indicated below:
Interest Payment Date Percentage
--------------------- ----------
March 1, 1999.............................. 2.00%
September 1, 1999.......................... 2.00%
March 1, 2000.............................. 2.50%
September 1, 2000.......................... 2.50%
March 1, 2001.............................. 3.50%
September 1, 2001.......................... 3.50%
March 1, 2002.............................. 4.50%
September 1, 2002.......................... 4.50%
March 1, 2003.............................. 4.50%
September 1, 2003.......................... 4.50%
If, however, the calculation of Cash Flow Participation Interest, based on the
appropriate percentages set forth above, results in an amount that is less than
$1.0 million for any two consecutive Semi-Annual Accrual Periods taken as a
whole, then Cash Flow Participation Interest will be for such two corresponding
Interest Payment Dates taken as a whole, $1.0 million (the "Minimum Cash Flow
Participation Interest Amount").
No later than 15 days prior to an Interest Payment Date or any other date
on which Cash Flow Participation Interest is payable pursuant to a redemption of
the Securities or an offer to purchase pursuant to Section 4.13 of the
Indenture, the Company shall deliver to the Trustee an Officers' Certificate
stating the amount of the Cash Flow Participation Interest payable on
<PAGE>
2
such upcoming Interest Payment Date or other payment date and calculations
showing how such amount was determined.
Notwithstanding the above, (i) if the Company's Fixed Charge Coverage Ratio
is less than 2.50 to 1 for any Semi-Annual Accrual Period, then the Company may
elect to pay Cash Flow Participation Interest on the next succeeding Interest
Payment Date with respect to such Semi-Annual Accrual Period by the issuance of
additional Securities equal to the amount of such interest would otherwise be
due but is not paid in cash (the "PIK Securities"), determined pursuant to
Section 2.1(a)(3) of the Indenture. In the event that the period for which
Interest accrues and is due (including for the period from the Issue Date to the
first interest payment date of March 1, 1999) is less than 180 days (such a
period, a "Stub Period"), then the Interest due for such Stub Period (which may
be a Semi-Annual Accrual Period) will be pro rated to reflect the actual number
of days that the Securities were outstanding for such Stub Period (calculated on
the basis of a 360 day year comprised of twelve 30-day months), provided that
the portion of Interest attributable to Cash Flow Participation Interest (or the
Minimum Cash Flow Participation Interest Amount, if applicable) due at the end
of such Stub Period (or, as the case may be on September 1, 1999 with respect to
the period covered by the Stub Period ending on March 1, 1999 plus the
Semi-Annual Accrual Period ending on September 1, 1999, taken together) shall
similarly be pro rated to reflect the actual number of days that the Securities
were outstanding for such Stub Period (or, with respect to the period ending on
September 1, 1999, the actual number of days that the Securities were
outstanding for the period covered by such Stub Period plus the succeeding
Semi-Annual Accrual Period, taken together) (calculated on the basis of a 360
day year comprised of twelve 30-day months). Interest on overdue principal and
installments of Interest will accrue at the rate of Interest borne by the
Securities.
Such interest is payable in addition to any other interest payable from
time to time with respect to this Security. The Trustee will not be deemed to
have notice of a Registration Default (as defined in the Registration Rights
Agreement) until it shall have received actual notice of such Registration
Default.
If the Company elects, pursuant to Section 2.1(a)(4) of the Indenture, to
issue PIK Securities, then the Company shall deliver a notice, signed by an
Officer, to the Trustee and the Paying Agent (which notice shall be received not
less than 5 nor more than 45 days prior to the record date preceding the
Interest Payment Date on which such PIK Securities will be issued) which shall
state whether the Company elects to satisfy the obligation to pay Cash Flow
Participation Interest, in full or in part, by the issuance of PIK Securities,
in which case such notice shall include a written order to the Trustee to record
on the PIK Grid of this Security (i) the date of the issuance of such PIK
Securities, (ii) the aggregate principal amount of such PIK Securities that were
issued on such date and (iii) the total amount of PIK Securities outstanding
after taking into account any Special PIK Redemption pursuant to Section 3.9 of
the Indenture. In the event that there have been no Special PIK Redemptions,
then the total amount of PIK Securities shall be the sum of all prior issuances
thereof.
In no event shall the election of the Company to pay Cash Flow
Participation Interest in cash or to satisfy the obligation to pay Cash Flow
Participation Interest by issuing PIK
<PAGE>
3
Securities on any Interest Payment Date preclude the Company from making a
different election with respect to all or any portion of Cash Flow Participation
Interest to be paid on this Security, or any other Security, on any subsequent
Interest Payment Date. If (i) the Company elects to satisfy the obligation to
pay Cash Flow Participation Interest on this Security, or any other Security, in
part in cash and in part by the issuance of PIK Securities on any Interest
Payment Date and (ii) more than one Security is outstanding, then the proportion
of cash to be paid and PIK Securities to be issued on such Interest Payment Date
in respect of these outstanding Securities shall be the same for each such
Security.
Within 2 business days after any issuance of PIK Securities, the Trustee
shall give notice of such issuance to the Depositary and all Securityholders
registered with the Registrar.
3. Method of Payment.
By at least 11:00 a.m. (New York City time) on the date on which any
principal and premium of or Interest and Liquidated Damages, if any, on this
Security is due and payable, the Company shall irrevocably deposit with the
Trustee or the Paying Agent money sufficient to pay such amounts. The Company
will instruct the Paying Agent to pay Interest (except Defaulted Interest) and
Liquidated Damages, if any, to the Persons who are registered Securityholders at
the close of business on the February 15 or August 15 next preceding the
Interest Payment Date. Securityholders must surrender Securities to a Paying
Agent to collect principal payments. The Company will instruct the Paying Agent
to pay principal and premium and Interest and Liquidated Damages, if any, in
money of the United States that at the time of payment is legal tender for
payment of public and private debts.
4. Trustee and Paying Agent and Registrar.
Initially, NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking
association (the "Trustee"), will act as Trustee as well as Paying Agent and
Registrar. The Company may appoint and change any Paying Agent, Registrar or
Company-registrar without notice to any Securityholder. The Company or any of
its Domestic Subsidiaries may act as Paying Agent.
5. Indenture.
The Company issued this Security under an Indenture dated as of November
24, 1998 (as it may be amended or supplemented from time to time in accordance
with the terms thereof, the "Indenture"), by and among the Company, the
Subsidiary Guarantors and the Trustee. Capitalized terms used herein and not
defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture for a statement of those terms.
The Securities are the senior obligations of the Company, rank pari passu
in right of payment with all current and future Senior Debt of the Company,
including the Senior Credit Facility, and rank senior in right of payment to all
existing and future subordinated obligations of
<PAGE>
4
the Company. The Security is one of the Initial Securities referred to in the
Indenture. The Securities include the Initial Securities and any New Securities
issued in exchange for the Initial Securities pursuant to the Indenture and the
Registration Rights Agreement. The Initial Securities and the New Securities are
treated as a single class of securities under the Indenture. Principal and
premium of and Interest and Liquidated Damages, if any, on the Securities will
be payable at the office or agency maintained by the Company for such purpose
pursuant to Section 2.3 of the Indenture. Initially, such office will be the
office of the Trustee maintained for such purpose. The Securities will be issued
in denominations of $1,000 and integral multiples thereof.
The Indenture imposes certain restrictive covenants on the Company and its
Restricted Subsidiaries as set forth in Article IV of the Indenture.
To guarantee the due and punctual payment of the principal and Interest, if
any, on the Securities and all other amounts payable by the Company under the
Indenture and the Securities when and as the same shall be due and payable,
whether at maturity, by redemption, by acceleration or otherwise, according to
the terms of the Securities and the Indenture, the Subsidiary Guarantors, as
primary obligors and not merely as surety, have unconditionally and irrevocably
guaranteed, on a joint and several basis, such obligations on a senior basis
pursuant to the terms of Article X of the Indenture.
The Securities are secured to the extent set forth in the Collateral
Agreement and Article XI of the Indenture.
6. Optional Redemption.
Pursuant to Section 3.7(a) of the Indenture, prior to September 1, 2001,
the Securities will be redeemable, in whole or in part, at the option of the
Company, upon not less than 30 and no more than 60 days' prior notice, on any
March 1, June 1, September 1 or December 1 of any year at a redemption price
equal to 100% of the principal amount thereof plus the Make-Whole Premium, plus,
to the extent not included in the Make-Whole Premium, accrued and unpaid
Interest and Liquidated Damages, if any, to the date of redemption. For purposes
of the foregoing: (i) "Make-Whole Premium" means, with respect to a Security, an
amount equal to the present value of the remaining Coupon Interest (exclusive of
any portion thereof accruing with respect to the period prior to the redemption
date) and premium payments due on such Security as if such Security were
redeemed on September 1, 2001 pursuant to the next succeeding paragraph,
discounted to the date of redemption on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at a discount rate equal to the
Treasury Rate plus 100 basis points; and (ii) if the Company redeems any
Security on June 1 or December 1 of any year, then Cash Flow Participation
Interest shall be calculated by multiplying (A) Consolidated Cash Flow, with
respect to any redemption on June 1, for the quarterly period ended on the
preceding March 31 and, with respect to any redemption on December 1, for the
quarterly period ended on the preceding September 30 by (B) the applicable
percentage (stated under paragraph 2 above and Section 2.1(a)(3) of the
Indenture) corresponding to the date next succeeding that June 1 or December 1,
as the case may be.
<PAGE>
5
Pursuant to Section 3.7(b) of the Indenture, on or after September 1, 2001,
the Securities are redeemable, in whole or in part, upon not less than 30 nor
more than 60 days' prior notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
Interest and Liquidated Damages, if any, thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on September 1 of the
years indicated below:
Redemption Price as a
Year Percentage of Principal Amount
---- ------------------------------
2001.......................... 107.250%
2002.......................... 103.625%
For purposes of the foregoing, if the Company redeems any Security (i) on March
1 or September 1 of any year, then Cash Flow Participation Interest shall be
calculated as set forth under paragraph 2 above and Section 2.1(a)(3) of the
Indenture; (ii) on June 1 or December 1 of any year, then Cash Flow
Participation Interest shall be calculated by multiplying (A) Consolidated Cash
Flow, with respect to any redemption on June 1, for the quarterly period ended
on the preceding March 31 and, with respect to any redemption on December 1, for
the quarterly period ended on the preceding September 30 by (B) the applicable
percentage (stated under paragraph 2 above and Section 2.1(a)(3) of the
Indenture) corresponding to the date next succeeding that June 1 or December 1,
as the case may be; and (iii) on any date other than March 1, June 1, September
1 or December 1 of any year, then Cash Flow Participation Interest shall be
calculated as described under paragraph 2 above and Section 2.1(a)(3) of the
Indenture with respect to such calculation for Stub Periods and more
particularly as follows: (w) for any redemption occurring between March 1 and
June 1 (exclusive of the dates March 1 and June 1), the Cash Flow Participation
Interest for the period from March 1 to the redemption date shall be calculated
by multiplying the Cash Flow Participation Interest actually paid on the
Interest Payment Date which occurred on the immediately preceding March 1 by a
fraction the numerator of which shall be the number of days from March 1 to the
redemption date and the denominator of which shall be 180; (x) for any
redemption occurring between June 1 and September 1 (exclusive of the dates June
1 and September 1) (I) the Cash Flow Participation Interest for the period from
March 1 to June 1 which shall be calculated as described in clause (ii) above
and (II) the Cash Flow Participation Interest for the period from June 1 to the
redemption date which shall be calculated by multiplying the Cash Flow
Participation Interest to be paid for the period from March 1 through June 1 by
a fraction the numerator of which shall be the number of days between June 1 and
the redemption date and the denominator of which shall be 90; (y) for any
redemption occurring between September 1 and December 1 (exclusive of the dates
September 1 and December 1), the Cash Flow Participation Interest for the period
from September 1 to the redemption date shall be calculated by multiplying the
Cash Flow Participation Interest actually paid on the Interest Payment Date
which occurred on the immediately preceding September 1 by a fraction the
numerator of which shall be the number of days from such September 1 to the
redemption date and the denominator of which shall be 180; (z) for any
redemption occurring between December 1 and March 1 (exclusive of the dates
December 1 and March 1) (I) the Cash Flow Participation Interest for the period
from September 1 to December 1 which shall be
<PAGE>
6
calculated as described in clause (ii) above and (II) the Cash Flow
Participation Interest for the period from December 1 to the redemption date
which shall be calculated by multiplying the Cash Flow Participation Interest to
be paid for the period from September 1 through December 1 by a fraction the
numerator of which shall be the number of days from December 1 to the redemption
date and the denominator of which shall be 90.
7. Mandatory Redemption.
Except pursuant to Sections 3.8 and 3.9 of the Indenture, the Company is
not required to make mandatory redemption or sinking fund payments with respect
to the Securities.
Pursuant to Section 3.9 of the Indenure, if the Company elects to pay Cash
Flow Participation Interest for a Semi-Annual Accrual Period by the issuance of
PIK Securities pursuant to Section 2.1(a)(4) of the Indenture, then the Company
shall be required to redeem such PIK Securities on the Interest Payment Date
falling immediately after the next succeeding Semi-Annual Accrual Period (such
date, the "Special PIK Redemption Date") at a redemption price equal to 100% of
the principal amount thereof plus accrued and unpaid Interest and Liquidated
Damages, if any, on such PIK Securities, to the Special PIK Redemption Date
(such redemption, the "Special PIK Redemption") if, but only if, (i) the
Company's Fixed Charge Coverage Ratio for the four full fiscal quarters
immediately preceding such Special PIK Redemption Date would have been at least
2.50 to 1 determined on a pro forma basis after giving effect to such Special
PIK Redemption as if such Special PIK Redemption had occurred at the beginning
of the applicable four-quarter reference period and (ii) such Special PIK
Redemption is permitted by the Senior Credit Facility.
In the event of a Special PIK Redemption, the Company shall deliver a
notice, signed by an Officer, to the Trustee and the Paying Agent (which notice
shall be received not less than 5 nor more than 45 days prior to the record date
preceding the Interest Payment Date which shall also be such Special PIK
Redemption Date) which shall include a written order to the Trustee to record on
the PIK Grid of this Security or, if more than one Security is outstanding at
that time, for each Security, (i) the date of the Special PIK Redemption, (ii)
the aggregate principal amount of PIK Securities to be redeemed on the Special
PIK Redemption Date and (iii) the total amount of PIK Securities outstanding
after taking into account this and any prior Special PIK Redemption.
Within 2 business days of any Special PIK Redemption, the Trustee shall
give notice of such Special PIK Redemption to the Depositary and all
Securityholders registered with the Registrar as of the record date preceeding
the Interest Payment Date that is such Special PIK Redemption Date.
8. Notice of Redemption.
Pursuant to Section 3.3 of the Indenture, notice of redemption will be
mailed at least 30 days but not more than 60 days before the redemption date by
first class mail to each Securityholder to be redeemed at his registered
address. Securities in denominations of principal
<PAGE>
7
amount 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 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.
For other provisions regarding the redemption provisions of this Security,
see Sections 3.1 through 3.6 of the Indenture.
9. Registration Rights.
The Company is party to a Registration Rights Agreement, dated as of
November 23, 1998, by and among the Company, the Subsidiary Guarantors, and
Lehman Brothers Inc. pursuant to which it is obligated to pay Liquidated Damages
upon the occurrence of certain Registration Defaults.
10. Denominations; Transfer; Exchange.
The Securities are in registered form without coupons in denominations of
principal amount of $1,000 and whole multiples of $1,000. A Securityholder may
register, transfer or exchange Securities in accordance with the Indenture. The
Registrar may require a Securityholder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not register
the transfer of or exchange (i) 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) for a period beginning 15 days before a selection of
Securities to be redeemed and ending on the date of such selection or (ii) any
Securities for a period beginning 15 days before an Interest Payment Date and
ending on such Interest Payment Date.
11. Persons Deemed Owners.
The registered holder of this Security may be treated as the owner of it
for all purposes.
12. Unclaimed Money.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon written request any money held by
them for the payment of principal or Interest that remains unclaimed for two
years after the Maturity Date or full redemption of the Securities, and,
thereafter, Securityholders entitled to the money must look to the Company for
payment as general creditors.
<PAGE>
8
13. Amendment and Waiver.
Subject to certain exceptions set forth in the Indenture, (i) the Indenture
and the Securities may be amended with the written consent of the
Securityholders of at least two-thirds in principal amount of the outstanding
Securities with respect to Sections 4.2, 4.3, 4.6 and 4.13 of the Indenture and
of at least a majority in principal amount of the outstanding Securities with
respect to certain other Sections of the Indenture and (ii) any default or
noncompliance with any provision may be waived with the written consent of the
Securityholders of a majority in principal amount of the outstanding Securities.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Securityholder, the Company, the Subsidiary Guarantors and the Trustee may
amend the Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency whether wholly within the Indenture or as compared to any of the
Operative Documents, or to make such other provisions in regard to matters or
questions arising under the Indenture as the Board of Directors of the Company
may deem necessary or desirable and which shall not materially and adversely
affect the rights of the Securityholders, or to comply with Article 5 of the
Indenture, or to provide for uncertificated Securities in addition to or in
place of certificated Securities, or to add additional guarantees with respect
to the Securities or to add additional security for the Securities, or to add
additional covenants of or surrender rights and powers conferred on the Company,
or to comply, or allow compliance with, any requirement of the SEC in connection
with qualifying the Indenture under the Act or giving effect to the security
arrangements contemplated by the Indenture, or to make any change that does not
adversely affect the rights of any Securityholder in any material respect or to
give effect to the provisions of the Security Documents and the Indenture,
including with regard to the release of all or a portion of the Collateral in
accordance with such provisions and to give effect to the release of any
Subsidiary Guarantee in accordance with the terms of the Indenture.
14. Defaults and Remedies.
Pursuant to Section 6.1 of the Indenture, An "Event of Default" occurs if:
the Company defaults in any payment of Interest or Liquidated Damages, if any,
on any Security when the same becomes due and payable, and such default
continues for a period of 30 days; the Company defaults in the payment of the
principal or Make-Whole Premium of any Security when the same becomes due and
payable at its Maturity Date, upon declaration or otherwise; the Company fails
to comply with Article V or the Company or a Restricted Subsidiary fails to
comply with Section 4.2 of the Indenture or Section 4.3 of the Indenture; the
Company or any of its Restricted Subsidiaries fails to comply with Section 4.12
of the Indenture or Section 4.13 of the Indenture; the Company or a Subsidiary
Guarantor, as the case may be, fails to comply with any of its agreements in the
Securities, the related Guarantees, the Indenture, the Collateral Agreement or
the other Security Documents (other than those referred to in clauses (i), (ii),
(iii) or (iv) above) and such failure continues for 60 days after the notice
specified below; the Company or any of its Restricted Subsidiaries default under
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money borrowed (or
the payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the Issue Date, which default (x) is caused by a failure to
<PAGE>
9
pay principal or premium, if any, or Interest on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on the date of such
default (a "Payment Default") or (y) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates without duplication $1.0 million or
more; the Company or any of its Restricted Subsidiaries fails to pay final
judgments aggregating in excess of $1.0 million (excluding amounts covered by
insurance), which judgments are not paid, discharged, stayed, vacated or bonded
pending appeal by a reputable financial intermediary with an investment grade
rating for a period of 60 days from the entry thereof; the Company or a
Restricted Subsidiary of the Company 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 in which it is the debtor;
(C) consents to the appointment of a Custodian of it or for any substantial part
of its property; or (D) makes a general assignment for the benefit of its
creditors; (E) generally are not paying their debts as they become due; or takes
any comparable action under any foreign laws relating to insolvency; a court of
competent jurisdiction enters an order or decree under any Bankruptcy Law that:
(A) is for relief against the Company or any Restricted Subsidiary of the
Company in an involuntary case; (B) appoints a Custodian of the Company or any
Restricted Subsidiary or for any assets that constitute a substantial part of
the assets of the Company or that constitute all or substantially all of the
assets of a Restricted Subsidiary; or (C) orders the winding up or liquidation
of the Company or any Restricted Subsidiary of the Company; (or any similar
relief is granted under any foreign laws) and the order, decree or relief
remains unstayed and in effect for 60 days; except as permitted under the
Indenture and the Collateral Agreement, any Guarantee shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any reason
to be in full force and effect for 30 days after notice or any Subsidiary
Guarantor, or any Person acting on behalf of any Subsidiary Guarantor, shall
deny or disaffirm its obligations under its Guarantee; or except as permitted by
the Collateral Agreement, the other Security Documents, the Indenture or any
amendments hereto or thereto, any of the Collateral Agreement or the other
Security Documents ceases to be in full force and effect or ceases to be
effective, in all material respects, to create the Lien on the Collateral in
favor of the Securityholders for 30 days after notice.
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (6) of Section 6.1 of the Indenture and any
event which with the giving of notice or the lapse of time would become an Event
of Default under clause (3), (5), (9), (10) and (11) of Section 6.1 of the
Indenture and what action the Company is taking or proposes to take with respect
thereto.
<PAGE>
10
If an Event of Default occurs and is continuing, the Trustee or the
Securityholders of at least 25% in aggregate principal amount of the Securities
may declare all the Securities to be due and payable immediately.
Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives indemnity or security satisfactory to it.
Subject to certain limitations, Securityholders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default or Event of Default (except a Default or Event of Default in payment of
principal or Interest) if it determines that withholding notice is not opposed
to their interest.
15. Trustee Dealings with the Company.
Subject to certain limitations set forth in the Indenture, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its affiliates and may otherwise deal
with the Company or its affiliates with the same rights it would have if it were
not Trustee.
16. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company or
the Subsidiary Guarantors shall not have any liability for any obligations of
the Company or the Subsidiary Guarantors 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.
17. Authentication
Pursuant to Section 2.2 of the Indenture, this Security shall not be valid
until an authorized signatory of the Trustee (or an authenticating agent acting
on its behalf) manually signs the certificate of authentication on the first
page of this Security.
18. 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
entirety), 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).
<PAGE>
11
19. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and 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.
20. Governing Law.
This Security shall be governed by, and construed in accordance with, the
laws of the State of New York but without giving effect to applicable principles
of conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby.
21. Copies of Indenture and Certain Other Documents.
The Company will furnish to any Securityholder upon written request and
without charge to the Securityholder a copy of the Indenture which has in it the
text of this Security as well as copies of the Collateral Agreement, the
Intercreditor Agreement and the Registration Rights Agreement. Requests may be
made to: Harvard Industries, Inc., 3 Werner Way, Suite 210, Lebanon, New Jersey
08833, attention: Chief Financial Officer.
22. Submission to Jurisdiction.
The Indenture and the Securities shall be governed by, and construed in
accordance with, the laws of the State of New York but without giving effect to
applicable principles of conflicts of law to the extent that the application of
the laws of another jurisdiction would be required thereby.
<PAGE>
12
PIK Grid
Pursuant to Sections 2.1(a)(4) and 3.9 of the Indenture, the Trustee is
required to complete the following register upon the issuance and redemption of
PIK Securities.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Total Amount
Date Amount Issued Amount Redeemed Outstanding(1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
</TABLE>
- ----------
(1) The amount listed under this column reflects the net of (i) the total
amount issued and (ii) the total amount redeemed on the date corresponding
to these issuances and redemptions.
<PAGE>
GUARANTEES
Each of the Subsidiary Guarantors hereby unconditionally guarantees jointly
and severally, on a senior basis the due and punctual payment of the principal
and premium of and Interest and Liquidated Damages, if any, on the Securities,
whether at maturity, by acceleration or otherwise, the due and punctual payment
of Interest on the overdue principal and premium of and Interest and Liquidated
Damages, if any, on the Securities, and the due and punctual performance of all
other obligations of the Company to the Securityholders or the Trustee, all in
accordance with the terms set forth in Article X of the Indenture.
The Guarantees, including the payment of principal and premium of and
Interest and Liquidated Damages, if any, on the Securities, will be senior
obligations of such Subsidiary Guarantors and rank pari passu in right of
payment with all existing and future senior obligations of the Subsidiary
Guarantors and rank senior to all existing and future subordinated obligations
of such Subsidiary Guarantors. The Guarantees will be secured to the extent set
forth under Article XI of the Indenture.
This Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Securities upon which this Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
The terms of the Guarantees evidenced hereby are qualified in their
entirety and remain subject to the terms of Article X of the Indenture, as such
Article may be amended, modified or changed from the date hereof, including but
not limited to the addition of additional Subsidiary Guarantors and the release
of existing Subsidiary Guarantors from their obligations under the Indenture.
This Guarantee shall be governed by and construed in accordance with the
laws of the State of New York without regard to principles of conflicts of law.
[The signature page follows.]
<PAGE>
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused this instrument to
be duly executed and its corporate seal to be hereunto affixed and attested.
DOEHLER-JARVIS, INC.
HARVARD TRANSPORTATION
CORPORATION
DOEHLER-JARVIS GREENEVILLE, INC.
POTTSTOWN PRECISION CASTING, INC.
DOEHLER-JARVIS TECHNOLOGIES, INC.
DOEHLER-JARVIS TOLEDO, INC.
HARMAN AUTOMOTIVE, INC.
HAYES-ALBION CORPORATION
THE KINGSTON-WARREN CORPORATION
On behalf of each of the above
Subsidiary Guarantors
By:
--------------------------------
Name:
Title:
<PAGE>
2
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 social security or tax I.D. No.)
and irrevocably appoint ______________ agent to transfer this Security on
the books of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date: ____________________ Your Signature: _____________________
Signature Guarantee: ______________________________
(Signature must be guaranteed by a participant in a recognized Signature
Guarantee Medallion Program or other signature guarantor program reasonably
acceptable to the Trustee)
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the first page of this Security.
In connection with any transfer or exchange of any of the Securities evidenced
by this certificate occurring prior to the date that is two years after the
later of the date of original issuance of such Securities and the last date, if
any, on which such Securities were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Securities are being transferred:
CHECK ONE BOX BELOW:
(1)[ ] to the Company; 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)[ ] pursuant to another available exemption from registration provided
by Rule 144 under the Securities act of 1933.
<PAGE>
3
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) or (5) is
checked, the Trustee may require, prior to registering any such transfer of the
Securities, such legal opinions, certifications and other information as the
Company has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, such as the exemption
provided by Rule 144 under such Act.
------------------------------
Signature
Signature Guarantee:
- ------------------------- ------------------------------
Signature
(Signature must be guaranteed
by a participant in a
recognized Signature Guarantee
Medallion Program or other
signature guarantor program
reasonably acceptable to the
Trustee)
- ------------------------------------------------------------
<PAGE>
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 Company 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>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
Amount of decrease in Amount of increase in
Date of Principal Amount of this Principal Amount of this
Exchange Global Security Global Security
- -------- ------------------------ ------------------------
Principal Amount of this Signature of authorized officer
Global Security following of Trustee or Securities
such decrease or increase Custodian
- ------------------------- -------------------------------
<PAGE>
EXHIBIT B
FORM OF NEW SECURITY
[GLOBAL SECURITIES LEGEND]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), 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 IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
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.
<PAGE>
2
HARVARD INDUSTRIES, INC.
14 1/2% Senior Secured Note Due 2003
No. __________
Principal Amount: $25,000,000 CUSIP NO. _______
HARVARD INDUSTRIES, INC., a Delaware corporation, promises to pay to CEDE &
COMPANY, or registered assigns, the principal sum of TWENTY FIVE MILLION DOLLARS
on September 1, 2003.
Interest Payment Dates: March 1 and September 1.
Record Dates: February 15 and August 15.
Additional provisions of this Security are set forth on the following pages
of this Security.
HARVARD INDUSTRIES, INC.
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
Dated: November __, 1998
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the Indenture.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
----------------------------------
Name:
Title:
Dated: November __, 1998
<PAGE>
3
14 1/2% Senior Secured Security Due 2003
1. Principal.
The Senior Secured Notes (the "Securities") are limited to $25.0 million
aggregate principal amount, subject to Section 2.1(a)(2) of the Indenture.
2. Interest.
HARVARD INDUSTRIES, INC., a Delaware corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Company"), promises to pay Interest (as defined below) on the
principal amount of this Security. Interest on the Securities will accrue at a
rate equal to the sum of (1) 14 1/2% per annum on the principal amount of
Securities outstanding (calculated on the basis of a 360-day year comprised of
twelve 30-day months) ("Coupon Interest") plus (2) Cash Flow Participation
Interest (as defined below and, together with Coupon Interest, "Interest").
"Cash Flow Participation Interest," for any relevant period, equals the product
of (1) Consolidated Cash Flow for the six month period ending, for interest
payments due March 1 of each year, on December 31 and, for interest payments due
on September 1 of each year, on June 30 (each, a "Semi-Annual Accrual Period")
prior to the next succeeding Interest Payment Date multiplied by (2) the
applicable percentage set forth for the period ending on the Interest Payment
Date indicated below:
Interest Payment Date Percentage
--------------------- ----------
March 1, 1999.................................. 2.00%
September 1, 1999.............................. 2.00%
March 1, 2000.................................. 2.50%
September 1, 2000.............................. 2.50%
March 1, 2001.................................. 3.50%
September 1, 2001.............................. 3.50%
March 1, 2002.................................. 4.50%
September 1, 2002.............................. 4.50%
March 1, 2003.................................. 4.50%
September 1, 2003.............................. 4.50%
If, however, the calculation of Cash Flow Participation Interest, based on the
appropriate percentages set forth above, results in an amount that is less than
$1.0 million for any two consecutive Semi-Annual Accrual Periods taken as a
whole, then Cash Flow Participation Interest will be for such two corresponding
Interest Payment Dates taken as a whole, $1.0 million (the "Minimum Cash Flow
Participation Interest Amount").
No later than 15 days prior to an Interest Payment Date or any other date
on which Cash Flow Participation Interest is payable pursuant to a redemption of
the Securities or an offer to purchase pursuant to Section 4.13 of the
Indenture, the Company shall deliver to the Trustee
<PAGE>
2
an Officers' Certificate stating the amount of the Cash Flow Participation
Interest payable on such upcoming Interest Payment Date or other payment date
and calculations showing how such amount was determined.
Notwithstanding the above, (i) if the Company's Fixed Charge Coverage Ratio
is less than 2.50 to 1 for any Semi-Annual Accrual Period, then the Company may
elect to pay Cash Flow Participation Interest on the next succeeding Interest
Payment Date for such Semi-Annual Accrual Period by the issuance of additional
Securities equal to the amount of such interest would otherwise be due but is
not paid in cash (the "PIK Securities"), determined pursuant to Section
2.1(a)(3) of the Indenture. In the event that the period for which Interest
accrues and is due (including for the period from the Issue Date to the first
interest payment date of March 1, 1999) is less than 180 days (such a period, a
"Stub Period"), then the Interest due for such Stub Period (which may be a
Semi-Annual Accrual Period) will be pro rated to reflect the actual number of
days that the Securities were outstanding for such Stub Period (calculated on
the basis of a 360 day year comprised of twelve 30- day months), provided that
the portion of Interest attributable to Cash Flow Participation Interest (or the
Minimum Cash Flow Participation Interest Amount, if applicable) due at the end
of such Stub Period (or, as the case may be on September 1, 1999 with respect to
the period covered by the Stub Period ending on March 1, 1999 plus the
Semi-Annual Accrual Period ending on September 1, 1999, taken together) shall
similarly be pro rated to reflect the actual number of days that the Securities
were outstanding for such Stub Period (or, with respect to the period ending on
September 1, 1999, the actual number of days that the Securities were
outstanding for the period covered by such Stub Period plus the succeeding
Semi-Annual Accrual Period, taken together) (calculated on the basis of a 360
day year comprised of twelve 30-day months). Interest on overdue principal and
installments of Interest will accrue at the rate of Interest borne by the
Securities.
Such interest is payable in addition to any other interest payable from
time to time with respect to this Security. The Trustee will not be deemed to
have notice of a Registration Default until it shall have received actual notice
of such Registration Default.
If the Company elects, pursuant to Section 2.1(a)(4) of the Indenture, to
issue PIK Securities, then the Company shall deliver a notice, signed by an
Officer, to the Trustee and the Paying Agent (which notice shall be received not
less than 5 nor more than 45 days prior to the record date preceding the
Interest Payment Date on which such PIK Securities will be issued) which shall
state whether the Company elects to satisfy the obligation to pay Cash Flow
Participation Interest, in full or in part, by the issuance of PIK Securities,
in which case such notice shall include a written order to the Trustee to record
on the register on the PIK Grid of this Security (i) the date of the issuance of
such PIK Securities, (ii) the aggregate principal amount of such PIK Securities
that were issued on such date and (iii) the total amount of PIK Securities
outstanding after taking into account any Special PIK Redemption pursuant to
Section 3.9 of the Indenture. In the event that there have been no Special PIK
Redemptions, then the total amount of PIK Securities shall be the sum of all
prior issuances thereof.
In no event shall the election of the Company to pay Cash Flow
Participation Interest in cash or to satisfy the obligation to pay Cash Flow
Participation Interest by issuing PIK
<PAGE>
3
Securities on any Interest Payment Date preclude the Company from making a
different election with respect to all or any portion of Cash Flow Participation
Interest to be paid on this Security, or any other Security, on any subsequent
Interest Payment Date. If (i) the Company elects to satisfy the obligation to
pay Cash Flow Participation Interest on this Security, or any other Security, in
part in cash and in part by the issuance of PIK Securities on any Interest
Payment Date and (ii) more than one Security is outstanding, then the proportion
of cash to be paid and PIK Securities to be issued on such Interest Payment Date
in respect of these outstanding Securities shall be the same for each such
Security.
Within 2 business days after any issuance of PIK Securities, the Trustee
shall give notice of such issuance to the Depositary and all Securityholders
registered with the Registrar.
3. Method of Payment.
By at least 11:00 a.m. (New York City time) on the date on which any
principal and premium of or Interest and Liquidated Damages, if any, on any
Security is due and payable, the Company shall irrevocably deposit with the
Trustee or the Paying Agent money sufficient to pay such amounts. The Company
will instruct the Paying Agent to pay Interest (except Defaulted Interest) and
Liquidated Damages, if any, to the Persons who are registered Securityholders at
the close of business on the February 15 or August 15 next preceding the
Interest Payment Date. Securityholders must surrender Securities to a Paying
Agent to collect principal payments. The Company will instruct the Paying Agent
to pay principal and premium and Interest and Liquidated Damages, if any, in
money of the United States that at the time of payment is legal tender for
payment of public and private debts.
4. Trustee and Paying Agent and Registrar.
Initially, NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking
association (the "Trustee"), will act as Trustee as well as Paying Agent and
Registrar. The Company may appoint and change any Paying Agent, Registrar or
Company-registrar without notice to any Securityholder. The Company or any of
its Domestic Subsidiaries may act as Paying Agent.
5. Indenture.
The Company issued this Security under an Indenture dated as of November
24, 1998 (as it may be amended or supplemented from time to time in accordance
with the terms thereof, the "Indenture"), by and among the Company, the
Subsidiary Guarantors and the Trustee. Capitalized terms used herein and not
defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture for a statement of those terms.
The Securities are the senior obligations of the Company, rank pari passu
in right of payment with all current and future Senior Debt of the Company,
including the Senior Credit Facility, and rank senior in right of payment to all
existing and future subordinated obligations of
<PAGE>
4
the Company. The Security is one of the New Securities referred to in the
Indenture. The Securities include the Initial Securities and any New Securities
issued in exchange for the Initial Securities pursuant to the Indenture and the
Registration Rights Agreement. The Initial Securities and the New Securities are
treated as a single class of securities under the Indenture. Principal and
premium of and Interest and Liquidated Damages, if any, on the Securities will
be payable at the office or agency maintained by the Company for such purpose
pursuant to Section 2.3 of the Indenture. Initially, such office will be the
office of the Trustee maintained for such purpose. The Securities will be issued
in denominations of $1,000 and integral multiples thereof.
The Indenture imposes certain restrictive covenants on the Company and its
Restricted Subsidiaries as set forth in Article IV thereof.
To guarantee the due and punctual payment of the principal and Interest, if
any, on the Securities and all other amounts payable by the Company under the
Indenture and the Securities when and as the same shall be due and payable,
whether at maturity, by acceleration or otherwise, according to the terms of the
Securities and the Indenture, the Subsidiary Guarantors, as primary obligors and
not merely as surety, have unconditionally and irrevocably guaranteed, on a
joint and several basis, such obligations on a senior basis pursuant to the
terms of Article X of the Indenture.
The Securities are secured to the extent set forth in the Collateral
Agreement and Article XI of the Indenture.
6. Optional Redemption.
Pursuant to Section 3.7(a) of the Indenture, prior to September 1, 2001,
the Securities will be redeemable, in whole or in part, at the option of the
Company, upon not less than 30 and no more than 60 days' prior notice, on any
March 1, June 1, September 1 or December 1 of any year at a redemption price
equal to 100% of the principal amount thereof plus the Make-Whole Premium, plus,
to the extent not included in the Make-Whole Premium, accrued and unpaid
Interest and Liquidated Damages, if any, to the date of redemption. For purposes
of the foregoing: (i) "Make-Whole Premium" means, with respect to a Security, an
amount equal to the present value of the remaining Coupon Interest (exclusive of
any portion thereof accruing with respect to the period prior to the redemption
date) and premium payments due on such Security as if such Security were
redeemed on September 1, 2001 pursuant to the next succeeding paragraph,
discounted to the date of redemption on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at a discount rate equal to the
Treasury Rate plus 100 basis points; and (ii) if the Company redeems any
Security on June 1 or December 1 of any year, then Cash Flow Participation
Interest shall be calculated by multiplying (A) Consolidated Cash Flow, with
respect to any redemption on June 1, for the quarterly period ended on the
preceding March 31 and, with respect to any redemption on December 1, for the
quarterly period ended on the preceding September 30 by (B) the applicable
percentage (stated under paragraph 2 above and Section 2.1(a)(3) of the
Indenture) corresponding to the date next succeeding that June 1 or December 1,
as the case may be.
<PAGE>
5
Pursuant to Section 3.7(b) of the Indenture, on or after September 1, 2001,
the Securities are redeemable, in whole or in part, upon not less than 30 nor
more than 60 days' prior notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
Interest and Liquidated Damages, if any, thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on September 1 of the
years indicated below:
Redemption Price as a
Year Percentage of Principal Amount
---- ------------------------------
2001............................. 107.250%
2002............................. 103.625%
For purposes of the foregoing, if the Company redeems any Security (i) on March
1 or September 1 of any year, then Cash Flow Participation Interest shall be
calculated as set forth under paragraph 2 above and Section 2.1(a)(3) of the
Indenture; (ii) on June 1 or December 1 of any year, then Cash Flow
Participation Interest shall be calculated by multiplying (A) Consolidated Cash
Flow, with respect to any redemption on June 1, for the quarterly period ended
on the preceding March 31 and, with respect to any redemption on December 1, for
the quarterly period ended on the preceding September 30 by (B) the applicable
percentage (stated under paragraph 2 above and Section 2.1(a)(3) of the
Indenture) corresponding to the date next succeeding that June 1 or December 1,
as the case may be; and (iii) on any date other than March 1, June 1, September
1 or December 1 of any year, then Cash Flow Participation Interest shall be
calculated as described under paragraph 2 above and Section 2.1(a)(3) of the
Indenture with respect to such calculation for Stub Periods and more
particularly as follows: (w) for any redemption occurring between March 1 and
June 1 (exclusive of the dates March 1 and June 1), the Cash Flow Participation
Interest for the period from March 1 to the redemption date shall be calculated
by multiplying the Cash Flow Participation Interest actually paid on the
Interest Payment Date which occurred on the immediately preceding March 1 by a
fraction the numerator of which shall be the number of days from March 1 to the
redemption date and the denominator of which shall be 180; (x) for any
redemption occurring between June 1 and September 1 (exclusive of the dates June
1 and September 1) (I) the Cash Flow Participation Interest for the period from
March 1 to June 1 which shall be calculated as described in clause (ii) above
and (II) the Cash Flow Participation Interest for the period from June 1 to the
redemption date which shall be calculated by multiplying the Cash Flow
Participation Interest to be paid for the period from March 1 through June 1 by
a fraction the numerator of which shall be the number of days between June 1 and
the redemption date and the denominator of which shall be 90; (y) for any
redemption occurring between September 1 and December 1 (exclusive of the dates
September 1 and December 1), the Cash Flow Participation Interest for the period
from September 1 to the redemption date shall be calculated by multiplying the
Cash Flow Participation Interest actually paid on the Interest Payment Date
which occurred on the immediately preceding September 1 by a fraction the
numerator of which shall be the number of days from such September 1 to the
redemption date and the denominator of which shall be 180; (z) for any
redemption occurring between December 1 and March 1 (exclusive of the dates
December 1 and March 1) (I) the Cash Flow Participation Interest for the period
from September 1 to December 1 which shall be
<PAGE>
6
calculated as described in clause (ii) above and (II) the Cash Flow
Participation Interest for the period from December 1 to the redemption date
which shall be calculated by multiplying the Cash Flow Participation Interest to
be paid for the period from September 1 through December 1 by a fraction the
numerator of which shall be the number of days from December 1 to the redemption
date and the denominator of which shall be 90.
7. Mandatory Redemption.
Except pursuant to Sections 3.8 and 3.9 of the Indenture, the Company is
not required to make mandatory redemption or sinking fund payments with respect
to the Securities.
Pursuant to Section 3.9 of the Indenure, if the Company elects to pay Cash
Flow Participation Interest for a Semi-Annual Accrual Period by the issuance of
PIK Securities pursuant to Section 2.1(a)(4) of the Indenture, then the Company
shall be required to redeem such PIK Securities on the Interest Payment Date
falling immediately after the next succeeding Semi-Annual Accrual Period (such
date, the "Special PIK Redemption Date") at a redemption price equal to 100% of
the principal amount thereof plus accrued and unpaid Interest and Liquidated
Damages, if any, on such PIK Securities, to the Special PIK Redemption Date
(such redemption, the "Special PIK Redemption") if, but only if, (i) the
Company's Fixed Charge Coverage Ratio for the four full fiscal quarters
immediately preceding such Special PIK Redemption Date would have been at least
2.50 to 1 determined on a pro forma basis after giving effect to such Special
PIK Redemption as if such Special PIK Redemption had occurred at the beginning
of the applicable four-quarter reference period and (ii) such Special PIK
Redemption is permitted by the Senior Credit Facility.
In the event of a Special PIK Redemption, the Company shall deliver a
notice, signed by an Officer, to the Trustee and the Paying Agent (which notice
shall be received not less than 5 nor more than 45 days prior to the record date
preceding the Interest Payment Date which shall also be such Special PIK
Redemption Date) which shall include a written order to the Trustee to record on
the PIK Grid of this Security or, if more than one Security is outstanding at
that time, for each Security, (i) the date of the Special PIK Redemption, (ii)
the aggregate principal amount of PIK Securities to be redeemed on the Special
PIK Redemption Date and (iii) the total amount of PIK Securities outstanding
after taking into account this and any prior Special PIK Redemption.
Within 2 business days of any Special PIK Redemption, the Trustee shall
give notice of such Special PIK Redemption to the Depositary and all
Securityholders registered with the Registrar as of the record date preceeding
the Interest Payment Date that is such Special PIK Redemption Date.
8. Notice of Redemption.
Pursuant to Section 3.3 of the Indenture, notice of redemption will be
mailed at least 30 days but not more than 60 days before the redemption date by
first class mail to each Securityholder to be redeemed at his registered
address. Securities in denominations of principal
<PAGE>
7
amount 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 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.
For other provisions regarding the redemption provisions of this Security,
see Sections 3.1 through 3.6 of the Indenture.
9. Denominations; Transfer; Exchange.
The Securities are in registered form without coupons in denominations of
principal amount of $1,000 and whole multiples of $1,000. A Securityholder may
register, transfer or exchange Securities in accordance with the Indenture. The
Registrar may require a Securityholder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not register
the transfer of or exchange (i) 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) for a period beginning 15 days before a selection of
Securities to be redeemed and ending on the date of such selection or (ii) any
Securities for a period beginning 15 days before an Interest Payment Date and
ending on such Interest Payment Date.
10. Persons Deemed Owners.
The registered holder of this Security may be treated as the owner of it
for all purposes.
11. Unclaimed Money.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon written request any money held by
them for the payment of principal or Interest that remains unclaimed for two
years after the Maturity Date or full redemption of the Securities, and,
thereafter, Securityholders entitled to the money must look to the Company for
payment as general creditors.
12. Amendment and Waiver.
Subject to certain exceptions set forth in the Indenture, (i) the Indenture
and the Securities may be amended with the written consent of the
Securityholders of at least two-thirds in principal amount of the outstanding
Securities with respect to Sections 4.2, 4.3, 4.6 and 4.13 of the Indenture and
of at least a majority in principal amount of the outstanding Securities with
respect to certain other Sections of the Indenture and (ii) any default or
noncompliance with any provision may be waived with the written consent of the
Securityholders of a majority in principal amount of the outstanding Securities.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Securityholder, the Company, the Subsidiary Guarantors
<PAGE>
8
and the Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency whether wholly within the Indenture or as
compared to any of the Operative Documents, or to make such other provisions in
regard to matters or questions arising under the Indenture as the Board of
Directors of the Company may deem necessary or desirable and which shall not
materially and adversely affect the rights of the Securityholders, or to comply
with Article 5 of the Indenture, or to provide for uncertificated Securities in
addition to or in place of certificated Securities, or to add additional
guarantees with respect to the Securities or to add additional security for the
Securities, or to add additional covenants of or surrender rights and powers
conferred on the Company, or to comply, or allow compliance with, any
requirement of the SEC in connection with qualifying the Indenture under the Act
or giving effect to the security arrangements contemplated by the Indenture, or
to make any change that does not adversely affect the rights of any
Securityholder in any material respect or to give effect to the provisions of
the Security Documents and the Indenture, including with regard to the release
of all or a portion of the Collateral in accordance with such provisions and to
give effect to the release of any Subsidiary Guarantee in accordance with the
terms of the Indenture.
13. Defaults and Remedies.
Pursuant to Section 6.1 of the Indenture, An "Event of Default" occurs if:
(i) the Company defaults in any payment of Interest or Liquidated Damages, if
any, on any Security when the same becomes due and payable, and such default
continues for a period of 30 days; (ii) the Company defaults in the payment of
the principal or Make-Whole Premium of any Security when the same becomes due
and payable at its Maturity Date, upon declaration or otherwise; (iii) the
Company fails to comply with Article V or the Company or a Restricted Subsidiary
fails to comply with Section 4.2 of the Indenture or Section 4.3 of the
Indenture; (iv) the Company or any of its Restricted Subsidiaries fails to
comply with Section 4.12 of the Indenture or Section 4.13 of the Indenture; (v)
the Company or a Subsidiary Guarantor, as the case may be, fails to comply with
any of its agreements in the Securities, the related Guarantees, the Indenture,
the Collateral Agreement or the other Security Documents (other than those
referred to in clauses (i), (ii), (iii) or (iv) above) and such failure
continues for 60 days after the notice specified below; (vi) the Company or any
of its Restricted Subsidiaries default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the Issue Date, which
default (x) is caused by a failure to pay principal or premium, if any, or
Interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment Default")
or (y) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates without duplication $1.0 million or more; (vii) the
Company or any of its Restricted Subsidiaries fails to pay final judgments
aggregating in excess of $1.0 million (excluding amounts covered by insurance),
which judgments are not paid, discharged, stayed, vacated or bonded pending
appeal by a reputable financial intermediary with an investment grade rating for
a period of 60 days from the entry thereof; (viii) the Company or a
<PAGE>
9
Restricted Subsidiary of the Company 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 in which it is the debtor;
(C) consents to the appointment of a Custodian of it or for any substantial part
of its property; (D) makes a general assignment for the benefit of its
creditors; or (E) generally are not paying their debts as they become due; or
takes any comparable action under any foreign laws relating to insolvency; (ix)
a court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that: (A) is for relief against the Company or any Restricted Subsidiary of
the Company in an involuntary case; (B) appoints a Custodian of the Company or
any Restricted Subsidiary or for any assets that constitute a substantial part
of the assets of the Company or that constitute all or substantially all of the
assets of a Restricted Subsidiary; or (C) orders the winding up or liquidation
of the Company or any Restricted Subsidiary of the Company; (or any similar
relief is granted under any foreign laws) and the order, decree or relief
remains unstayed and in effect for 60 days; (x) except as permitted under the
Indenture and the Collateral Agreement, any Guarantee shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any reason
to be in full force and effect for 30 days after notice or any Subsidiary
Guarantor, or any Person acting on behalf of any Subsidiary Guarantor, shall
deny or disaffirm its obligations under its Guarantee; or (xi) except as
permitted by the Collateral Agreement, the other Security Documents, the
Indenture or any amendments hereto or thereto, any of the Collateral Agreement
or the other Security Documents ceases to be in full force and effect or ceases
to be effective, in all material respects, to create the Lien on the Collateral
in favor of the Securityholders for 30 days after notice.
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (6) of Section 6.1 of the Indenture and any
event which with the giving of notice or the lapse of time would become an Event
of Default under clause (3), (5), (9), (10) and (11) of Section 6.1 of the
Indenture and what action the Company is taking or proposes to take with respect
thereto.
If an Event of Default occurs and is continuing, the Trustee or the
Securityholders of at least 25% in aggregate principal amount of the Securities
may declare all the Securities to be due and payable immediately.
Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives indemnity or security satisfactory to it.
Subject to certain limitations, Securityholders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default or Event of Default (except a Default or Event of Default in payment of
principal or interest) if it determines that withholding notice is not opposed
to their interest.
<PAGE>
10
14. Trustee Dealings with the Company.
Subject to certain limitations set forth in the Indenture, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its affiliates and may otherwise deal
with the Company or its affiliates with the same rights it would have if it were
not Trustee.
15. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company or
the Subsidiary Guarantors shall not have any liability for any obligations of
the Company or the Subsidiary Guarantors 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.
16. Authentication
Pursuant to Section 2.2 of the Indenture, this Security shall not be valid
until an authorized signatory of the Trustee (or an authenticating agent acting
on its behalf) manually signs the certificate of authentication on the first
page of this Security.
17. 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
entirety), 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).
18. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the 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.
19. Governing Law.
This Security shall be governed by, and construed in accordance with, the
laws of the State of New York but without giving effect to applicable principles
of conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby.
<PAGE>
11
20. Copies of Indenture and Certain Other Documents.
The Company will furnish to any Securityholder upon written request and
without charge to the Securityholder a copy of the Indenture which has in it the
text of this Security as well as copies of the Collateral Agreement and the
Intercreditor Agreement. Requests may be made to: Harvard Industries, Inc., 3
Werner Way, Suite 210, Lebanon, New Jersey 08833, attention: Chief Financial
Officer.
21. Submission to Jurisdiction.
The Indenture and the Securities shall be governed by, and construed in
accordance with, the laws of the State of New York but without giving effect to
applicable principles of conflicts of law to the extent that the application of
the laws of another jurisdiction would be required thereby.
<PAGE>
12
PIK Grid
Pursuant to Sections 2.1(a)(4) and 3.9 of the Indenture, the Trustee is
required to complete the following register upon the issuance and redemption of
PIK Securities.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Total Amount
Date Amount Issued Amount Redeemed Outstanding(1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
</TABLE>
- ----------
(**) The amount listed under this column reflects the net of (i) the total
amount issued and (ii) the total amount redeemed on the date corresponding
to these issuances and redemptions.
<PAGE>
GUARANTEES
Each of the Subsidiary Guarantors hereby unconditionally guarantees jointly
and severally, on a senior basis the due and punctual payment of the principal
and premium of and Interest and Liquidated Damages, if any, on the Securities,
whether at maturity, by acceleration or otherwise, the due and punctual payment
of Interest on the overdue principal and premium of and Interest and Liquidated
Damages, if any, on the Securities, and the due and punctual performance of all
other obligations of the Company to the Securityholders or the Trustee, all in
accordance with the terms set forth in Article X of the Indenture.
The Guarantees, including the payment of principal and premium of and
Interest and Liquidated Damages, if any, on the Securities, will be senior
obligations of such Subsidiary Guarantors and rank pari passu in right of
payment with all existing and future senior obligations of the Subsidiary
Guarantors and rank senior to all existing and future subordinated obligations
of such Subsidiary Guarantors. The Guarantees will be secured to the extent set
forth under Article XI of the Indenture.
This Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Securities upon which this Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
The terms of the Guarantees evidenced hereby are qualified in their
entirety and remain subject to the terms of Article X of the Indenture, as such
Article may be amended, modified or changed from the date hereof, including but
not limited to the addition of additional Subsidiary Guarantors and the release
of existing Subsidiary Guarantors from their obligations under the Indenture.
This Guarantee shall be governed by and construed in accordance with the
laws of the State of New York without regard to principles of conflicts of law.
[The signature page follows.]
<PAGE>
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused this instrument to
be duly executed and its corporate seal to be hereunto affixed and attested.
DOEHLER-JARVIS, INC.
HARVARD TRANSPORTATION CORPORATION
DOEHLER-JARVIS GREENEVILLE, INC.
POTTSTOWN PRECISION CASTING, INC.
DOEHLER-JARVIS TECHNOLOGIES, INC.
DOEHLER-JARVIS TOLEDO, INC.
HARMAN AUTOMOTIVE, INC.
HAYES-ALBION CORPORATION
THE KINGSTON-WARREN CORPORATION
On behalf of each of the above
Subsidiary Guarantors
By:
-----------------------------
Name:
Title:
<PAGE>
2
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 social security or tax I.D. No.)
and irrevocably appoint ______________ agent to transfer this Security on
the books of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date: ____________________ Your Signature: _____________________
Signature Guarantee: ______________________________
(Signature must be guaranteed by a participant in a recognized Signature
Guarantee Medallion Program or other signature guarantor program reasonably
acceptable to the Trustee)
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the first page of this Security.
<PAGE>
EXHIBIT C
================================================================================
COLLATERAL AGREEMENT
made by
HARVARD INDUSTRIES, INC.,
DOEHLER-JARVIS, INC.
HARVARD TRANSPORTATION CORPORATION
DOEHLER-JARVIS GREENEVILLE, INC.
POTTSTOWN PRECISION CASTING, INC.
DOEHLER-JARVIS TECHNOLOGIES, INC.
DOEHLER-JARVIS TOLEDO, INC.
HARMAN AUTOMOTIVE, INC.
HAYES-ALBION CORPORATION
THE KINGSTON-WARREN CORPORATION
in favor of
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Collateral Agent
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<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINED TERMS....................................................1
1.1 Definitions..................................................1
1.2 Other Definitional Provisions................................5
SECTION 2. GRANT OF SECURITY INTEREST.......................................6
2.1 Collateral...................................................6
2.2 Grant of Second Priority Security Interest...................6
2.3 Acknowledgment Regarding Intercreditor Agreement.............7
SECTION 3. REPRESENTATIONS AND WARRANTIES...................................7
3.1 Title; No Other Liens........................................7
3.2 Perfected Liens..............................................7
3.3 Chief Executive Office.......................................7
3.4 Inventory and Equipment......................................8
3.5 Farm Products................................................8
3.6 Pledged Securities...........................................8
3.7 Receivables..................................................8
3.8 Contracts....................................................9
3.9 Intellectual Property........................................9
SECTION 4. COVENANTS.......................................................10
4.1 Delivery of Instruments and Chattel Paper...................10
4.2 Maintenance of Insurance....................................10
4.3 Payment of Obligations......................................11
4.4 Maintenance of Perfected Security Interest;
Further Documentation...................................11
4.5 Changes in Locations, Name, etc.............................12
4.6 Notices.....................................................12
4.7 Pledged Securities..........................................12
4.8 Receivables.................................................14
4.9 Contracts...................................................14
4.10 Intellectual Property......................................14
SECTION 5. REMEDIAL PROVISIONS.............................................16
5.1 Certain Matters Relating to Receivables.....................16
5.2 Communications with Obligors; Grantors Remain Liable........17
5.3 Pledged Stock...............................................17
5.4 Proceeds to be Turned Over To Collateral Agent..............18
5.5 Application of Proceeds.....................................19
5.6 Code and Other Remedies.....................................19
5.7 Registration Rights.........................................20
5.8 Waiver; Deficiency..........................................21
i
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Page
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SECTION 6. THE COLLATERAL AGENT............................................21
6.1 Collateral Agent's Appointment as Attorney-in-Fact, etc.....21
6.2 Duty of Collateral Agent....................................23
6.3 Execution of Financing Statements...........................23
6.4 Authority of Collateral Agent...............................23
SECTION 7. MISCELLANEOUS...................................................24
7.1 Amendments in Writing.......................................24
7.2 Notices.....................................................24
7.3 No Waiver by Course of Conduct; Cumulative Remedies.........24
7.4 Enforcement Expenses; Indemnification.......................24
7.5 Successors and Assigns......................................24
7.6 Set-Off.....................................................25
7.7 Counterparts................................................25
7.8 Severability................................................25
7.9 Section Headings............................................25
7.10 Integration................................................25
7.11 GOVERNING LAW..............................................26
7.12 Submission To Jurisdiction; Waivers........................26
7.13 Acknowledgements...........................................26
7.14 Additional Grantors........................................27
7.15 Releases...................................................27
7.16 WAIVER OF JURY TRIAL.......................................27
ii
<PAGE>
COLLATERAL AGREEMENT
COLLATERAL AGREEMENT, dated as of November 24, 1998, made by each of the
signatories hereto (together with any other entity that may become a party
hereto as provided herein, the "Grantors"), in favor of NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee under the Indenture described below (the
Trustee, as secured party hereunder, the "Collateral Agent") is entered by and
among HARVARD INDUSTRIES, INC., a Delaware corporation (the "Company"),
DOEHLER-JARVIS, INC., a Delaware corporation, HARVARD TRANSPORTATION,
CORPORATION, a Michigan corporation, DOEHLER-JARVIS GREENEVILLE, INC., a
Delaware corporation, POTTSTOWN PRECISION CASTING, INC., a Delaware corporation,
DOEHLER-JARVIS TECHNOLOGIES, INC., a Delaware corporation, DOEHLER-JARVIS TOLEDO
INC., a Delaware corporation, and HARMAN AUTOMOTIVE, INC., a Michigan
corporation, HAYES-ALBION CORPORATION, a Michigan corporation and THE
KINGSTON-WARREN CORPORATION, a New Hampshire corporation (collectively, the
"Subsidiary Guarantors").
W I T N E S S E T H :
WHEREAS, pursuant to the Amended and Restated Purchase Agreement (as
defined in the Indenture) and the Indenture (as defined herein), the Company
proposes to issue the Securities (as defined in the Indenture) upon the terms
and subject to the conditions set forth therein;
WHEREAS, the Grantors are members of an affiliated group of companies;
WHEREAS, the Grantors are engaged in related businesses, and each Grantor
will derive substantial direct and indirect benefit from the issuance of the
Securities; and
WHEREAS, it is a condition to the closing of the offering of the Securities
that the Grantors shall have executed and delivered this Agreement to the
Collateral Agent;
NOW, THEREFORE, in consideration of the premises and to induce the Initial
Purchaser (as defined in the Indenture) to enter into the Amended and Restated
Purchase Agreement and to induce the prospective purchasers of the Securities to
purchase said Securities, each Grantor hereby agrees with the Collateral Agent
as follows:
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms defined in the
Indenture and used herein shall have the meanings given to them in the
Indenture, and the following terms which are defined in the Uniform Commercial
Code in effect in the State of New York on the date hereof are used herein as so
defined: Accounts, Chattel Paper, Documents, Equipment, Farm Products,
Instruments, Inventory and Investment Property.
(b) The following terms shall have the following meanings:
<PAGE>
2
"Agreement": this Collateral Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"Collateral": as defined in Section 2.
"Collateral Account": any collateral account established by the Collateral
Agent as provided in Section 5.1 or 5.4.
"Contracts": the contracts and agreements listed in Schedule 7, as the same
may be amended, supplemented or otherwise modified from time to time, including,
without limitation, (i) all rights of any Grantor to receive moneys due and to
become due to it thereunder or in connection therewith, (ii) all rights of any
Grantor to damages arising thereunder and (iii) all rights of any Grantor to
perform and to exercise all remedies thereunder.
"Copyright Licenses": any written agreement naming any Grantor as licensor
(including, without limitation, those listed in Schedule 6) granting any right
under any Copyright, including, without limitation, the grant of rights to
manufacture, distribute, exploit and sell materials derived from any Copyright.
"Copyrights": (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished (including,
without limitation, those listed in Schedule 6), all registrations and
recordings thereof, and all applications in connection therewith, including,
without limitation, all registrations, recordings and applications in the United
States Copyright Office, and (ii) the right to obtain all renewals thereof.
"DIP Credit Facilities": as defined in the Senior Credit Facility.
"General Intangibles": all "general intangibles" as such term is defined in
Section 9-106 of the Uniform Commercial Code in effect in the State of New York
on the date hereof and, in any event, including, without limitation, with
respect to any Grantor, all contracts, agreements, instruments and indentures in
any form, and portions thereof, to which such Grantor is a party or under which
such Grantor has any right, title or interest or to which such Grantor or any
property of such Grantor is subject, as the same may from time to time be
amended, supplemented or otherwise modified, including, without limitation, (i)
all rights of such Grantor to receive moneys due and to become due to it
thereunder or in connection therewith, (ii) all rights of such Grantor to
damages arising thereunder and (iii) all rights of such Grantor to perform and
to exercise all remedies thereunder, in each case to the extent the grant by
such Grantor of a security interest pursuant to this Agreement in its right,
title and interest in such contract, agreement, instrument or indenture is not
prohibited by such contract, agreement, instrument or indenture without the
consent of any other party thereto, would not give any other party to such
contract, agreement, instrument or indenture the right to terminate its
obligations thereunder, or is permitted with consent if all necessary consents
to such grant of a security interest have been obtained from the other parties
thereto (it being
<PAGE>
3
understood that the foregoing shall not be deemed to obligate such Grantor to
obtain such consents); provided, that the foregoing limitation shall not affect,
limit, restrict or impair the grant by such Grantor of a security interest
pursuant to this Agreement in any Receivable or any money or other amounts due
or to become due under any such contract, agreement, instrument or indenture.
"Indenture": the Indenture dated as of November 24, 1998 by and among the
Company, the Subsidiary Guarantors named therein and the Trustee.
"Intellectual Property": the collective reference to all rights, priorities
and privileges relating to intellectual property, whether arising under United
States, multinational or foreign laws or otherwise, including, without
limitation, the Copyrights, the Copyright Licenses, the Patents, the Patent
Licenses, the Trademarks and the Trademark Licenses that are owned, held or used
in the business of any Grantor or any of its Subsidiaries, and all rights to sue
at law or in equity for any infringement or other impairment thereof, including
the right to receive all proceeds and damages therefrom.
"Intercompany Note": any promissory note evidencing loans made by any
Grantor to any of its Subsidiaries (that is not a Grantor).
"Intercreditor Agreement": the Intercreditor Agreement among (i) the
Company, (ii) the Collateral Agent and (iii) the Administrative Agent, dated as
of November 24, 1998.
"Issuers": the collective reference to each issuer of a Pledged Security.
"Letter of Credit": as defined as the Senior Credit Facility.
"Loan Security Documents": the "Security Documents" as defined in the
Senior Credit Facility.
"Material Adverse Effect": as defined in the Senior Credit Facility.
"New York UCC": the Uniform Commercial Code as from time to time in effect
in the State of New York.
"Obligations": the collective reference to any amounts owing to the
Securityholders in respect of principal and premium of and Interest, Liquidated
Damage, if any, and Defaulted Interest, if any, of the Securities under the
Indenture and all other obligations and liabilities of the Company and the
Subsidiary Guarantors (including, without limitation, amounts owing to
Securityholders under the Indenture after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Company or any Subsidiary Guarantor).
<PAGE>
4
"Patent License": all agreements, whether written or oral, providing for
the grant by Grantor of any right to manufacture, use or sell any invention
covered in whole or in part by a Patent, including, without limitation, any of
the foregoing referred to in Schedule 6.
"Patents": (i) all letters patent of the United States, any other country
or any political subdivision thereof, all reissues and extensions thereof and
all goodwill associated therewith, including, without limitation, any of the
foregoing referred to in Schedule 6, (ii) all applications for letters patent of
the United States or any other country and all divisions, continuations and
continuations-in-part thereof, including, without limitation, any of the
foregoing referred to in Schedule 6, and (iii) all rights to obtain any reissues
or extensions of the foregoing.
"Plan of Reorganization": the Grantors' First Amended and Modified
Consolidated Plan of Reorganization under Chapter 11 of the Bankruptcy Code
dated August 19, 1998 as confirmed by the Bankruptcy Court on October 15, 1998.
"Pledged Notes": all promissory notes listed on Schedule 2, all
Intercompany Notes at any time issued to any Grantor and all other promissory
notes issued to or held by any Grantor (other than promissory notes issued in
connection with extensions of trade credit by any Grantor in the ordinary course
of business).
"Pledged Securities": the collective reference to the Pledged Notes and the
Pledged Stock.
"Pledged Stock": the shares of Capital Stock listed on Schedule 2, together
with any other shares, stock certificates, options or rights of any nature
whatsoever in respect of the Capital Stock of any Person that may be issued or
granted to, or held by, any Grantor while this Agreement is in effect.
"Proceeds": all "proceeds" as such term is defined in Section 9-306(1) of
the Uniform Commercial Code in effect in the State of New York on the date
hereof and, in any event, shall include, without limitation, all dividends or
other income from the Pledged Securities, collections thereon or distributions
or payments with respect thereto.
"Property": any right or interest in or to property of any kind whatsoever,
whether real, personal or mixed and whether tangible or intangible, including,
without limitation, Capital Stock.
"Receivable": any right to payment for goods sold or leased or for services
rendered, whether or not such right is evidenced by an Instrument or Chattel
Paper and whether or not it has been earned by performance (including, without
limitation, any Account).
<PAGE>
5
"Requirements of Laws": as to any Person, the Certificate of Incorporation
and By-Laws or other 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.
"Securities Act": the Securities Act of 1933, as amended.
"Substitution Event": collectively, (i) the payment in full in cash of the
Lender Obligations, (ii) the termination of all commitments by the Lenders to
extend credit under the Senior Credit Facility, (iii) the termination of the
rights of the Administrative Agent under the Intercreditor Agreement and (iv)
the continuance of the Obligations hereunder.
"Trademark License": any agreement, whether written or oral, providing for
the grant by or to any Grantor of any right to use any Trademark, including,
without limitation, any of the foregoing referred to in Schedule 6.
"Trademarks": (i) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, service marks,
logos and other source or business identifiers, and all goodwill associated
therewith, now existing or hereafter adopted or acquired, all registrations and
recordings thereof, and all applications in connection therewith, whether in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, and all common-law rights related thereto,
including, without limitation, any of the foregoing referred to in Schedule 6,
and (ii) the right to obtain all renewals thereof.
"Unperfected Collateral": as defined in Section 3.2.
"Vehicles": all cars, trucks, trailers, construction and earth moving
equipment and other vehicles covered by a certificate of title law of any state
and all tires and other appurtenances to any of the foregoing.
1.2 Other Definitional Provisions. (a) The words "hereof," "herein",
"hereto" 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 and Schedule references are to this Agreement unless
otherwise specified.
(b) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral or any
part thereof, when used in relation to a Grantor, shall refer to such Grantor's
Collateral or the relevant part thereof.
<PAGE>
6
SECTION 2. GRANT OF SECURITY INTEREST
2.1 Collateral. For the purposes of this Agreement, all of the following
property now owned or at any time hereafter acquired by a Grantor or in which a
Grantor now has or at any time in the future may acquire any right, title or
interest is collectively referred to as the "Collateral":
(a) all Accounts;
(b) all Chattel Paper;
(c) all Contracts;
(d) all Documents;
(e) all Equipment;
(f) all General Intangibles;
(g) all Instruments;
(h) all Intellectual Property;
(i) all Inventory;
(j) all Pledged Securities;
(k) all Vehicles;
(l) all Investment Property;
(m) all deposit accounts and other bank accounts;
(n) all books and records pertaining to the Collateral; and
(o) to the extent not otherwise included, all Proceeds and products of any
and all of the foregoing and all collateral security and guarantees given by any
Person with respect to any of the foregoing.
2.2 Grant of Second Priority Security Interest. As collateral security for
the prompt and complete payment and performance when due (whether at stated
maturity, acceleration or otherwise) of the Obligations, each Grantor hereby
grants, assigns and transfers to the Collateral Agent for the benefit of the
Securityholders a second priority security interest in all of its Collateral,
subject to the first priority security interest in such Collateral created in
favor of
<PAGE>
7
the Administrative Agent by the Loan Collateral Agreement, and subject to the
other Liens permitted by Section 4.6 of the Indenture.
2.3 Acknowledgment Regarding Intercreditor Agreement. Each Securityholder,
by its acceptance of the Securities, consents and agrees to the terms of the
Intercreditor Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Trustee to enter into the Indenture, the Initial Purchaser to
enter into the Amended and Restated Purchase Agreement and the prospective
purchasers of the Initial Securities to purchase the Initial Securities from the
Initial Purchaser as contemplated by the Amended and Restated Purchase Agreement
and the Indenture, each Grantor hereby represents and warrants to the Collateral
Agent on behalf of the Securityholders that:
3.1 Title; No Other Liens. Except for (a) the security interest granted to
the Administrative Agent for the benefit of the Lenders under the Senior Credit
Facility pursuant to the Loan Collateral Agreement and the other Loan Security
Documents, and the security interest granted to the Collateral Agent for the
benefit of the Securityholders pursuant to this Agreement and the other Security
Documents and (b) the other Liens permitted to exist on the Collateral by
Section 4.6 of the Indenture, such Grantor owns each item of the Collateral free
and clear of any and all Liens or claims of others. No financing statement,
other than with respect to the DIP Facilities, or other public notice with
respect to all or any part of the Collateral is on file or of record in any
public office, except such as have been filed in favor of (i) the Administrative
Agent pursuant to the Loan Collateral Agreement and the other Loan Security
Documents, (ii) the Collateral Agent pursuant to this Agreement and the other
Security Documents or except as shall be terminated on the date hereof and (iii)
the other Liens permitted to exist on the Collateral by Section 4.6 of the
Indenture..
3.2 Perfected Liens. The security interests granted pursuant to this
Agreement (a) upon completion of the filings and other actions specified on
Schedule 3 (which, in the case of all filings and other documents referred to on
said Schedule, have been delivered to the Collateral Agent in completed and duly
executed form) will constitute valid perfected security interests in all of the
Collateral (except for Vehicles and Intellectual Property not listed on Schedule
6 (the "Unperfected Collateral")) in favor of the Collateral Agent, for the
benefit of the Securityholders, as collateral security for such Grantor's
Obligations, enforceable in accordance with the terms hereof and applicable law
against all creditors of such Grantor and (b) are prior to all other Liens on
the Collateral in existence on the date hereof except for (i) Liens granted to
the Administrative Agent for the benefit of the Lenders under the Senior Credit
Facility pursuant to the Loan Collateral Agreement and the other Loan Security
Documents, (ii) Liens permitted by Section 4.6 of the Indenture, (iii) Liens
which have priority over the Liens on the Collateral by operation of law and
(iv) Liens described on Schedule 8.
3.3 Chief Executive Office. On the date hereof, such Grantor's jurisdiction
of organization and the location of such Grantor's chief executive office or
sole place of business are specified on Schedule 4.
<PAGE>
8
3.4 Inventory and Equipment. On the date hereof, the Inventory and the
Equipment (other than mobile goods) are kept at the locations listed on Schedule
5.
3.5 Farm Products. None of the Collateral constitutes, or is the Proceeds
of, Farm Products.
3.6 Pledged Securities. (a) The shares of Pledged Stock pledged by such
Grantor held by the Administrative Agent under the Loan Collateral Agreement and
in which, pursuant to this Agreement and the Intercreditor Agreement, the
Collateral Agent has a second security interest, constitute all the issued and
outstanding shares of all classes of the Capital Stock of each domestic Issuer
owned by such Grantor.
(b) All the shares of the Pledged Stock have been duly and validly issued
and are fully paid and nonassessable.
(c) Each of the Pledged Notes constitutes the legal, valid and binding
obligation of the obligor with respect thereto, enforceable in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
(d) Such Grantor is the record and beneficial owner of, and has good and
marketable title to, the Pledged Securities pledged by it hereunder, free of any
and all Liens or options in favor of, or claims of, any other Person, except the
security interest created by this Agreement.
(e) Pursuant to Section 8 of the Intercreditor Agreement, the
Administrative Agent has agreed, upon (i) the payment in full of all Lender
Obligations (as defined in the Intercreditor Agreement) and the termination of
all commitments to extend credit under the Senior Credit Facility and (ii) the
request of the Trustee, to (x) provide a written acknowledgment of (i) above and
that the Senior Secured Parties (as defined in the Intercreditor Agreement) have
no further rights under the Intercreditor Agreement in respect of the Collateral
and (y) deliver to the Trustee any items of Collateral held in the possession of
the Administrative Agent, provided that there are Trustee Obligations (as
defined in the Intercreditor Agreement) then outstanding.
3.7 Receivables. (a) No amount payable to such Grantor under or in
connection with any Receivable is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Administrative Agent or, after the
Substitution Event, the Collateral Agent.
(b) Substantially all of the obligors on Receivables are not Governmental
Authorities.
<PAGE>
9
(c) The amounts represented by such Grantor to the Securityholders and the
Collateral Agent from time to time as owing to such Grantor in respect of the
Receivables will at such times be accurate.
3.8 Contracts. (a) No consent of any party (other than such Grantor) to any
Contract is required, or purports to be required, in connection with the
execution, delivery and performance of this Agreement.
(b) Each Contract is in full force and effect and constitutes a valid and
legally enforceable obligation of the parties thereto, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
(c) No consent or authorization of, filing with or other act by or in
respect of any Governmental Authority is required in connection with the
execution, delivery, performance, validity or enforceability of any of the
Contracts by any party thereto other than those which have been duly obtained,
made or performed, are in full force and effect and do not subject the scope of
any such Contract to any material adverse limitation, either specific or general
in nature.
(d) Neither such Grantor nor (to the best of such Grantor's knowledge) any
of the other parties to the Contracts is in default in the performance or
observance of any of the terms thereof in any manner that, in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
(e) The right, title and interest of such Grantor in, to and under the
Contracts are not subject to any defenses, offsets, counterclaims or claims
that, in the aggregate, could reasonably be expected to have a Material Adverse
Effect.
(f) Such Grantor has delivered to the Collateral Agent a complete and
correct copy of each Contract, including all amendments, supplements and other
modifications thereto.
(g) No amount payable to such Grantor under or in connection with any
Contract is evidenced by any Instrument or Chattel Paper which has not been
delivered to the Administrative Agent or, after the Substitution Event, the
Collateral Agent.
(h) None of the parties to any Contract is a Governmental Authority.
3.9 Intellectual Property. (a) Schedule 6 lists all registrations,
applications for, and all material unregistered Intellectual Property owned by
such Grantor in its own name on the date hereof.
(b) On the date hereof, all material Intellectual Property is valid,
subsisting, unexpired and enforceable, has not been abandoned and, to the best
knowledge of such Grantor, does not infringe the intellectual property rights of
any other Person.
<PAGE>
10
(c) Except as set forth in Schedule 6, on the date hereof, none of the
Intellectual Property is the subject of any licensing or franchise agreement
pursuant to which such Grantor is the licensor or franchisor.
(d) No holding, decision or judgment has been rendered by any Governmental
Authority which would limit, cancel or question the validity of, or such
Grantor's rights in, any Intellectual Property in any respect that could
reasonably be expected to have a Material Adverse Effect.
(e) No action or proceeding is pending, or, to the knowledge of such
Grantor, threatened, on the date hereof (i) seeking to limit, cancel or question
the validity of any Intellectual Property or such Grantor's ownership interest
therein, or (ii) which, if adversely determined, would have a material adverse
effect on the value of any Intellectual Property.
SECTION 4. COVENANTS
Each Grantor covenants and agrees with the Collateral Agent and the
Securityholders that, from and after the date of this Agreement until the
Obligations shall have been paid in full:
4.1 Delivery of Instruments and Chattel Paper. (a) If any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper, such Instrument or Chattel Paper shall be
immediately delivered to the Administrative Agent, duly indorsed in a manner
satisfactory to the Administrative Agent, to be held as Collateral pursuant to
this Agreement, subject to Section 8 of the Intercreditor Agreement.
(b) If the Substitution Event shall have occurred, if any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper, such Instrument or Chattel Paper shall be
immediately delivered to the Collateral Agent, duly indorsed in a manner
satisfactory to the Collateral Agent, to be held as Collateral pursuant to this
Agreement.
4.2 Maintenance of Insurance. (a) Such Grantor will maintain, with
financially sound and reputable companies, insurance policies (i) insuring the
Inventory, Equipment and Vehicles against loss by fire, explosion, theft and
such other casualties as may be reasonably satisfactory to the Collateral Agent
and (ii) to the extent requested by the Collateral Agent, insuring such Grantor,
the Collateral Agent, and the Securityholders against liability for personal
injury and property damage relating to such Inventory, Equipment and Vehicles,
such policies to be in such form and amounts and having such coverage as may be
reasonably satisfactory to the Collateral Agent.
(b) All such insurance shall (i) provide that no cancellation, material
reduction in amount or material change in coverage thereof shall be effective
until at least 30 days after receipt by the Collateral Agent of written notice
thereof, (ii) name the Collateral Agent as insured
<PAGE>
11
party or loss payee, (iii) if reasonably requested by the Collateral Agent,
include a breach of warranty clause and (iv) be reasonably satisfactory in all
other respects to the Collateral Agent.
(c) Upon the reasonable request of the Collateral Agent, the Grantors shall
deliver to the Collateral Agent, the Securityholders and the Trustee a report of
a reputable insurance broker with respect to such insurance substantially
concurrently with the delivery by the Grantors to the Collateral Agent of their
audited financial statements for each fiscal year and such supplemental reports
with respect thereto as the Collateral Agent may from time to time reasonably
request.
(d) Notwithstanding the foregoing paragraphs (a) through (c), to the extent
the powers granted to the Collateral Agent in such paragraphs are granted to the
Administrative Agent under the Loan Collateral Agreement, the Administrative
Agent's exercise of such powers shall control.
4.3 Payment of Obligations. Such Grantor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes (except as may be treated under the Plan of
Reorganization), assessments and governmental charges or levies imposed upon the
Collateral or in respect of income or profits therefrom, as well as all claims
of any kind (including, without limitation, claims for labor, materials and
supplies) against or with respect to the Collateral, except that no such charge
need be paid if the amount or validity thereof is currently being contested in
good faith by appropriate proceedings, reserves in conformity with GAAP with
respect thereto have been provided on the books of such Grantor and such
proceedings could not reasonably be expected to result in the sale, forfeiture
or loss of any material portion of the Collateral or any interest therein.
4.4 Maintenance of Perfected Security Interest; Further Documentation. (a)
Such Grantor shall maintain the security interest created by this Agreement as a
perfected security interest (except with respect to Unperfected Collateral, to
the extent that filing of UCC financing statements is insufficient to perfect a
security interest in such Unperfected Collateral) having at least the priorities
described in Section 2 hereof and shall defend such security interest against
the claims and demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Collateral Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Collateral Agent may
reasonably request, all in reasonable detail.
(c) At any time and from time to time, upon the written request of the
Collateral Agent, and at the sole expense of such Grantor, such Grantor will
promptly and duly execute and deliver, and have recorded, such further
instruments and documents and take such further actions as the Collateral Agent
may reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code (or other similar laws) in effect
in any jurisdiction with respect to the security interests created hereby.
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12
4.5 Changes in Locations, Name, etc. Such Grantor will not, except upon 15
days' prior written notice to the Collateral Agent and delivery to the
Collateral Agent of (a) all additional executed financing statements and other
documents reasonably requested by the Collateral Agent to maintain the validity,
perfection and priority of the security interests provided for herein and (b) if
applicable, a written supplement to Schedule 5 showing any additional location
at which Inventory or Equipment shall be kept:
(i) permit any of the Inventory or Equipment to be kept at a location
other than those listed on Schedule 5, except with respect to Equipment
under repair and held by bailees;
(ii) change the location of its chief executive office or sole place
of business from that referred to in Section 3.3; or
(iii) change its name, identity or corporate structure to such an
extent that any financing statement filed by the Collateral Agent in
connection with this Agreement would become misleading.
4.6 Notices. Such Grantor will advise the Collateral Agent promptly, in
reasonable detail, of:
(a) any Lien (other than security interests created hereby or Liens
permitted under the Indenture) on any of the Collateral which would adversely
affect the ability of the Collateral Agent to exercise any of its remedies
hereunder; and
(b) of the occurrence of any other event which could reasonably be expected
to have a material adverse effect on the aggregate value of the Collateral or on
the security interests created hereby (the materiality of the adverse nature of
any such occurrence or other event will not be presumed by the sending of any
such notice).
4.7 Pledged Securities. (a) Subject to Section 8 of the Intercreditor
Agreement, if, prior to the occurrence of the Substitution Event, such Grantor
shall become entitled to receive or shall receive any stock certificate
(including, without limitation, any certificate representing a stock dividend or
a distribution in connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any reorganization), option
or rights in respect of the Capital Stock of any Issuer, whether in addition to,
in substitution of, as a conversion of, or in exchange for, any shares of the
Pledged Stock, or otherwise in respect thereof, such Grantor shall accept the
same as the agent of the Administrative Agent, hold the same in trust for the
Administrative Agent, and deliver the same forthwith to the Administrative Agent
in the exact form received, duly indorsed by such Grantor to the Administrative
Agent, if required, together with an undated stock power covering such
certificate duly executed in blank by such Grantor and with, if the
Administrative Agent so requests, signature guaranteed, to be held by the
Administrative Agent, subject to the terms hereof and of the Intercreditor
Agreement, as additional collateral security for the Obligations. Subject to the
provisions of the Indenture, any sums paid upon or in respect of the Pledged
Securities upon the liquidation or dissolution of any Issuer shall be paid over
to the Administrative Agent to be held by it, subject to the terms of the
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13
Intercreditor Agreement, as additional collateral security for the Obligations,
and in case any distribution of capital shall be made on or in respect of the
Pledged Securities or any property shall be distributed upon or with respect to
the Pledged Securities pursuant to the recapitalization or reclassification of
the capital of any Issuer or pursuant to the reorganization thereof, the
property so distributed shall, unless otherwise subject to a perfected security
interest in favor of the Administrative Agent, be delivered to the
Administrative Agent to be held by it, subject to the terms of the Intercreditor
Agreement, as additional collateral security for the Obligations. If any sums of
money or property so paid or distributed in respect of the Pledged Securities
shall be received by such Grantor, such Grantor shall, until such money or
property is paid or delivered to the Administrative Agent, hold such money or
property in trust for the Collateral Agent, subject to Section 8 of the
Intercreditor Agreement, segregated from other funds of such Grantor, as
additional collateral security for the Obligations.
(b) If (i) the Substitution Event shall have occurred and (ii) any Grantor
referred to in Section 4.7(a) shall become entitled to receive or shall receive
any stock certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate issued in
connection with any reorganization), option or rights in respect of the Capital
Stock of any Issuer, whether in addition to, in substitution of, as a conversion
of, or in exchange for, any shares of the Pledged Stock, or otherwise in respect
thereof, such Grantor shall accept the same as the agent of the Collateral
Agent, hold the same in trust for the Collateral Agent, and deliver the same
forthwith to the Collateral Agent in the exact form received, duly indorsed by
such Grantor to the Collateral Agent, if required, together with an undated
stock power covering such certificate duly executed in blank by such Grantor and
with, if the Collateral Agent so requests, signature guaranteed, to be held by
the Collateral Agent, subject to the terms hereof, as additional collateral
security for the Obligations. Subject to the provisions of the Indenture any
sums paid upon or in respect of the Pledged Securities upon the liquidation or
dissolution of any Issuer shall be paid over to the Collateral Agent to be held
by it hereunder as additional collateral security for the Obligations, and in
case any distribution of capital shall be made on or in respect of the Pledged
Securities or any property shall be distributed upon or with respect to the
Pledged Securities pursuant to the recapitalization or reclassification of the
capital of any Issuer or pursuant to the reorganization thereof, the property so
distributed shall, unless otherwise subject to a perfected security interest in
favor of the Collateral Agent, be delivered to the Collateral Agent to be held
by it hereunder as additional collateral security for the Obligations. If any
sums of money or property so paid or distributed in respect of the Pledged
Securities shall be received by such Grantor, such Grantor shall, until such
money or property is paid or delivered to the Collateral Agent, hold such money
or property in trust for the Collateral Agent, pursuant to Section 8 of the
Intercreditor Agreement, segregated from other funds of such Grantor, as
additional collateral security for the Obligations.
(c) Following the occurrence of the Substitution Event and without the
prior written consent of the Collateral Agent, the Grantor referred to in
Section 4.7(a) will not (i) vote to enable, or take any other action to permit,
any Issuer to issue any stock or other equity securities of any nature or to
issue any other securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of any Issuer,
(ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the
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14
Pledged Securities or Proceeds thereof (except pursuant to a transaction
expressly permitted by the Indenture), (iii) create, incur or permit to exist
any Lien or option in favor of, or any claim of any Person with respect to, any
of the Pledged Securities or Proceeds thereof, or any interest therein, except
for the security interests created by this Agreement or (iv) enter into any
agreement or undertaking restricting the right or ability of such Grantor or the
Collateral Agent to sell, assign or transfer any of the Pledged Securities or
Proceeds thereof.
(d) In the case of each Grantor which is an Issuer, such Issuer agrees that
(i) it will be bound by the terms of this Agreement relating to the Pledged
Securities issued by it and will comply with such terms insofar as such terms
are applicable to it, (ii) it will notify the Collateral Agent promptly in
writing of the occurrence of any of the events described in Section 4.7(a) with
respect to the Pledged Securities issued by it and (iii) the terms of Sections
5.3(c) and 5.7 shall apply to it, mutatis mutandis, with respect to all actions
that may be required of it pursuant to Section 5.3(c) or 5.7 with respect to the
Pledged Securities issued by it.
4.8 Receivables. (a) Other than in the ordinary course of business
consistent with its past practice, such Grantor will not (i) grant any extension
of the time of payment of any Receivable, (ii) compromise or settle any
Receivable for less than the full amount thereof, (iii) release, wholly or
partially, any Person liable for the payment of any Receivable, (iv) allow any
credit or discount whatsoever on any Receivable or (v) amend, supplement or
modify any Receivable in any manner that could adversely affect the value
thereof.
(b) Such Grantor will deliver to the Collateral Agent a copy of each
material demand, notice or document received by it that questions or calls into
doubt the validity or enforceability of more than 5% of the aggregate amount of
the then outstanding Receivables.
4.9 Contracts. (a) Such Grantor will perform and comply in all material
respects with all its obligations under the Contracts.
(b) Such Grantor will not amend, modify, terminate or waive any provision
of any Contract in any manner which could reasonably be expected to materially
adversely affect the value of such Contract as Collateral.
(c) Such Grantor will exercise promptly and diligently each and every
material right which it may have under each Contract (other than any right of
termination).
(d) Such Grantor will deliver to the Collateral Agent a copy of each
material demand, notice or document received by it relating in any way to any
Contract that questions the validity or enforceability of such Contract.
4.10 Intellectual Property. (a) Such Grantor (either itself or through
licensees) will (i) continue to use each material Trademark on each and every
trademark class of goods applicable to its current line as reflected in its
current catalogs, brochures and price lists in order to maintain such Trademark
in full force free from any claim of abandonment for non-use, (ii) maintain as
in the past the quality of products and services offered under each material
Trademark, (iii) use such Trademark with the appropriate notice of registration
and all other
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15
notices and legends required by applicable Requirements of Law, (iv) not adopt
or use any mark which is confusingly similar or a colorable imitation of each
material Trademark unless the Collateral Agent, for the benefit of the
Securityholders, shall obtain a perfected security interest in such mark
pursuant to this Agreement, and (v) not (and not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby each
material Trademark may become invalidated or impaired in any way.
(b) Such Grantor (either itself or through licensees) will not do any act,
or omit to do any act, whereby any material Patent may become forfeited,
abandoned or dedicated to the public.
(c) Such Grantor (either itself or through licensees) (i) will not (and
will not permit any licensee or sublicensee thereof to) do any act or knowingly
omit to do any act whereby any material Copyright may become invalidated or
otherwise impaired or fall into the public domain.
(d) Such Grantor (either itself or through licensees) will not do any act
that knowingly uses any material Intellectual Property to infringe the
intellectual property rights of any other Person.
(e) Such Grantor will notify the Collateral Agent immediately if it knows,
or has reason to know, that any application or registration relating to any
material Intellectual Property may become forfeited, abandoned or dedicated to
the public, or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, the United States
Copyright Office or any court or tribunal in any country) regarding such
Grantor's ownership of, or the validity of, any material Intellectual Property
or such Grantor's right to register the same or to own and maintain the same.
(f) Whenever such Grantor, either by itself or through any agent, employee,
licensee or designee, shall file an application for the registration of any
Intellectual Property with the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, such Grantor shall report such
filing to the Collateral Agent within five Business Days after the last day of
the fiscal quarter in which such filing occurs. Upon request of the Collateral
Agent, such Grantor shall execute and deliver, and have recorded, any and all
agreements, instruments, documents, and papers as the Collateral Agent may
request to evidence the Collateral Agent's security interest in any Copyright,
Patent or Trademark and the goodwill and general intangibles of such Grantor
relating thereto or represented thereby.
(g) Such Grantor will take all reasonable and necessary steps, including,
without limitation, in any proceeding before the United States Patent and
Trademark Office, the United States Copyright Office or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the material Intellectual Property, including,
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16
without limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
(h) In the event that any material Intellectual Property is infringed,
misappropriated or diluted by a third party, such Grantor shall (i) take such
actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and promptly notify the
Collateral Agent after it learns thereof and take all appropriate remedial
action, including, when appropriate, sue for infringement, misappropriation or
dilution, to seek injunctive relief where appropriate and to recover any and all
damages for such infringement, misappropriation or dilution.
SECTION 5. REMEDIAL PROVISIONS
5.1 Certain Matters Relating to Receivables. (a) The Collateral Agent shall
have the right, following the occurrence of the Substitution Event, to make test
verifications of the Receivables in any manner and through any medium that it
reasonably considers advisable, and each Grantor shall furnish all such
assistance and information as the Collateral Agent may require in connection
with such test verifications. At any time and from time to time, following the
occurrence of the Substitution Event, upon the Collateral Agent's request and at
the expense of the relevant Grantor, such Grantor shall cause independent public
accountants or others satisfactory to the Collateral Agent to furnish to the
Collateral Agent reports showing reconciliations, aging and test verifications
of, and trial balances for, the Receivables; provided, however, that unless a
Default or Event Default shall have occurred and be continuing, the Collateral
Agent shall request no more than two (2) such reports during any calendar year.
(b) The Collateral Agent hereby authorizes each Grantor to collect such
Grantor's Receivables and the Collateral Agent may, following the occurrence of
the Substitution Event, curtail or terminate said authority at any time after
the occurrence and during the continuance of an Event of Default. If required by
the Collateral Agent, following the occurrence of the Substitution Event, at any
time after the occurrence and during the continuance of an Event of Default, any
payments of Receivables, when collected by any Grantor, (i) shall be forthwith
(and, in any event, within two Business Days) deposited by such Grantor in the
exact form received, duly indorsed by such Grantor to the Collateral Agent if
required, in a Collateral Account maintained under the sole dominion and control
of the Collateral Agent, subject to withdrawal by the Collateral Agent for the
account of Securityholders only as provided in Section 5.5, and (ii) until so
turned over, shall be held by such Grantor in trust for the Collateral Agent,
segregated from other funds of such Grantor. Each such deposit of Proceeds of
Receivables shall be accompanied by a report identifying in reasonable detail
the nature and source of the payments included in the deposit.
(c) At the Collateral Agent's request, each Grantor shall deliver to the
Collateral Agent all original and other documents evidencing, and relating to,
the agreements and transactions which gave rise to the Receivables, including,
without limitation, all original orders, invoices and shipping receipts in paper
and electronic format as may be directed by the Collateral Agent.
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5.2 Communications with Obligors; Grantors Remain Liable. (a) The
Collateral Agent in its own name or in the name of others may at any time after
the occurrence and during the continuance of an Event of Default, following the
occurrence of the Substitution Event, communicate with obligors under the
Receivables and parties to the Contracts to verify with them to the Collateral
Agent's satisfaction the existence, amount and terms of any Receivables or
Contracts.
(b) Upon the request of the Collateral Agent at any time after the
occurrence and during the continuance of an Event of Default, following the
occurrence of the Substitution Event, each Grantor shall notify obligors on the
Receivables and parties to the Contracts that the Receivables and the Contracts
have been assigned to the Collateral Agent for the benefit of the
Securityholders and that payments in respect thereof shall be made directly to
the Collateral Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor shall
remain liable under each of the Receivables and Contracts to observe and perform
all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise
thereto. Neither the Collateral Agent nor any Securityholder shall have any
obligation or liability under any Receivable (or any agreement giving rise
thereto) or Contract by reason of or arising out of this Agreement or the
receipt by the Collateral Agent or any Securityholder of any payment relating
thereto, nor shall the Collateral Agent or any Securityholder be obligated in
any manner to perform any of the obligations of any Grantor under or pursuant to
any Receivable (or any agreement giving rise thereto) or Contract, to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any party
thereunder, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
5.3 Pledged Stock. (a) Unless (i) the Substitution Event shall have
occurred, (ii) an Event of Default shall have occurred and be continuing and
(iii) the Collateral Agent shall have given notice to the relevant Grantor of
the Collateral Agent's intent to exercise its corresponding rights pursuant to
Section 5.3(b), each Grantor shall be permitted to receive all cash dividends
paid in respect of the Pledged Stock and all payments made in respect of the
Pledged Notes, in each case paid in the normal course of business of the
relevant Issuer and consistent with past practice, to the extent permitted in
the Indenture Agreement, and to exercise all voting and corporate rights with
respect to the Pledged Securities; provided, however, that no vote shall be cast
or corporate right exercised or other action taken which, in the Collateral
Agent's reasonable judgment, would impair the Collateral or which would be
inconsistent with or result in any violation of any provision of the Indenture
Agreement, this Agreement or any other Loan Document.
(b) If, following the occurrence of the Substitution Event, an Event of
Default shall occur and be continuing and the Collateral Agent shall give notice
of its intent to exercise such rights to the relevant Grantor or Grantors, (i)
the Collateral Agent shall have the right to receive any and all cash dividends,
payments or other Proceeds paid in respect of the Pledged
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18
Securities and make application thereof to the Obligations in the order set
forth in Section 5.5, and (ii) any or all of the Pledged Securities shall be
registered in the name of the Collateral Agent or its nominee, and the
Collateral Agent or its nominee may thereafter exercise (x) all voting,
corporate and other rights pertaining to such Pledged Securities at any meeting
of shareholders of the relevant Issuer or Issuers or otherwise and (y) any and
all rights of conversion, exchange and subscription and any other rights,
privileges or options pertaining to such Pledged Securities as if it were the
absolute owner thereof (including, without limitation, the right to exchange at
its discretion any and all of the Pledged Securities upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate structure of any Issuer, or upon the exercise by any Grantor or
the Collateral Agent of any right, privilege or option pertaining to such
Pledged Securities, and in connection therewith, the right to deposit and
deliver any and all of the Pledged Securities with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as the Collateral Agent may determine), all without liability except
to account for property actually received by it, but the Collateral Agent shall
have no duty to any Grantor to exercise any such right, privilege or option and
shall not be responsible for any failure to do so or delay in so doing.
(c) Each Grantor hereby authorizes and instructs each Issuer of any Pledged
Securities pledged by such Grantor hereunder, following the occurrence of the
Substitution Event, to (i) comply with any instruction received by it from the
Collateral Agent in writing that (x) states that an Event of Default has
occurred and is continuing and (y) is otherwise in accordance with the terms of
this Agreement, without any other or further instructions from such Grantor, and
each Grantor agrees that each Issuer shall be fully protected in so complying,
and (ii) unless otherwise expressly permitted hereby, pay any dividends or other
payments with respect to the Pledged Securities directly to the Collateral
Agent.
5.4 Proceeds to be Turned Over To Collateral Agent. (a) In addition to the
rights of the Collateral Agent specified in Section 5.1 with respect to payments
of Receivables, all Proceeds received by any Grantor consisting of cash, checks
and other near-cash items shall be held by such Grantor in trust for the
Collateral Agent to the extent of its second priority interest therein,
segregated from other funds of such Grantor, and shall, forthwith upon receipt
by such Grantor, be turned over to the Administrative Agent, pursuant to the
Intercreditor Agreement, in the exact form received by such Grantor (duly
indorsed by such Grantor to the Administrative Agent, if required). All Proceeds
received by the Administrative Agent hereunder shall be held by the
Administrative Agent in a Collateral Account maintained under its sole dominion
and control subject to the rights of the Collateral Agent pursuant to Section 8
of the Intercreditor Agreement. All Proceeds while held by the Administrative
Agent in a Collateral Account (or by such Grantor in trust for the Collateral
Agent and the Securityholders) shall continue to be held as collateral security
for all the Obligations and shall not constitute payment thereof until applied
as provided in Section 5.5.
(b) If (i) the Substitution Event shall have occurred and (ii) an Event of
Default shall occur and be continuing and the Collateral Agent shall give notice
of its intent to exercise such rights to the relevant Grantor or Grantors, (i)
the Collateral Agent shall have the right to receive any and all cash dividends,
payments or other Proceeds paid in respect of the Pledged Securities and make
application thereof to the Obligations in the order set forth in Section 5.5,
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and (ii) any or all of the Pledged Securities shall be registered in the name of
the Collateral Agent or its nominee, and the Collateral Agent or its nominee may
thereafter exercise (x) all voting, corporate and other rights pertaining to
such Pledged Securities at any meeting of shareholders of the relevant Issuer or
Issuers or otherwise and (y) any and all rights of conversion, exchange and
subscription and any other rights, privileges or options pertaining to such
Pledged Securities as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged
Securities upon the merger, consolidation, reorganization, recapitalization or
other fundamental change in the corporate structure of any Issuer, or upon the
exercise by any Grantor or the Collateral Agent of any right, privilege or
option pertaining to such Pledged Securities, and in connection therewith, the
right to deposit and deliver any and all of the Pledged Securities with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as the Collateral Agent may determine), all without
liability except to account for property actually received by it, but the
Collateral Agent shall have no duty to any Grantor to exercise any such right,
privilege or option and shall not be responsible for any failure to do so or
delay in so doing.
5.5 Application of Proceeds. If (i) the Substitution Event shall have
occurred and (ii) an Event of Default shall have occurred and be continuing, at
any time at the Collateral Agent's election, the Collateral Agent may apply all
or any part of Proceeds constituting Collateral, whether or not held in any
Collateral Account in payment of the Obligations in the order specified in the
Indenture.
5.6 Code and Other Remedies. If an Event of Default shall occur and be
continuing, the Collateral Agent, on behalf of the Securityholders and the
Trustee, may exercise, in addition to all other rights and remedies granted to
them in this Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations, all rights and remedies of a secured
party under the New York UCC or any other applicable law, subject to the
Intercreditor Agreement. Without limiting the generality of the foregoing and
subject to the Intercreditor Agreement, the Collateral Agent, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon any
Grantor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived) may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give option or options
to purchase, or otherwise dispose of and deliver the Collateral or any part
thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, at any exchange, broker's board or office of
the Collateral Agent or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk. Subject to the
Intercreditor Agreement, the Collateral Agent shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold, free
of any right or equity of redemption in any Grantor, which right or equity is
hereby waived and released. Each Grantor further agrees, at the Collateral
Agent's request, to assemble the Collateral and make it available to the
Collateral Agent at places which the Collateral Agent shall reasonably select,
whether at such Grantor's premises or elsewhere. The Collateral Agent shall
apply the net proceeds of any action taken by it pursuant to this Section 5.6,
after deducting all reasonable
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20
costs and expenses of every kind incurred in connection therewith or incidental
to the care or safekeeping of any of the Collateral or in any way relating to
the Collateral or the rights of the Collateral Agent or the Securityholders
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Obligations, in such
order as the Collateral Agent may elect, and only after such application and
after the payment by the Collateral Agent of any other amount required by any
provision of law, including, without limitation, Section 9-504(1)(c) of the New
York UCC, need the Collateral Agent account for the surplus, if any, to any
Grantor. To the extent permitted by applicable law, each Grantor waives all
claims, damages and demands it may acquire against the Collateral Agent or any
Securityholder arising out of the exercise by them of any rights hereunder. If
any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition.
5.7 Registration Rights. (a) If (i) the Collateral Agent shall determine to
exercise its right to sell any or all of the Pledged Stock pursuant to Section
5.6, (ii) the Substitution Event shall have occurred and (iii) in the opinion of
the Collateral Agent it is necessary or advisable to have the Pledged Stock, or
that portion thereof to be sold, registered under the provisions of the
Securities Act, then the relevant Grantor will cause the Issuer thereof to (i)
execute and deliver, and cause the directors and officers of such Issuer to
execute and deliver, all such instruments and documents, and do or cause to be
done all such other acts as may be, in the opinion of the Collateral Agent,
necessary or advisable to register the Pledged Stock, or that portion thereof to
be sold, under the provisions of the Securities Act, (ii) use its best efforts
to cause the registration statement relating thereto to become effective and to
remain effective for a period of one year from the date of the first public
offering of the Pledged Stock, or that portion thereof to be sold, and (iii)
make all amendments thereto and/or to the related prospectus which, in the
opinion of the Collateral Agent, are necessary or advisable, all in conformity
with the requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Each Grantor agrees to
cause such Issuer to comply with the provisions of the securities or "Blue Sky"
laws of any and all jurisdictions which the Collateral Agent shall designate and
to make available to its Securityholders, as soon as practicable, an earnings
statement (which need not be audited) which will satisfy the provisions of
Section 11(a) of the Securities Act.
(b) Each Grantor recognizes that the Collateral Agent may be unable to
effect a public sale of any or all the Pledged Stock, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Collateral
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.
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21
(c) Each Grantor agrees to use its best efforts to do or cause to be done
all such other acts as may be necessary to make such sale or sales of all or any
portion of the Pledged Stock pursuant to this Section 5.7 valid and binding and
in compliance with any and all other applicable Requirements of Law. Each
Grantor further agrees that a breach of any of the covenants contained in this
Section 5.7 will cause irreparable injury to the Collateral Agent and the
Securityholders, that the Collateral Agent and the Securityholders have no
adequate remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained in this Section 5.7 shall be specifically
enforceable against such Grantor, and such Grantor hereby waives and agrees not
to assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred under the
Indenture.
5.8 Waiver; Deficiency. Each Grantor waives and agrees not to assert any
rights or privileges which it may acquire under Section 9-112 of the New York
UCC. Each Grantor shall remain liable for any deficiency if the proceeds of any
sale or other disposition of the Collateral are insufficient to pay its
Obligations and the fees and disbursements of any attorneys employed by the
Collateral Agent or any Securityholder to collect such deficiency.
SECTION 6. THE COLLATERAL AGENT
6.1 Collateral Agent's Appointment as Attorney-in-Fact, etc. (a) Subject to
the Loan Collateral Agreement and the Intercreditor Agreement, each Grantor,
pursuant to Section 11.1 of the Indenture, hereby irrevocably constitutes and
appoints the Collateral Agent and any officer or agent thereof, with full power
of substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Grantor and in the name of
such Grantor or in its own name, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, and, without limiting the generality of the
foregoing, each Grantor hereby gives the Collateral Agent the power and right,
on behalf of such Grantor, without notice to or assent by such Grantor to do any
or all of the following:
(i) in the name of such Grantor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Receivable or Contract or with respect to any other Collateral and file any
claim or take any other action or proceeding in any court of law or equity
or otherwise deemed appropriate by the Collateral Agent for the purpose of
collecting any and all such moneys due under any Receivable or Contract or
with respect to any other Collateral whenever payable;
(ii) in the case of any Intellectual Property, execute and deliver,
and have recorded, any and all agreements, instruments, documents and
papers as the Collateral Agent may request to evidence the Collateral
Agent's security interest in such Intellectual Property and the goodwill
and general intangibles of such Grantor relating thereto or represented
thereby;
<PAGE>
22
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of the
premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in Section 5.6
or 5.7, any indorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
(v) (1) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Collateral Agent or as the Collateral Agent
shall direct; (2) ask or demand for, collect, and receive payment of and
receipt for, any and all moneys, claims and other amounts due or to become
due at any time in respect of or arising out of any Collateral; (3) sign
and indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (4) commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any portion thereof and to enforce any other right in respect
of any Collateral; (5) defend any suit, action or proceeding brought
against such Grantor with respect to any Collateral; (6) settle, compromise
or adjust any such suit, action or proceeding and, in connection therewith,
give such discharges or releases as the Collateral Agent may deem
appropriate; (7) assign any Copyright, Patent or Trademark (along with the
goodwill of the business to which any such Copyright, Patent or Trademark
pertains), throughout the world for such term or terms, on such conditions,
and in such manner, as the Collateral Agent shall in its sole discretion
determine; and (8) generally, sell, transfer, pledge and make any agreement
with respect to or otherwise deal with any of the Collateral as fully and
completely as though the Collateral Agent were the absolute owner thereof
for all purposes, and do, at the Collateral Agent's option and such
Grantor's expense, at any time, or from time to time, all acts and things
which the Collateral Agent deems necessary to protect, preserve or realize
upon the Collateral and the Collateral Agent's security interests therein
and to effect the intent of this Agreement, all as fully and effectively as
such Grantor might do.
Anything in this Section 6.1(a) to the contrary notwithstanding, the
Collateral Agent agrees that it will not exercise any rights under the power of
attorney provided for in this Section 6.1(a) (except for the rights provided in
Section 6.1(a)(iii)) unless an Event of Default shall have occurred and be
continuing, subject to the Intercreditor Agreement.
(b) Subject to the Loan Collateral Agreement and the Intercreditor
Agreement, any Grantor fails to perform or comply with any of its agreements
contained herein, the Collateral Agent, at its option, but without any
obligation so to do, may perform or comply, or otherwise cause performance or
compliance, with such agreement.
(c) The expenses of the Collateral Agent incurred in connection with
actions undertaken as provided in this Section 6.1, together with interest
thereon at a rate per annum equal to the Defaulted Interest under the Indenture,
from the date of payment by the Collateral
<PAGE>
23
Agent to the date reimbursed by the relevant Grantor, shall be payable by such
Grantor to the Collateral Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. All powers, authorizations and agencies
contained in this Agreement are coupled with an interest and are irrevocable
until this Agreement is terminated and the security interests created hereby are
released.
6.2 Duty of Collateral Agent. Without limiting any of the rights of the
Collateral Agent hereunder, the Collateral Agent's sole duty with respect to the
custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9- 207 of the New York UCC or otherwise, shall be to
deal with it in the same manner as the Collateral Agent deals with similar
property in its capacity as an indenture trustee, taking into account whether an
Event of Default has occurred and it is continuing. The Collateral Agent's sole
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the New York UCC or
otherwise, shall be to deal with it in the same manner as the Collateral Agent
deals with similar property for its own account. Neither the Collateral Agent
nor any Securityholder nor any of their respective officers, directors,
employees or agents shall be liable for failure to demand, collect or realize
upon any of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
any Grantor or any other Person or to take any other action whatsoever with
regard to the Collateral or any part thereof. The powers conferred on the
Collateral Agent hereunder are solely to protect the Collateral Agent's
interests in the Collateral for the benefit of the Securityholders and shall not
impose any duty upon the Collateral Agent or any Securityholder to exercise any
such powers. The Collateral Agent shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers, and neither they
nor any of their officers, directors, employees or agents shall be responsible
to any Grantor for any act or failure to act hereunder, except for their own
gross negligence or willful misconduct.
6.3 Execution of Financing Statements. Pursuant to Section 9-402 of the New
York UCC and any other applicable law, each Grantor authorizes the Collateral
Agent to file or record financing statements and other filing or recording
documents or instruments with respect to the Collateral without the signature of
such Grantor in such form and in such offices as the Collateral Agent reasonably
determines appropriate to perfect the security interests of the Collateral Agent
under this Agreement. A photographic or other reproduction of this Agreement
shall be sufficient as a financing statement or other filing or recording
document or instrument for filing or recording in any jurisdiction.
6.4 Authority of Collateral Agent. Each Grantor acknowledges that the
rights and responsibilities of the Collateral Agent under this Agreement with
respect to any action taken by the Collateral Agent or the exercise or
non-exercise by the Collateral Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Collateral Agent and the
Securityholders, be governed by the Indenture and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Collateral Agent and Grantors, the Collateral Agent shall be conclusively
presumed to be acting as agent for the Securityholders with full and
<PAGE>
24
valid authority so to act or refrain from acting, and no Grantor shall be under
any obligation, or entitlement, to make any inquiry respecting such authority.
SECTION 7. MISCELLANEOUS
7.1 Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with Section 10.1 of the Indenture.
7.2 Notices. All notices, requests and demands to or upon the Collateral
Agent or any Grantor hereunder shall be effected in the manner provided for in
Section 12.2 of the Indenture.
7.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the
Collateral Agent, nor any Securityholder shall by any act (except by a written
instrument pursuant to Section 7.1), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Collateral Agent or any Securityholder any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Collateral Agent or any Securityholder of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Collateral Agent or such Securityholder would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
7.4 Enforcement Expenses; Indemnification. (a) Each Grantor agrees to pay
or reimburse each Securityholder and the Collateral Agent for all its costs and
expenses incurred in enforcing or preserving any rights under this Agreement and
the other Loan Documents to which such Grantor is a party, including, without
limitation, the fees and disbursements of counsel (including the allocated fees
and expenses of in-house counsel) to each Lender and of counsel to the
Collateral Agent.
(b) Each Grantor agrees to pay, and to save the Collateral Agent and the
Securityholders harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales or other
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.
(c) The agreements in this Section shall survive repayment of the
Obligations and all other amounts payable under the Indenture and the other
Operative Documents.
7.5 Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of each Grantor and of the Collateral Agent and shall
inure to the benefit of the Collateral Agent and the Securityholders and their
successors and assigns; provided that no
<PAGE>
25
Grantor may assign, transfer or delegate any of its rights or obligations under
this Agreement without the prior written consent of the Collateral Agent.
7.6 Set-Off. Each Grantor hereby irrevocably authorizes the Collateral
Agent and each Securityholder at any time and from time to time while an Event
of Default shall have occurred and be continuing, without notice to such Grantor
or any other Grantor, any such notice being expressly waived by each Grantor, to
set-off and appropriate and apply 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 the Collateral Agent or such Securityholder to or for the credit or the
account of such Grantor (other than for the account of any Grantor acting in a
fiduciary or other special capacity), or any part thereof in such amounts as the
Collateral Agent or such Securityholder may elect, against and on account of the
obligations and liabilities of such Grantor to the Collateral Agent, such
Securityholder hereunder and claims of every nature and description of the
Collateral Agent or such Securityholder against such Grantor, in any currency,
whether arising hereunder, under the Indenture, any other Operative Document or
otherwise, as the Collateral Agent or such Securityholder may elect, whether or
not the Collateral Agent or any Securityholder has made any demand for payment
and although such obligations, liabilities and claims may be contingent or
unmatured. The Collateral Agent and each Securityholder shall notify such
Grantor promptly of any such set-off and the application made by the Collateral
Agent or such Lender of the proceeds thereof, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Collateral Agent and each Securityholder under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Collateral Agent or such Securityholder may have.
7.7 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.
7.8 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.
7.9 Section Headings. The Section headings used in this Agreement are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
7.10 Integration. This Agreement and the other Operative Documents
represent the agreement of the Grantors and the Collateral Agent with respect to
the subject matter hereof and thereof, and there are no promises, undertakings,
representations or warranties by the Collateral Agent or any Securityholder
relative to subject matter hereof and thereof not expressly set forth or
referred to herein or in the other Loan Documents.
<PAGE>
26
7.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
7.12 Submission To Jurisdiction; Waivers. Each of the Grantors and the
Collateral Agent hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Operative Documents to
which it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such party
at its address referred to in Section 7.2 or, with respect to the Grantors,
at such other address of which the Collateral Agent shall have been
notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent permitted by law, any right it may
have to claim or recover in any legal action or proceeding referred to in
this Section any special, exemplary, punitive or consequential damages.
7.13 Acknowledgements. Each of the Grantors and the Collateral Agent hereby
acknowledges that with respect to itself:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Operative Documents to which it is
a party;
(b) neither the Collateral Agent nor any Securityholder has any
fiduciary relationship with or duty to any Grantor arising out of or in
connection with this Agreement or any of the other Operative Documents, and
the relationship between the Grantors, on the one hand, and the Collateral
Agent and the Securityholders, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
<PAGE>
27
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Securityholders and the Collateral Agent or among the Grantors, the
Securityholders and the Collateral Agent.
7.14 Additional Grantors. Each Restricted Subsidiary that is required to
become a party to this Agreement pursuant to Section 10.7 of the Indenture shall
become a Grantor for all purposes of this Agreement upon execution and delivery
by such Restricted Subsidiary of an Assumption Agreement in the form of Annex 1
hereto.
7.15 Releases. (a) At such time as the Obligations shall have been paid in
full, the Collateral shall be released from the Liens created hereby, and this
Agreement and all obligations (other than those expressly stated to survive such
termination) of the Collateral Agent and each Grantor hereunder shall terminate,
all without delivery of any instrument or performance of any act by any party,
and all rights to the Collateral shall revert to the Grantors. At the request
and sole expense of any Grantor following any such termination, the Collateral
Agent shall deliver to such Grantor any Collateral held by the Collateral Agent
hereunder, and execute and deliver to such Grantor such documents as such
Grantor shall reasonably request to evidence such termination.
(b) If any of the Collateral shall be sold, transferred or otherwise
disposed of by any Grantor in a transaction permitted by the Indenture, then the
Collateral Agent, at the request and sole expense of such Grantor, shall execute
and deliver to such Grantor all releases or other documents reasonably necessary
or desirable for the release of the Liens created hereby on such Collateral.
7.16 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
<PAGE>
28
IN WITNESS WHEREOF, each of the undersigned has caused this Collateral
Agreement to be duly executed and delivered as of the date first above written.
HARVARD INDUSTRIES, INC.
By:
-----------------------------
Name:
Title:
DOEHLER-JARVIS, INC.
HARVARD TRANSPORTATION CORPORATION
DOEHLER-JARVIS GREENEVILLE, INC.
POTTSTOWN PRECISION CASTING, INC.
DOEHLER-JARVIS TECHNOLOGIES, INC.
DOEHLER-JARVIS TOLEDO, INC.
HARMAN AUTOMOTIVE, INC.
HAYES-ALBION CORPORATION
THE KINGSTON-WARREN CORPORATION
On behalf of each of the above
Subsidiary Guarantors
By:
-----------------------------
Name:
Title:
<PAGE>
Schedule 1
Intentionally Left Blank
<PAGE>
Schedule 2
DESCRIPTION OF PLEDGED SECURITIES
Pledged Stock:
Issuer Class of Stock Stock Certificate No. No. of Shares
- ------ -------------- --------------------- -------------
Pledged Notes:
Issuer Payee Principal Amount
- ------ ----- ----------------
<PAGE>
Schedule 3
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
Uniform Commercial Code Filings
[List each office where a financing statement is to be filed]
Patent and Trademark Filings
[List all filings]
Actions with respect to Pledged Stock
Other Actions
[Describe other actions to be taken]
<PAGE>
Schedule 4
LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE
Grantor Location
------- --------
Harvard Industries, Inc.
Doehler-Jarvis, Inc.
Harvard Transportation Corporation
Doehler-Jarvis Greeneville, Inc.
Pottstown Precision Casting, Inc.
Doehler-Jarvis Technologies, Inc.
Doehler-Jarvis Toledo, Inc.
Harman Automotive, Inc.
Hayes-Albion Corporation
The Kingston-Warren Corporation
<PAGE>
Schedule 5
LOCATION OF INVENTORY AND EQUIPMENT
Grantor Location
------- --------
Harvard Industries, Inc.
Doehler-Jarvis, Inc.
Harvard Transportation Corporation
Doehler-Jarvis Greeneville, Inc.
Pottstown Precision Casting, Inc.
Doehler-Jarvis Technologies, Inc.
Doehler-Jarvis Toledo, Inc.
Harman Automotive, Inc.
Hayes-Albion Corporation
The Kingston-Warren Corporation
<PAGE>
Schedule 6
COPYRIGHTS AND COPYRIGHT LICENSES
Harvard Industries, Inc.
Doehler-Jarvis, Inc.
Harvard Transportation Corporation
Doehler-Jarvis Greeneville, Inc.
Pottstown Precision Casting, Inc.
Doehler-Jarvis Technologies, Inc.
Doehler-Jarvis Toledo, Inc.
Harman Automotive, Inc.
Hayes-Albion Corporation
The Kingston-Warren Corporation
<PAGE>
PATENTS AND PATENT LICENSES
Harvard Industries, Inc.
Doehler-Jarvis, Inc.
Harvard Transportation Corporation
Doehler-Jarvis Greeneville, Inc.
Pottstown Precision Casting, Inc.
Doehler-Jarvis Technologies, Inc.
Doehler-Jarvis Toledo, Inc.
Harman Automotive, Inc.
Hayes-Albion Corporation
The Kingston-Warren Corporation
<PAGE>
TRADEMARKS AND TRADEMARK LICENSES
Harvard Industries, Inc.
Doehler-Jarvis, Inc.
Harvard Transportation Corporation
Doehler-Jarvis Greeneville, Inc.
Pottstown Precision Casting, Inc.
Doehler-Jarvis Technologies, Inc.
Doehler-Jarvis Toledo, Inc.
Harman Automotive, Inc.
Hayes-Albion Corporation
The Kingston-Warren Corporation
<PAGE>
Schedule 7
CONTRACTS
<PAGE>
Schedule 8
EXISTING PRIOR LIENS
<PAGE>
ISSUER
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the Collateral
Agreement dated as of November 24, 1998 (the "Agreement"), made by the Grantors
party thereto in favor of ________, as Collateral Agent. The undersigned agrees
for the benefit of the Collateral Agent, the Securityholders and the Trustee as
follows:
1. The undersigned will be bound by the terms of the Agreement and will
comply with such terms insofar as such terms are applicable to the undersigned.
2. The undersigned will notify the Collateral Agent promptly in writing of
the occurrence of any of the events described in Section 4.7(a) of the
Agreement.
3. The terms of Sections 5.3(a) and 5.7 of the Agreement shall apply to it,
mutatis mutandis, with respect to all actions that may be required of it
pursuant to Section 5.3(a) or 5.7 of the Agreement.
[NAME OF ISSUER]
By
---------------------------------------------------
Title
---------------------------------------------------
Address for Notices:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Fax:
---------------------------------------------------
<PAGE>
Annex 1 to
Collateral Agreement
FORM OF ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT, dated as of ________________, ____, made by
______________________________, a ______________ corporation (the "Additional
Grantor"), in favor of ___________________, as Collateral Agent for the
Securityholders, dated as of November 24, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Indenture"). All capitalized terms
not defined herein shall have the meaning ascribed to them in such Indenture.
W I T N E S S E T H :
WHEREAS, in connection with the Indenture, the Grantors (other than the
Additional Grantor) have entered into the Collateral Agreement, dated as of
November 24, 1998 (as amended, supplemented or otherwise modified from time to
time, the "Collateral Agreement") in favor of the Collateral Agent for the
benefit of the Securityholders;
WHEREAS, the Indenture requires the Additional Grantor to become a party to
the Collateral Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Collateral Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Collateral Agreement. By executing and delivering this Assumption
Agreement, the Additional Grantor, as provided in Section 7.14 of the Collateral
Agreement, hereby becomes a party to the Collateral Agreement as a Grantor
thereunder with the same force and effect as if originally named therein as a
Grantor and, without limiting the generality of the foregoing, hereby expressly
assumes all obligations and liabilities of a Grantor thereunder. The information
set forth in Annex 1-A hereto is hereby added to the information set forth in
Schedules ____________ to the Collateral Agreement. The Additional Grantor
hereby represents and warrants that each of the representations and warranties
contained in Section 3 of the Collateral Agreement is true and correct on and as
the date hereof (after giving effect to this Assumption Agreement) as if made on
and as of such date.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
<PAGE>
2
IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to
be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTOR]
By:
-----------------------------
Name:
Title:
<PAGE>
EXHIBIT D
FORM OF SECOND PRIORITY MORTGAGE
THIS SECOND PRIORITY MORTGAGE, dated as of November , 1998 is made by
HARVARD INDUSTRIES, INC., a Delaware corporation, successor by merger to Harvard
Merger Corporation, a Delaware corporation, and Harvard Industries, Inc., a
Florida corporation ("Mortgagor"), whose address is 3 Werner Way, Lebanon, New
Jersey 08833, to NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national
banking association, whose address is Sixth and Marquette, Minneapolis,
Minnesota 55479-0069, Attn: Corporate Trust Services, as Collateral Agent (the
"Second Priority Collateral Agent") under the Collateral Agreement, dated as of
the date hereof (as the same may be amended, supplemented or otherwise modified
from time to time, the "Collateral Agreement") among the Second Priority
Collateral Agent, the Second Priority Note Trustee, Mortgagor, and the other
Subsidiary Guarantors named therein (Mortgagor and the Subsidiary Guarantors,
collectively, the "Second Priority Borrowers") (in such capacity, the
"Mortgagee") for the benefit of Norwest Bank Minnesota, National Association as
trustee (with any successor in such capacity, the "Second Priority Note
Trustee") under the Indenture, dated as of the date hereof (as the same may be
amended, supplemented or otherwise modified from time to time, the "Second
Priority Indenture") among the Second Priority Borrowers, as guarantors, the
Second Priority Note Trustee, and the holders from time to time (the "Second
Priority Holders") of 14 1/2% Senior Secured Securities Due 2003 (the "Second
Priority Notes") of Mortgagor issued pursuant to the Second Priority Indenture
(in such capacity, "Mortgagee").
Unless otherwise defined herein, terms which are defined in the Collateral
Agreement and used herein are so used as so defined. References to this
"Mortgage" shall mean this instrument and any and all renewals, modifications,
amendments, supplements, extensions, consolidations, substitutions, spreaders
and replacements of this instrument.
Background
A. Mortgagor is the owner of the parcel(s) of real property described on
Schedule A attached (such real property, together with all of the buildings,
improvements, structures and fixtures now or subsequently located thereon (the
"Improvements"), being collectively referred to as the "Real Estate").
B. Mortgagor has entered into the Credit Agreement dated as of the date
hereof (as the same may be amended, supplemented or otherwise modified from time
to time, the "Credit Agreement") with Doehler-Jarvis, Inc., Harvard
Transportation Corporation, Doehler-Jarvis Greeneville, Inc., Pottstown
Precision Casting, Inc., Doehler-Jarvis Technologies, Inc., Doehler-Jarvis
Toledo, Inc., Harman Automotive Inc., Hayes-Albion Corporation, and The
Kingston-Warren Corporation (collectively with the Mortgagor, "Borrowers"), the
several banks and other financial institutions or entities from time to time
parties thereto (the "Lenders"), Lehman Brothers Inc., as
<PAGE>
2
arranger, Lehman Commercial Paper Inc., as syndication agent (in such capacity,
"First Priority Syndication Agent"), and General Electric Capital Corporation,
as administrative agent (in such capacity, "First Priority Administrative
Agent", and collectively with the First Priority Syndication Agent, "Agents").
Pursuant to the Credit Agreement, the Lenders have made certain Loans to, and
issued or participated in Letters of Credit issued for the account of, Borrowers
upon the terms and conditions set forth therein. Pursuant to the Credit
Agreement, Borrowers' obligations in respect of all such Loans and Letters of
Credit made or issued under the Credit Agreement are secured by first priority
security interests in favor of First Priority Administrative Agent, for the
benefit of the Agents and the Lenders, in substantially all of the assets of
Borrowers, including a first priority mortgage dated as of the date hereof made
by Mortgagor in favor of the First Priority Administrative Agent, for the
benefit of the Agents and the Lenders (as the same may be amended, supplemented
or otherwise modified from time to time, the "First Priority Mortgage"). The
First Priority Mortgage encumbers Mortgagor's interest in the Real Estate.
References in this Mortgage to the "Default Rate" shall mean the rate of
interest per annum equivalent to the Base Rate as defined in the Credit
Agreement plus two percent.
C. Mortgagor has issued the Second Priority Notes pursuant to the Second
Priority Indenture upon the terms and subject to the conditions set forth
therein. Pursuant to Section 11.1 of the Second Priority Indenture, Mortgagor,
in order to secure the Second Priority Borrowers' obligations under the Second
Priority Indenture and the Collateral Documents, is required to execute and
deliver this Second Priority Mortgage to the Mortgagee for the benefit of the
Second Priority Note Trustee and the Second Priority Holders, which is intended
to, and shall be, junior to the first priority security interest granted
pursuant to the First Priority Mortgage, the relative priority being as set
forth in the Second Priority Indenture, the Collateral Agreement, and that
certain Intercreditor Agreement dated as of the date hereof (as the same may be
amended, supplemented or otherwise modified from time to time, the
"Intercreditor Agreement") between Second Priority Note Trustee, First Priority
Administrative Agent, and Mortgagor.
D. This Mortgage secures the prompt payment and performance in full of the
obligations secured by the Second Priority Indenture in accordance with its
terms.
Granting Clauses
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Mortgagor agrees that to secure:
(a)(i) the obligations of Mortgagor to pay the principal of and interest
(including, without limitation, interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to any Second Priority Borrower, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding)
under the Second Priority Notes, and (ii) the obligations of Second Priority
Borrowers to pay all other amounts payable under the Second Priority Indenture
or any other Collateral Document (collectively, the "Indebtedness"); and
(b) the performance and observance of each obligation, term, covenant and
condition to be performed or observed by any Second Priority Borrower, whether
direct or
<PAGE>
3
indirect, absolute or contingent, due or to become due, or now existing or
hereinafter incurred, which may arise under, out of, or in connection with, the
Second Priority Indenture, the Second Priority Notes, the Collateral Agreement,
this Mortgage, or any of the other Collateral Documents (collectively, the
"Obligations") (the Second Priority Indenture, the Second Priority Notes, the
Collateral Agreement and the Collateral Documents collectively being referred to
as the "Loan Documents");
MORTGAGOR HEREBY GRANTS TO MORTGAGEE A LIEN UPON AND A SECURITY INTEREST IN, AND
HEREBY MORTGAGES AND WARRANTS, GRANTS, ASSIGNS, TRANSFERS AND SETS OVER TO
MORTGAGEE:
(A) the Real Estate;
(B) all the estate, right, title, claim or demand whatsoever of
Mortgagor, in possession or expectancy, in and to the Real Estate or any
part thereof;
(C) all right, title and interest of Mortgagor in, to and under all
easements, rights of way, gores of land, streets, ways, alleys, passages,
sewer rights, waters, water courses, water and riparian rights, development
rights, air rights, mineral rights and all estates, rights, titles,
interests, privileges, licenses, tenements, hereditaments and appurtenances
belonging, relating or appertaining to the Real Estate, and any reversions,
remainders, rents, issues, profits and revenue thereof and all land lying
in the bed of any street, road or avenue, in front of or adjoining the Real
Estate to the center line thereof;
(D) all of the fixtures, chattels, business machines, machinery,
apparatus, equipment, furnishings, fittings and articles of personal
property of every kind and nature whatsoever, and all appurtenances and
additions thereto and substitutions or replacements thereof (together with,
in each case, attachments, components, parts and accessories) currently
owned or subsequently acquired by Mortgagor and now or subsequently
attached to, or contained in or used or usable in any way in connection
with any operation or letting of the Real Estate, including but without
limiting the generality of the foregoing, all screens, awnings, shades,
blinds, curtains, draperies, artwork, carpets, rugs, storm doors and
windows, furniture and furnishings, heating, electrical, and mechanical
equipment, lighting, switchboards, plumbing, ventilating, air conditioning
and air-cooling apparatus, refrigerating, and incinerating equipment,
escalators, elevators, loading and unloading equipment and systems, stoves,
ranges, laundry equipment, cleaning systems (including window cleaning
apparatus), telephones, communication systems (including satellite dishes
and antennae), televisions, computers, sprinkler systems and other fire
prevention and extinguishing apparatus and materials, security systems,
motors, engines, machinery, pipes, pumps, tanks, conduits, appliances,
fittings and fixtures of every kind and description (all of the foregoing
in this paragraph (D) being referred to as the "Equipment");
(E) all right, title and interest of Mortgagor in and to all
substitutes and replacements of, and all additions and improvements to, the
Real Estate and the
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4
Equipment, subsequently acquired by or released to Mortgagor or
constructed, assembled or placed by Mortgagor on the Real Estate,
immediately upon such acquisition, release, construction, assembling or
placement, including, without limitation, any and all building materials
whether stored at the Real Estate or offsite, and, in each such case,
without any further mortgage, conveyance, assignment or other act by
Mortgagor;
(F) all right, title and interest of Mortgagor in, to and under all
leases, subleases, underlettings, concession agreements, management
agreements, licenses and other agreements relating to the use or occupancy
of the Real Estate or the Equipment or any part thereof, now existing or
subsequently entered into by Mortgagor and whether written or oral and all
guarantees of any of the foregoing (collectively, as any of the foregoing
may be amended, restated, extended, renewed or modified from time to time,
the "Leases"), and all rights of Mortgagor in respect of cash and
securities deposited thereunder and the right to receive and collect the
revenues, income, rents, issues and profits thereof, together with all
other rents, royalties, issues, profits, revenue, income and other benefits
arising from the use and enjoyment of the Mortgaged Property (as defined
below) (collectively, the "Rents") including, but not limited to, all
rights conferred by Act No. 210 of the Michigan Public Acts of 1953 as
amended by Act No. 151 of the Michigan Public Acts of 1966 (MCLA 554.231 et
seq.), and Act No. 228 of the Michigan Public Acts of 1925 as amended by
Act No. 55 of the Michigan Public Acts of 1933 (MCLA 554.211 et seq.);
(G) all trade names, trade marks, logos, copyrights, good will and
books and records relating to or used in connection with the operation of
the Real Estate or the Equipment or any part thereof; all general
intangibles related to the operation of the Improvements now existing or
hereafter arising;
(H) all unearned premiums under insurance policies now or subsequently
obtained by Mortgagor relating to the Real Estate or Equipment and
Mortgagor's interest in and to all proceeds of any such insurance policies
(including title insurance policies) including the right to collect and
receive such proceeds, subject to the provisions relating to insurance
generally set forth below; and all awards and other compensation, including
the interest payable thereon and the right to collect and receive the same,
made to the present or any subsequent owner of the Real Estate or Equipment
for the taking by eminent domain, condemnation or otherwise, of all or any
part of the Real Estate or any easement or other right therein;
(I) all right, title and interest of Mortgagor in and to (i) all
contracts from time to time executed by Mortgagor or any manager or agent
on its behalf relating to the ownership, construction, maintenance, repair,
operation, occupancy, sale or financing of the Real Estate or Equipment or
any part thereof and all agreements relating to the purchase or lease of
any portion of the Real Estate or any property which is adjacent or
peripheral to the Real Estate, together with the right to exercise such
options and all leases of Equipment (collectively, the "Contracts"), (ii)
all consents, licenses, building permits, certificates of occupancy and
other governmental approvals relating to
<PAGE>
5
construction, completion, occupancy, use or operation of the Real Estate or
any part thereof (collectively, the "Permits") and (iii) all drawings,
plans, specifications and similar or related items relating to the Real
Estate (collectively, the "Plans");
(J) any and all monies now or subsequently on deposit for the payment
of real estate taxes or special assessments against the Real Estate or for
the payment of premiums on insurance policies covering the foregoing
property or otherwise on deposit with or held by Mortgagee as provided in
this Mortgage; and
(K) all proceeds, both cash and noncash, of the foregoing;
(All of the foregoing property and rights and interests now owned or held
or subsequently acquired by Mortgagor and described in the foregoing clauses (A)
through (E) are collectively referred to as the "Premises", and those described
in the foregoing clauses (A) through (K) are collectively referred to as the
"Mortgaged Property").
TO HAVE AND TO HOLD the Mortgaged Property and the rights and privileges
hereby mortgaged unto Mortgagee, its successors and assigns for the uses and
purposes set forth, until the Indebtedness is fully paid and the Obligations
fully performed.
It is the intent of Mortgagor, Mortgagee, and the Second Priority Holders
that the lien and security interest granted to Mortgagee, for the benefit of the
Second Priority Holders, pursuant to this Mortgage shall constitute a separate
and distinct lien and security interest junior to the lien and security interest
granted by Mortgagor to the First Priority Administrative Agent, for the benefit
of the Lenders, pursuant to the First Priority Mortgage.
Terms and Conditions
Mortgagor further represents, warrants, covenants and agrees with Mortgagee
as follows, provided that notwithstanding anything to the contrary in this
Mortgage, any consent or approval of Mortgagee required to be obtained under
this Mortgage, any election by Mortgagee, or any determination of any matter
required to be reasonably satisfactory to Mortgagee, shall be deemed to be given
or made, as the case may be, in accordance with any such consent, approval,
election or determination made as to such matter by the First Priority
Administrative Agent as mortgagee under the corresponding provision of the First
Priority Mortgage:
1. Warranty of Title. Mortgagor warrants good and indefeasible title to the
Premises, subject only to (i) the matters that are set forth in Schedule B of
the title insurance policy or policies being issued to Mortgagee to insure the
lien of this Mortgage; and (ii) those liens expressly permitted by the terms of
the Second Priority Indenture (the "Permitted Exceptions").
2. Payment of Indebtedness. Mortgagor shall pay the Indebtedness at the
times and places and in the manner specified in the Second Priority Notes and in
any other Loan Document and shall perform all the Obligations set forth therein.
<PAGE>
6
3. Requirements. Mortgagor shall promptly comply with, or cause to be
complied with, and conform to all present and future laws, statutes, codes,
ordinances, orders, judgments, decrees, rules, regulations and requirements, and
irrespective of the nature of the work to be done, of each of the United States
of America, any State and any municipality, local government or other political
subdivision thereof and any agency, department, bureau, board, commission or
other instrumentality of any of them, now existing or subsequently created
(collectively, "Governmental Authority") which has jurisdiction over the
Mortgaged Property and all covenants, restrictions and conditions now or later
of record which may be applicable to any of the Mortgaged Property, or to the
use, manner of use, occupancy, possession, operation, maintenance, alteration,
repair or reconstruction of any of the Mortgaged Property. All present and
future laws, statutes, codes, ordinances, orders, judgments, decrees, rules,
regulations and requirements of every Governmental Authority applicable to
Mortgagor or to any of the Mortgaged Property and all covenants, restrictions,
and conditions which now or later may be applicable to any of the Mortgaged
Property are collectively referred to as the "Legal Requirements".
(b) From and after the date of this Mortgage, Mortgagor shall not by act or
omission permit any building or other improvement on any premises not subject to
the lien of this Mortgage to rely on the Premises or any part thereof or any
interest therein to fulfill any Legal Requirement, and Mortgagor hereby assigns
to Mortgagee any and all rights to give consent for all or any portion of the
Premises or any interest therein to be so used. Mortgagor shall not by act or
omission impair the integrity of any of the Real Estate as a single zoning lot
separate and apart from all other premises. Mortgagor represents that each
parcel of the Real Estate constitutes a legally subdivided lot, in compliance
with all subdivision laws and similar Legal Requirements. Any act or omission by
Mortgagor which would result in a violation of any of the provisions of this
subsection shall be void.
4. Payment of Taxes and Other Impositions. Promptly when due, Mortgagor
shall pay and discharge all taxes of every kind and nature (including, without
limitation, all real and personal property, income, franchise, withholding,
transfer, gains, profits and gross receipts taxes), all charges for any easement
or agreement maintained for the benefit of any of the Mortgaged Property, all
general and special assessments, levies, permits, inspection and license fees,
all water and sewer rents and charges, vault taxes, and all other public charges
even if unforeseen or extraordinary, imposed upon or assessed against or which
may become a lien on any of the Mortgaged Property, or arising in respect of the
occupancy, use or possession thereof, together with any penalties or interest on
any of the foregoing (all of the foregoing are collectively referred to as the
"Impositions"). Mortgagor shall within 30 days after each due date deliver to
Mortgagee (i) original or copies of receipted bills and cancelled checks
evidencing payment of such Imposition if it is a real estate tax or other public
charge and (ii) evidence acceptable to Mortgagee showing the payment of any
other such Imposition. If by law any Imposition, at Mortgagor's option, may be
paid in installments (whether or not interest shall accrue on the unpaid balance
of such Imposition), Mortgagor may elect to pay such Imposition in such
installments and shall be responsible for the payment of such installments with
interest, if any.
<PAGE>
7
(b) Nothing herein shall affect any right or remedy of Mortgagee under this
Mortgage or otherwise, without notice or demand to Mortgagor, to pay any
Imposition after the date such Imposition shall have become due. Any sums paid
by Mortgagee in discharge of any Impositions shall be payable on demand by
Mortgagor to Mortgagee together with interest at the Default Rate as set forth
above.
(c) Mortgagor shall have the right before any delinquency occurs to contest
or object in good faith to the amount or validity of any Imposition by
appropriate legal proceedings, but such right shall not be deemed or construed
in any way as relieving, modifying, or extending Mortgagor's covenant to pay any
such Imposition at the time and in the manner provided in this Section unless
(i) Mortgagor has given prior written notice to Mortgagee of Mortgagor's intent
so to contest or object to an Imposition, (ii) Mortgagor shall demonstrate to
Mortgagee's satisfaction that the legal proceedings shall operate conclusively
to prevent the sale of the Mortgaged Property, or any part thereof, to satisfy
such Imposition prior to final determination of such proceedings and (iii)
Mortgagor shall furnish a good and sufficient bond or surety as requested by and
reasonably satisfactory to Mortgagee in the amount of the Impositions which are
being contested plus any interest and penalty which may be imposed thereon and
which could become a lien against the Real Estate or any part of the Mortgaged
Property.
5. Insurance. (a) Mortgagor shall maintain or cause to be maintained on all
of the Premises
(i) property insurance against loss or damage by fire, lightning,
windstorm, tornado, water damage, flood, earthquake and by such other
further risks and hazards as now are or subsequently may be covered by an
"all risk" policy or a fire policy covering "special" causes of loss, and
the policy limits shall be automatically reinstated after each loss;
(ii) commercial general liability insurance under a policy including
the "broad form CGL endorsement" (or which incorporates the language of
such endorsement), covering all claims for personal injury, bodily injury
or death, or property damage occurring on, in or about the Premises in an
amount not less than $10,000,000 combined single limit with respect to
injury and property damage relating to any one occurrence plus such excess
limits as Mortgagee shall request from time to time;
(iii) insurance against rent loss, extra expense or business
interruption, in amounts satisfactory to Mortgagee, but not less than one
year's gross rent or gross income;
(iv) if any portion of the Premises are located in an area identified
as a special flood hazard area by the Federal Emergency Management Agency
or other applicable agency, flood insurance in an amount satisfactory to
Mortgagee, but in no event less than the maximum limit of coverage
available under the National Flood Insurance Act of 1968, as amended; and
<PAGE>
8
(v) such other insurance in such amounts as Mortgagee may reasonably
request from time to time against loss or damage by any other risk commonly
insured against by persons occupying or using like properties in the
locality or localities in which the Real Estate is situated.
(b) Each insurance policy (other than flood insurance) shall (x) provide
that it shall not be canceled, non-renewed or materially amended without
30-days' prior written notice to Mortgagee, and (y) with respect to all property
insurance, provide for deductibles in an amount reasonably satisfactory to
Mortgagee and contain a "Replacement Cost Endorsement" without any deduction
made for depreciation and with no co-insurance penalty (or attaching an agreed
amount endorsement satisfactory to Mortgagee), with loss payable to Mortgagee
and First Priority Administrative Agent (in its capacity as mortgagee under the
First Priority Mortgage) (modified, if necessary, to provide that proceeds in
the amount of replacement cost may be retained by Mortgagee without the
obligation to rebuild) as its interest may appear, without contribution, under a
"standard" or "New York" mortgagee clause acceptable to Mortgagee. Liability
insurance policies shall name Mortgagee as an additional insured and contain a
waiver of subrogation against Mortgagee. Each policy shall expressly provide
that any proceeds which are payable to Mortgagee shall be paid by check payable
to the order of Mortgagee only and requiring the endorsement of Mortgagee only.
(c) Mortgagor shall deliver to Mortgagee an original of each insurance
policy required to be maintained, or a certificate of such insurance acceptable
to Mortgagee, together with a copy of the declaration page for each such policy.
Mortgagor shall (i) pay as they become due all premiums for such insurance and
(ii) not later than 15 days prior to the expiration of each policy to be
furnished pursuant to the provisions of this Section, deliver a renewed policy
or policies, or duplicate original or originals thereof, marked "premium paid,"
or accompanied by such other evidence of payment satisfactory to Mortgagee.
(d) If Mortgagor is in default of its obligations to insure or deliver any
such prepaid policy or policies, then Mortgagee, at its option and without
notice, may effect such insurance from year to year, and pay the premium or
premiums therefor, and Mortgagor shall pay to Mortgagee on demand such premium
or premiums so paid by Mortgagee with interest from the time of payment at the
Default Rate.
(e) Mortgagor promptly shall comply with and conform to (i) all provisions
of each such insurance policy, and (ii) all requirements of the insurers
applicable to Mortgagor or to any of the Mortgaged Property or to the use,
manner of use, occupancy, possession, operation, maintenance, alteration or
repair of any of the Mortgaged Property. Mortgagor shall not use or permit the
use of the Mortgaged Property in any manner which would permit any insurer to
cancel any insurance policy or void coverage required to be maintained by this
Mortgage.
(f) If the Mortgaged Property, or any part thereof, shall be destroyed or
damaged, Mortgagor shall give immediate notice thereof to Mortgagee. All
insurance proceeds shall be paid to Mortgagee to be held by Mortgagee as
collateral to secure the payment and performance of the Indebtedness and the
Obligations. Notwithstanding the preceding sentence, provided that
<PAGE>
9
no Event of Default shall have occurred and be continuing, Mortgagor shall have
the right to adjust such loss, and the insurance proceeds relating to such loss
shall be paid over to Mortgagor; provided that Mortgagor shall, promptly after
any such damage, repair all such damage regardless of whether any insurance
proceeds have been received or whether such proceeds, if received, are
sufficient to pay for the costs of repair.
(g) In the event of foreclosure of this Mortgage or other transfer of title
to the Mortgaged Property, all right, title and interest of Mortgagor in and to
any insurance policies then in force shall pass to the purchaser or grantee.
(h) Mortgagor may maintain insurance required under this Mortgage by means
of one or more blanket insurance policies maintained by Mortgagor; provided,
however, that (A) any such policy shall specify, or Mortgagor shall furnish to
Mortgagee a written statement from the insurer so specifying, the maximum amount
of the total insurance afforded by such blanket policy that is allocated to the
Premises and the other Mortgaged Property and any sublimits in such blanket
policy applicable to the Premises and the other Mortgaged Property, (B) each
such blanket policy shall include an endorsement providing that, in the event of
a loss resulting from an insured peril, insurance proceeds shall be allocated to
the Mortgaged Property in an amount equal to the coverages required to be
maintained by Mortgagor as provided above and (C) the protection afforded under
any such blanket policy shall be no less than that which would have been
afforded under a separate policy or policies relating only to the Mortgaged
Property.
6. Restrictions on Liens and Encumbrances. Except for the lien of this
Mortgage and the Permitted Exceptions, Mortgagor shall not further mortgage, nor
otherwise encumber the Mortgaged Property nor create or suffer to exist any
lien, charge or encumbrance on the Mortgaged Property, or any part thereof,
whether superior or subordinate to the lien of this Mortgage and whether
recourse or non-recourse.
7. Due on Sale and Other Transfer Restrictions. Except as expressly
permitted under the Second Priority Indenture, Mortgagor shall not sell,
transfer, convey or assign all or any portion of, or any interest in, the
Mortgaged Property.
8. Maintenance; No Alteration; Inspection; Utilities. Mortgagor shall
maintain or cause to be maintained all the Improvements in good condition and
repair and shall not commit or suffer any waste of the Improvements. Mortgagor
shall repair, restore, replace or rebuild promptly any part of the Premises
which may be damaged or destroyed by any casualty whatsoever. The Improvements
shall not be demolished or materially altered, nor any material additions built,
without the prior written consent of Mortgagee. Mortgagor's failure to pay (i)
any Imposition assessed against the Premises, or any installment thereof, or
(ii) any insurance premium upon policies required to be carried by the terms of
this Mortgage, shall constitute waste (although the meaning of the term "waste"
shall not be limited to such nonpayment) as provided by Act No. 236 of the
Michigan Public Acts of 1961 (Revised Judicature Act), Section 600.2927, as and
if amended and shall entitle Mortgagee to all remedies provided for therein; and
Mortgagor agrees to and hereby does consent to the appointment of a receiver
under said statute, should Mortgagee elect to seek such relief thereunder.
<PAGE>
10
(b) Mortgagee and any persons authorized by Mortgagee shall have the right
to enter and inspect the Premises and all work done, labor performed and
materials furnished in and about the Improvements and to inspect and make copies
of all books, contracts and records of Mortgagor relating to the Mortgaged
Property.
(c) Mortgagor shall pay or cause to be paid when due all utility charges
which are incurred for gas, electricity, water or sewer services furnished to
the Premises and all other assessments or charges of a similar nature, whether
public or private, affecting the Premises or any portion thereof, whether or not
such assessments or charges are liens thereon.
9. Condemnation/Eminent Domain. Immediately upon obtaining knowledge of the
institution of any proceedings for the condemnation of the Mortgaged Property,
or any portion thereof, Mortgagor will notify Mortgagee of the pendency of such
proceedings. Mortgagee is hereby authorized and empowered by Mortgagor to settle
or compromise any claim in connection with such condemnation and to receive all
awards and proceeds thereof to be held by Mortgagee as collateral to secure the
payment and performance of the Indebtedness and the Obligations. Notwithstanding
the preceding sentence, provided no Event of Default shall have occurred and be
continuing, Mortgagor shall, at its expense, diligently prosecute any proceeding
relating to such condemnation, settle or compromise any claims in connection
therewith and receive any awards or proceeds thereof, provided that Mortgagor
shall promptly repair and restore the Mortgaged Property to its condition prior
to such condemnation, regardless of whether any award shall have been received
or whether such award is sufficient to pay for the costs of such repair and
restoration.
10. Restoration. Mortgagor shall use all insurance proceeds and all
condemnation proceeds and awards to promptly restore the Mortgaged Property to
its condition prior to such casualty or condemnation, (giving effect to the
remaining configuration of the Premises after such condemnation) and in
compliance with all Legal Requirements.
11. Leases. Mortgagor shall not (i) execute an assignment or pledge of any
Lease relating to all or any portion of the Mortgaged Property other than in
favor of Mortgagee, or (ii) except as expressly permitted under the Second
Priority Indenture, without the prior written consent of Mortgagee, execute or
permit to exist any Lease of any of the Mortgaged Property.
12. Further Assurances. To further assure Mortgagee's rights under this
Mortgage, Mortgagor agrees upon demand of Mortgagee to do any act or execute any
additional documents (including, but not limited to, security agreements on any
personalty included or to be included in the Mortgaged Property and a separate
assignment of each Lease in recordable form) as may be required by Mortgagee to
confirm the lien of this Mortgage and all other rights or benefits conferred on
Mortgagee.
13. Mortgagee's Right to Perform. If Mortgagor fails to perform any of the
covenants or agreements of Mortgagor, Mortgagee, without waiving or releasing
Mortgagor from any obligation or default under this Mortgage, may, at any time
(but shall be under no obligation
<PAGE>
11
to pay or perform the same, and the amount or cost thereof, with interest at the
Default Rate, shall immediately be due from Mortgagor to Mortgagee and the same
shall be secured by this Mortgage and shall be a lien on the Mortgaged Property
prior to any right, title to, interest in or claim upon the Mortgaged Property
attaching subsequent to the lien of this Mortgage. No payment or advance of
money by Mortgagee under this Section shall be deemed or construed to cure
Mortgagor's default or waive any right or remedy of Mortgagee.
14. Hazardous Material. (a) Neither Mortgagor nor, to the best knowledge of
Mortgagor, any other person has ever caused or permitted any Hazardous Material
(as defined below) to be placed, held, located or disposed of on, under or at
the Premises, or any part thereof, and the Premises have never been used
(whether by Mortgagor or, to the best knowledge of Mortgagor, by any other
person, including any tenant) as a dump site or storage (whether permanent or
temporary) site for any Hazardous Material, except in the ordinary course of
Grantor's business and in compliance with Hazardous Material Laws.
(b) Mortgagor represents that (i) to the best of Mortgagor's knowledge,
upon due inquiry, the Premises are free of all Hazardous Material, except those
used in the ordinary course of business and in compliance with Hazardous
Material Laws, and (ii) the Premises is not presently adversely affected by any
Hazardous Material or is in violation of any applicable Legal Requirement of any
Governmental Authority regulating, relating to, or imposing liability or
standards of conduct concerning Hazardous Material, the violation of which could
reasonably be expected to result in material liability.
(c) Mortgagor shall comply with any and all applicable Legal Requirements
governing the discharge and removal of Hazardous Material, shall pay immediately
when due the costs of removal of any Hazardous Material, and shall keep the
Premises free of any lien imposed pursuant to such Legal Requirements. In the
event Mortgagor fails to do so, after notice to Mortgagor and the expiration of
the earlier of (i) applicable cure periods hereunder, or (ii) the cure period
permitted under the applicable Legal Requirement, Mortgagee may declare such
failure an Event of Default or cause the Premises to be freed from the Hazardous
Material and the cost of the removal with interest at the Default Rate shall
immediately be due from Mortgagor to Mortgagee and the same shall be added to
the Indebtedness and be secured by this Mortgage. Mortgagor further agrees not
to willfully release or dispose of any Hazardous Material at the Premises,
except in the ordinary course of business, without the express approval of
Mortgagee and any such release or disposal, regardless of whether in the
ordinary course of business, shall comply with all applicable Legal Requirements
and any conditions established by Mortgagee. In addition, Mortgagor agrees not
to allow the manufacture, storage, transmission, presence or disposal of any
Hazardous Material over or upon the Premises, except in the ordinary course of
business. Mortgagee at its own expense shall have the right at any time to
conduct an environmental audit of the Premises and Mortgagor shall cooperate in
the conduct of such environmental audit. Mortgagor shall give Mortgagee and its
agents and employees access to the Premises to remove Hazardous Material.
Mortgagor agrees to defend, indemnify and hold Mortgagee free and harmless from
and against all loss, costs, damage and expense related to the Premises or
Mortgagor's business (including attorneys' fees and costs and consequential
damages) Mortgagee may sustain by reason of (i) the imposition or recording of a
lien by any
<PAGE>
12
Governmental Authority pursuant to any Legal Requirement relating to hazardous
or toxic wastes or substances or the removal thereof ("Hazardous Material
Laws"); (ii) claims of any private parties regarding violations of Hazardous
Material Laws; (iii) costs and expenses (including, without limitation,
attorneys' fees and fees incidental to the securing of repayment of such costs
and expenses) incurred by Mortgagor or Mortgagee in connection with the removal
of any such lien or in connection with Mortgagor's or Mortgagee's compliance
with any Hazardous Material Laws; and (iv) the assertion against Mortgagee by
any party of any claim in connection with Hazardous Material.
(d) For the purposes of this Mortgage, "Hazardous Material" means and
includes any hazardous, nuclear, toxic or dangerous waste, substance or material
defined as such in (or for purposes of) the Comprehensive Environmental
Response, Compensation, and Liability Act, any so-called "Superfund" or
"Superlien" law, or any other Legal Requirement regulating, relating to, or
imposing liability or standards of conduct concerning, any hazardous, nuclear,
toxic or dangerous waste, substance or material, as now or at any time in
effect.
(e) The foregoing indemnification shall survive repayment of the Second
Priority Notes, notwithstanding the delivery of any satisfaction, release or
release deed, discharge or deed of reconveyance, or the assignment of this
Mortgage by Mortgagee.
15. Events of Default. The occurrence of an Event of Default under the
Second Priority Indenture shall constitute an Event of Default hereunder.
16. Remedies. Except as expressly provided in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
Upon the occurrence of any Event of Default, in addition to any other rights and
remedies Mortgagee may have pursuant to the Loan Documents, or as provided by
law, Mortgagee may immediately take such action, without notice or demand, as it
deems advisable to protect and enforce its rights against Mortgagor and in and
to the Mortgaged Property, including, but not limited to, the following actions,
each of which may be pursued concurrently or otherwise, at such time and in such
manner as Mortgagee may determine, in its sole discretion, without impairing or
otherwise affecting the other rights and remedies of Mortgagee:
(i) Mortgagee may, to the extent permitted by applicable law, (A)
institute and maintain an action of mortgage foreclosure against all or any
part of the Mortgaged Property (as described below), (B) institute and
maintain an action on the Indebtedness, (C) sell all or part of the
Mortgaged Property (Mortgagor expressly granting to Mortgagee the power of
sale, as more fully described below), or (D) take such other action at law
or in equity for the enforcement of this Mortgage or any of the Loan
Documents as the law may allow. Mortgagee may proceed in any such action to
final judgment and execution thereon for all sums due hereunder, together
with interest thereon at the Default Rate and all costs of suit, including,
without limitation, reasonable attorneys' fees and disbursements. Interest
at the Default Rate shall be due on any judgment obtained by Mortgagee from
the date of judgment until actual payment is made of the full amount of the
judgment.
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13
(ii) Mortgagee may immediately commence foreclosure proceedings
against the Mortgaged Property pursuant to applicable law. The commencement
by Mortgagee of foreclosure proceedings by advertisement or in equity shall
be deemed an exercise by Mortgagee of its option set forth above to
accelerate the due date of all sums secured hereby. Mortgagor hereby grants
power to Mortgagee, in the event of the occurrence of an Event of Default
hereunder, to grant, bargain, sell, release and convey the Mortgaged
Property at public auction or venue, and upon such sale to execute and
deliver to the purchaser(s) instruments of conveyance pursuant to the terms
hereof and to the applicable laws. Mortgagor acknowledges that the
foregoing sentence confers a power of sale upon Mortgagee, and that upon
the occurrence of an Event of Default this Mortgage may be foreclosed by
advertisement as described below and in the applicable Michigan statutes.
Mortgagor understands that upon default, Mortgagee is hereby authorized and
empowered to sell the Mortgaged Property, or cause the same to be sold and
to convey the same to the purchaser in any lawful manner, including but not
limited to that provided by Chapter 32 of the Revised Judicature Act of
Michigan, entitled "Foreclosure of Mortgage by Advertisement", which
permits Mortgagee to sell the Mortgaged Property without affording
Mortgagor a hearing, or giving it actual personal notice. The only notice
required under such Chapter 32 is to publish notice in a local newspaper
and to post a copy of the notice on the Mortgaged Property.
WAIVER: By conferring this power of sale upon Mortgagee, Mortgagor, for
itself, its successors and assigns, after an opportunity for consultation
with its legal counsel, hereby voluntarily, knowingly and intelligently
waives all rights under the Constitution and Laws of the United States and
under the Constitution and Laws of the State of Michigan, both to a hearing
on the right to exercise and the exercise of the power of sale, and to
notice except as required by the Michigan statute which provides for
Foreclosure of Mortgages by Advertisement.
(iii) Mortgagee may personally, or by its agents, attorneys and
employees and without regard to the adequacy or inadequacy of the Mortgaged
Property or any other collateral as security for the Indebtedness and
Obligations enter into and upon the Mortgaged Property and each and every
part thereof and exclude Mortgagor and its agents and employees therefrom
without liability for trespass, damage or otherwise (Mortgagor hereby
agreeing to surrender possession of the Mortgaged Property to Mortgagee
upon demand at any such time) and use, operate, manage, maintain and
control the Mortgaged Property and every part thereof. Following such entry
and taking of possession, Mortgagee shall be entitled, without limitation,
(x) to lease all or any part or parts of the Mortgaged Property for such
periods of time and upon such conditions as Mortgagee may, in its
discretion, deem proper, (y) to enforce, cancel or modify any Lease and (z)
generally to execute, do and perform any other act, deed, matter or thing
concerning the Mortgaged Property as Mortgagee shall deem appropriate as
fully as Mortgagor might do. In connection with Mortgagee's right to
possession of the Mortgaged Property as specified in this paragraph,
Mortgagor acknowledges that it has been advised that there is a significant
body of case law in Michigan which purportedly
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14
provides that in the absence of a showing of waste of a character
sufficient to endanger the value of the Mortgaged Property, or other
special factors, a mortgagor is entitled to remain in possession of
Mortgaged Property, and to enjoy the income, rents and profits therefrom,
during the pendency of foreclosure proceedings and until the expiration of
the redemption period, even if the mortgage documents expressly provide to
the contrary. Mortgagor further acknowledges that it has been advised that
Mortgagee recognizes the value of the security covered hereby is
inextricably intertwined with the effectiveness of the management,
maintenance and general operation of the Mortgaged Property, and that
Mortgagee would not extend the Indebtedness secured hereby unless it could
be assured that it would have the right to take possession of the Mortgaged
Property in order to manage or to control management thereof, and to enjoy
the income, rents and profits therefrom, immediately upon default by
Mortgagor hereunder, notwithstanding that foreclosure proceedings may not
have been instituted, or are pending, or the redemption period may not have
expired. Accordingly, Mortgagor hereby knowingly, intelligently and
voluntarily waives all right to possession of the Mortgaged Property from
and after the occurrence of an Event of Default hereunder, upon demand for
possession by Mortgagee, and Mortgagor agrees not to assert any objection
or defense to Mortgagee's request or petition to a court for possession.
The rights hereby conferred upon Mortgagee have been agreed upon prior to
any default by Mortgagor hereunder and the exercise by Mortgagee of any
such rights shall not be deemed to put Mortgagee in the status of a
"mortgagee in possession". Mortgagor acknowledges that this provision is
material to this transaction and that Mortgagee would not extend the
Indebtedness secured hereby but for this paragraph.
(a) The holder of this Mortgage, in any action to foreclose it, shall be
entitled to the appointment of a receiver. In case of a foreclosure sale, the
Real Estate may be sold, at Mortgagee's election, in one parcel or in more than
one parcel and if in more than one parcel the same may be divided as Mortgagee
may elect and Mortgagee is specifically empowered, (without being required to do
so, and in its sole and absolute discretion) to cause successive sales of
portions of the Mortgaged Property to be held. At the election of Mortgagee, the
Mortgaged Property may be offered first in parcels and then as a whole, the
offer producing the highest price for the entire property offered to prevail.
Mortgagor hereby waives any right to require any such sale to be made in parcels
or any right to select such parcels.
(b) In the event of any breach of any of the covenants, agreements, terms
or conditions contained in this Mortgage, Mortgagee shall be entitled to enjoin
such breach and obtain specific performance of any covenant, agreement, term or
condition and Mortgagee shall have the right to invoke any equitable right or
remedy as though other remedies were not provided for in this Mortgage.
(c) In the event of a default because of the existence of any lien upon the
Mortgaged Property, Mortgagee shall have the right (without being obligated to
do so or to continue to do so), without notice to Mortgagor, to advance on and
for the account of Mortgagor such sums as Mortgagee in its sole discretion deems
necessary to cure such default or to induce the holder of any such lien to
forbear from exercising its rights thereunder. Notwithstanding
<PAGE>
15
anything herein to the contrary, the repayment of all such advances, with
interest thereon at the Default Rate from the date of each such advance, shall
be immediately due and payable without demand.
17. Right of Mortgagee to Credit Sale. Upon the occurrence of any sale made
under this Mortgage, whether made under the power of sale or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale,
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof. In
lieu of paying cash therefor, Mortgagee may make settlement for the purchase
price by crediting upon the Indebtedness or other sums secured by this Mortgage
the net sales price after deducting therefrom the expenses of sale and the cost
of the action and any other sums which Mortgagee is authorized to deduct under
this Mortgage. In such event, this Mortgage, the Second Priority Indenture, the
Second Priority Notes, the other Loan Documents and any documents evidencing
expenditures secured hereby may be presented to the person or persons conducting
the sale in order that the amount so used or applied may be credited upon the
Indebtedness as having been paid.
18. Appointment of Receiver. If an Event of Default shall have occurred and
be continuing, Mortgagee as a matter of right and without notice to Mortgagor,
unless otherwise required by applicable law, and without regard to the adequacy
or inadequacy of the Mortgaged Property or any other collateral as security for
the Indebtedness and Obligations or the interest of Mortgagor therein, shall
have the right to apply to any court having jurisdiction to appoint a receiver
or receivers or other manager of the Mortgaged Property, and Mortgagor hereby
irrevocably consents to such appointment and waives notice of any application
therefor (except as may be required by law). Any such receiver or receivers
shall have all the usual powers and duties of receivers in like or similar cases
and all the powers and duties of Mortgagee in case of entry as provided in this
Mortgage, including, without limitation and to the extent permitted by law, the
right to enter into leases of all or any part of the Mortgaged Property, and
shall continue as such and exercise all such powers until the date of
confirmation of sale of the Mortgaged Property unless such receivership is
sooner terminated.
19. Extension, Release, etc. Without affecting the lien or charge of this
Mortgage upon any portion of the Mortgaged Property not then or theretofore
released as security for the full amount of the Indebtedness, Mortgagee may,
from time to time and without notice, agree to (i) release any person liable for
the Indebtedness (ii) extend the maturity or alter any of the terms of the
Indebtedness or any guaranty thereof, (iii) grant other indulgences, (iv)
release or reconvey, or cause to be released or reconveyed at any time at
Mortgagee's option any parcel, portion or all of the Mortgaged Property, (v)
take or release any other or additional security for any obligation herein
mentioned, or (vi) make compositions or other arrangements with debtors in
relation thereto. If at any time this Mortgage shall secure less than all of the
principal amount of the Indebtedness, it is expressly agreed that any repayments
of the principal amount of the Indebtedness shall not reduce the amount of the
lien of this Mortgage until the lien amount shall equal the principal amount of
the Indebtedness outstanding.
(b) No recovery of any judgment by Mortgagee and no levy of an execution
under any judgment upon the Mortgaged Property or upon any other property of
Mortgagor shall affect
<PAGE>
16
the lien of this Mortgage or any liens, rights, powers or remedies of Mortgagee
hereunder, and such liens, rights, powers and remedies shall continue
unimpaired.
(c) If Mortgagee shall have the right to foreclose this Mortgage, Mortgagor
authorizes Mortgagee at its option to foreclose the lien of this Mortgage
subject to the rights of any tenants of the Mortgaged Property. The failure to
make any such tenants parties defendant to any such foreclosure proceeding and
to foreclose their rights will not be asserted by Mortgagor as a defense to any
proceeding instituted by Mortgagee to collect the Indebtedness or to foreclose
the lien of this Mortgage.
(d) Unless expressly provided otherwise, in the event that ownership of
this Mortgage and title to the Mortgaged Property or any estate therein shall
become vested in the same person or entity, this Mortgage shall not merge in
such title but shall continue as a valid lien on the Mortgaged Property for the
amount secured hereby.
20. Security Agreement under Uniform Commercial Code. (a) It is the
intention of the parties hereto that this Mortgage shall constitute a Security
Agreement within the meaning of the Uniform Commercial Code (the "Code") of the
State of Michigan. If an Event of Default shall occur under this Mortgage, then
in addition to having any other right or remedy available at law or in equity,
Mortgagee shall have the option of either (i) proceeding under the Code and
exercising such rights and remedies as may be provided to a secured party by the
Code with respect to all or any portion of the Mortgaged Property which is
personal property (including, without limitation, taking possession of and
selling such property) or (ii) treating such property as real property and
proceeding with respect to both the real and personal property constituting the
Mortgaged Property in accordance with Mortgagee's rights, powers and remedies
with respect to the real property (in which event the default provisions of the
Code shall not apply). If Mortgagee shall elect to proceed under the Code, then
five days' notice of sale of the personal property shall be deemed reasonable
notice and the reasonable expenses of retaking, holding, preparing for sale,
selling and the like incurred by Mortgagee shall include, but not be limited to,
attorneys' fees and legal expenses. At Mortgagee's request, Mortgagor shall
assemble the personal property and make it available to Mortgagee at a place
designated by Mortgagee which is reasonably convenient to both parties.
(b) Mortgagor and Mortgagee agree, to the extent permitted by law, that:
(i) all of the goods described within the definition of the word "Equipment" are
or are to become fixtures on the Real Estate; (ii) this Mortgage upon recording
or registration in the real estate records of the proper office shall constitute
a financing statement filed as a "fixture filing" within the meaning of Sections
9- 313 and 9-402 of the Code; (iii) Mortgagor is the record owner of the Real
Estate; (iv) the mailing addresses of Mortgagor and Mortgagee are as set forth
on the first page of this Mortgage; and (v) Mortgagor's federal tax
identification number is. In addition, for purposes of Article 9 of the Michigan
Uniform Commercial Code, (i) Mortgagor is the "debtor", (ii) Mortgagee is the
"secured party" and (iii) information concerning the security interest created
hereby may be obtained from Mortgagee at its address on the first page of this
Mortgage.
<PAGE>
17
(c) Mortgagor, upon request by Mortgagee from time to time, shall execute,
acknowledge and deliver to Mortgagee one or more separate security agreements,
in form satisfactory to Mortgagee, covering all or any part of the Mortgaged
Property and will further execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, any financing statement, affidavit,
continuation statement or certificate or other document as Mortgagee may request
in order to perfect, preserve, maintain, continue or extend the security
interest under and the priority of this Mortgage and such security instrument.
Mortgagor further agrees to pay to Mortgagee on demand all costs and expenses
incurred by Mortgagee in connection with the preparation, execution, recording,
filing and re-filing of any such document and all reasonable costs and expenses
of any record searches for financing statements Mortgagee shall reasonably
require. If Mortgagor shall fail to furnish any financing or continuation
statement within 10 days after request by Mortgagee, then pursuant to the
provisions of the Code, Mortgagor hereby authorizes Mortgagee, without the
signature of Mortgagor, to execute and file any such financing and continuation
statements. The filing of any financing or continuation statements in the
records relating to personal property or chattels shall not be construed as in
any way impairing the right of Mortgagee to proceed against any personal
property encumbered by this Mortgage as real property, as set forth above.
21. Assignment of Rents. Mortgagor hereby assigns to Mortgagee the Rents as
further security for the payment of the Indebtedness and performance of the
Obligations, provided that such assignment shall be junior to the assignment of
the Rents contained in the First Priority Mortgage, and Mortgagor grants to
Mortgagee the right to enter the Mortgaged Property for the purpose of
collecting the same and to let the Mortgaged Property or any part thereof, and
to apply the Rents on account of the Indebtedness. The foregoing assignment and
grant is present and absolute and shall continue in effect until the
Indebtedness is paid in full, but Mortgagee hereby waives the right to enter the
Mortgaged Property for the purpose of collecting the Rents and Mortgagor shall
be entitled to collect, receive, use and retain the Rents until the occurrence
of an Event of Default under this Mortgage; such right of Mortgagor to collect,
receive, use and retain the Rents may be revoked by Mortgagee upon the
occurrence of any Event of Default under this Mortgage by giving not less than
five days' written notice of such revocation to Mortgagor; in the event such
notice is given, Mortgagor shall pay over to Mortgagee, or to any receiver
appointed to collect the Rents, any lease security deposits, and shall pay
monthly in advance to Mortgagee, or to any such receiver, the fair and
reasonable rental value as determined by Mortgagee for the use and occupancy of
the Mortgaged Property or of such part thereof as may be in the possession of
Mortgagor or any affiliate of Mortgagor, and upon default in any such payment
Mortgagor and any such affiliate will vacate and surrender the possession of the
Mortgaged Property to Mortgagee or to such receiver, and in default thereof may
be evicted by summary proceedings or otherwise. Mortgagor shall not accept
prepayments of installments of Rent to become due for a period of more than one
month in advance (except for security deposits and estimated payments of
percentage rent, if any). Mortgagee shall be entitled to all of the rights and
benefits conferred by Act No. 210 of the Michigan Public Acts of 1953 as it may
be amended, including by Act No. 151 of the Michigan Public Acts of 1966 (MCLA
554.231 et seq.), and Act No. 228 of the Michigan Public Acts of 1925 as it may
be amended, including by Act No. 55 of the Michigan Public Acts of 1933 (MCLA
554.211 et seq.).
<PAGE>
18
The collection of rents by Mortgagee shall in no way waive the right of
Mortgagee to foreclose this Mortgage in the event of any default.
22. Trust Funds. All lease security deposits of the Real Estate shall be
treated as trust funds not to be commingled with any other funds of Mortgagor.
Within 10 days after request by Mortgagee, Mortgagor shall furnish Mortgagee
satisfactory evidence of compliance with this subsection, together with a
statement of all lease security deposits by lessees and copies of all Leases not
previously delivered to Mortgagee, which statement shall be certified by
Mortgagor.
23. Additional Rights. The holder of any subordinate lien on the Mortgaged
Property shall have no right to terminate any Lease whether or not such Lease is
subordinate to this Mortgage nor shall any holder of any subordinate lien join
any tenant under any Lease in any action to foreclose the lien or modify,
interfere with, disturb or terminate the rights of any tenant under any Lease.
By recordation of this Mortgage all subordinate lienholders are subject to and
notified of this provision, and any action taken by any such lienholder contrary
to this provision shall be null and void. Upon the occurrence of any Event of
Default, Mortgagee may, in its sole discretion and without regard to the
adequacy of its security under this Mortgage, apply all or any part of any
amounts on deposit with Mortgagee under this Mortgage against all or any part of
the Indebtedness. Any such application shall not be construed to cure or waive
any Default or Event of Default or invalidate any act taken by Mortgagee on
account of such Default or Event of Default.
24. Notices. All notices, requests, demands and other communications
hereunder shall be given in accordance with the provisions of Section 12.2 of
the Second Priority Indenture to Mortgagor and to Mortgagee as specified
therein.
25. No Oral Modification. This Mortgage may not be amended, supplemented or
otherwise modified except in accordance with the provisions of Article IX of the
Second Priority Indenture. Any agreement made by Mortgagor and Mortgagee after
the date of this Mortgage relating to this Mortgage shall be superior to the
rights of the holder of any intervening or subordinate lien or encumbrance.
26. Partial Invalidity. In the event any one or more of the provisions
contained in this Mortgage shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, but each shall be construed as if
such invalid, illegal or unenforceable provision had never been included.
Notwithstanding to the contrary anything contained in this Mortgage or in any
provisions of the Indebtedness or Loan Documents, the obligations of Mortgagor
and of any other obligor under the Indebtedness or Loan Documents shall be
subject to the limitation that Mortgagee shall not charge, take or receive, nor
shall Mortgagor or any other obligor be obligated to pay to Mortgagee, any
amounts constituting interest in excess of the maximum rate permitted by law to
be charged by Mortgagee.
<PAGE>
19
27. Mortgagor's Waiver of Rights. To the fullest extent permitted by law,
Mortgagor waives the benefit of all laws now existing or that may subsequently
be enacted providing for (i) any appraisement before sale of any portion of the
Mortgaged Property, (ii) any extension of the time for the enforcement of the
collection of the Indebtedness or the creation or extension of a period of
redemption from any sale made in collecting such debt and (iii) exemption of the
Mortgaged Property from attachment, levy or sale under execution or exemption
from civil process. To the full extent Mortgagor may do so, Mortgagor agrees
that Mortgagor will not at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, exemption, extension or redemption, or requiring
foreclosure of this Mortgage before exercising any other remedy granted
hereunder and Mortgagor, for Mortgagor and its successors and assigns, and for
any and all persons ever claiming any interest in the Mortgaged Property, to the
extent permitted by law, hereby waives and releases all rights of redemption,
valuation, appraisement, stay of execution, notice of election to mature or
declare due the whole of the secured indebtedness and marshaling in the event of
foreclosure of the liens hereby created.
28. Remedies Not Exclusive. Mortgagee shall be entitled to enforce payment
of the Indebtedness and performance of the Obligations and to exercise all
rights and powers under this Mortgage or under any of the other Loan Documents
or other agreement or any laws now or hereafter in force, notwithstanding some
or all of the Indebtedness and Obligations may now or hereafter be otherwise
secured, whether by mortgage, security agreement, pledge, lien, assignment or
otherwise. Neither the acceptance of this Mortgage nor its enforcement, shall
prejudice or in any manner affect Mortgagee's right to realize upon or enforce
any other security now or hereafter held by Mortgagee, it being agreed that
Mortgagee shall be entitled to enforce this Mortgage and any other security now
or hereafter held by Mortgagee in such order and manner as Mortgagee may
determine in its absolute discretion. No remedy herein conferred upon or
reserved to Mortgagee is intended to be exclusive of any other remedy herein or
by law provided or permitted, but each shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute. Every power or remedy given by any of the Loan
Documents to Mortgagee or to which it may otherwise be entitled, may be
exercised, concurrently or independently, from time to time and as often as may
be deemed expedient by Mortgagee. In no event shall Mortgagee, in the exercise
of the remedies provided in this Mortgage (including, without limitation, in
connection with the assignment of Rents to Mortgagee, or the appointment of a
receiver and the entry of such receiver on to all or any part of the Mortgaged
Property), be deemed a "mortgagee in possession," and Mortgagee shall not in any
way be made liable for any act, either of commission or omission, in connection
with the exercise of such remedies.
29. Multiple Security. If (a) the Premises shall consist of one or more
parcels, whether or not contiguous and whether or not located in the same
county, or (b) in addition to this Mortgage, Mortgagee shall now or hereafter
hold one or more additional mortgages, liens, deeds of trust or other security
(directly or indirectly) for the Indebtedness upon other property in the State
in which the Premises are located (whether or not such property is owned by
Mortgagor or by others) or (c) both the circumstances described in clauses (a)
and (b) shall be true, then to the fullest extent permitted by law, Mortgagee
may, at its election, commence or consolidate in a
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20
single foreclosure action all foreclosure proceedings against all such
collateral securing the Indebtedness (including the Mortgaged Property), which
action may be brought or consolidated in the courts of any county in which any
of such collateral is located. Mortgagor acknowledges that the right to maintain
a consolidated foreclosure action is a specific inducement to Mortgagee to
extend the Indebtedness, and Mortgagor expressly and irrevocably waives any
objections to the commencement or consolidation of the foreclosure proceedings
in a single action and any objections to the laying of venue or based on the
grounds of forum non conveniens which it may now or hereafter have. Mortgagor
further agrees that if Mortgagee shall be prosecuting one or more foreclosure or
other proceedings against a portion of the Mortgaged Property or against any
collateral other than the Mortgaged Property, which collateral directly or
indirectly secures the Indebtedness, or if Mortgagee shall have obtained a
judgment of foreclosure and sale or similar judgment against such collateral,
then, whether or not such proceedings are being maintained or judgments were
obtained in or outside the State in which the Premises are located, Mortgagee
may commence or continue foreclosure proceedings and exercise its other remedies
granted in this Mortgage against all or any part of the Mortgaged Property and
Mortgagor waives any objections to the commencement or continuation of a
foreclosure of this Mortgage or exercise of any other remedies hereunder based
on such other proceedings or judgments, and waives any right to seek to dismiss,
stay, remove, transfer or consolidate either any action under this Mortgage or
such other proceedings on such basis. Neither the commencement nor continuation
of proceedings to foreclose this Mortgage nor the exercise of any other rights
hereunder nor the recovery of any judgment by Mortgagee in any such proceedings
shall prejudice, limit or preclude Mortgagee's right to commence or continue one
or more foreclosure or other proceedings or obtain a judgment against any other
collateral (either in or outside the State in which the Premises are located)
which directly or indirectly secures the Indebtedness, and Mortgagor expressly
waives any objections to the commencement of, continuation of, or entry of a
judgment in such other proceedings or exercise of any remedies in such
proceedings based upon any action or judgment connected to this Mortgage, and
Mortgagor also waives any right to seek to dismiss, stay, remove, transfer or
consolidate either such other proceedings or any action under this Mortgage on
such basis. It is expressly understood and agreed that to the fullest extent
permitted by law, Mortgagee may, at its election, cause the sale of all
collateral which is the subject of a single foreclosure action at either a
single sale or at multiple sales conducted simultaneously and take such other
measures as are appropriate in order to effect the agreement of the parties to
dispose of and administer all collateral securing the Indebtedness (directly or
indirectly) in the most economical and least time-consuming manner.
30. Successors and Assigns. All covenants of Mortgagor contained in this
Mortgage are imposed solely and exclusively for the benefit of Mortgagee and its
successors and assigns, and no other person or entity shall have standing to
require compliance with such covenants or be deemed, under any circumstances, to
be a beneficiary of such covenants, any or all of which may be freely waived in
whole or in part by Mortgagee at any time if in its sole discretion it deems
such waiver advisable. All such covenants of Mortgagor shall run with the land
and bind Mortgagor, the successors and assigns of Mortgagor (and each of them)
and all subsequent owners, encumbrancers and tenants of the Mortgaged Property,
and shall inure to the benefit of Mortgagee, its successors and assigns. The
word "Mortgagor" shall be construed as if
<PAGE>
21
it read "Mortgagors" whenever the sense of this Mortgage so requires and if
there shall be more than one Mortgagor, the obligations of the Mortgagors shall
be joint and several.
31. No Waivers, etc. Any failure by Mortgagee to insist upon the strict
performance by Mortgagor of any of the terms and provisions of this Mortgage
shall not be deemed to be a waiver of any of the terms and provisions hereof,
and Mortgagee, notwithstanding any such failure, shall have the right thereafter
to insist upon the strict performance by Mortgagor of any and all of the terms
and provisions of this Mortgage to be performed by Mortgagor. Mortgagee may
release, regardless of consideration and without the necessity for any notice to
or consent by the holder of any subordinate lien on the Mortgaged Property, any
part of the security held for the obligations secured by this Mortgage without,
as to the remainder of the security, in anywise impairing or affecting the lien
of this Mortgage or the priority of such lien over any subordinate lien.
32. Governing Law, etc. This Mortgage shall be governed by and construed
and interpreted in accordance with the laws of the State of Michigan, except
that Mortgagor expressly acknowledges that by its terms the Second Priority
Notes shall be governed and construed in accordance with the laws of the State
of New York, without regard to principles of conflict of law, and for purposes
of consistency, Mortgagor agrees that in any in personam proceeding related to
this Mortgage the rights of the parties to this Mortgage shall also be governed
by and construed in accordance with the laws of the State of New York governing
contracts made and to be performed in that State, without regard to principles
of conflict of law.
33. Certain Definitions. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, words used in this
Mortgage shall be used interchangeably in singular or plural form and the word
"Mortgagor" shall mean "each Mortgagor or any subsequent owner or owners of the
Mortgaged Property or any part thereof or interest therein," the word
"Mortgagee" shall mean "Mortgagee or any successor agent for the Second Priority
Holders," the words "Second Priority Notes" shall mean "the Second Priority
Notes, the Second Priority Indenture or any other evidence of indebtedness
secured by this Mortgage," the word "person" shall include any individual,
corporation, partnership, trust, unincorporated association, government,
governmental authority, or other entity, and the words "Mortgaged Property"
shall include any portion of the Mortgaged Property or interest therein.
Whenever the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural and vice versa. The captions in this
Mortgage are for convenience or reference only and in no way limit or amplify
the provisions hereof.
34. Conflict With Second Priority Indenture. In the event of any conflict
or inconsistency between the terms and provisions of this Mortgage and the terms
and provisions of the Second Priority Indenture, the terms and provisions of the
Second Priority Indenture shall govern; provided, however that in the event of
any conflict or inconsistency between the terms and provisions of the Second
Priority Indenture and the terms and provisions of the Intercreditor Agreement,
the terms and provisions of the Intercreditor Agreement shall govern.
<PAGE>
22
35. Intercreditor Agreement. Notwithstanding anything to the contrary in
this Mortgage, the exercise of all rights and remedies by Mortgagee pursuant to
this Mortgage or otherwise in respect of the Mortgaged Property, and the
application of any proceeds of the Mortgaged Property, are subject to and shall
be governed by the terms and conditions of the Intercreditor Agreement. In the
event of any inconsistency between the provisions of this Mortgage and the
provisions of the Intercreditor Agreement, the provisions of the Intercreditor
Agreement shall control.
<PAGE>
23
This Mortgage has been duly executed by Mortgagor on the date first above
written.
In the Presence of: HARVARD INDUSTRIES, INC.
- ---------------------- By: -------------------------
Print name: Name:
Title:
- --------------------
Print name:
<PAGE>
CORPORATION
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me this ____ day of
November, 1998, by ______________, the [ ] President of Harvard Industries,
Inc., a Delaware corporation, on behalf of the corporation.
------------------------
Notary Public
My Commission Expires
[seal]
<PAGE>
Schedule A
Description of the Premises
[Attach Legal Description of all parcels; include
municipal tax assessment identification numbers]
<PAGE>
Delaware
THIS MORTGAGE CONSTITUTES A FIXTURE FILING
UNDER THE MICHIGAN UNIFORM COMMERCIAL CODE
SECOND PRIORITY MORTGAGE
from
HARVARD INDUSTRIES, INC., Mortgagor,
a Delaware corporation whose address is
3 Werner Way, Suite 210, Lebanon, New Jersey 08833
to
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, Mortgagee,
a national banking association whose address is
Sixth and Marquette,
Minneapolis, Minnesota 55479-0069
As Collateral Agent
DATED AS OF NOVEMBER 24, 1998
Prepared by, and after recording, please return to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
ATTN: Arthur K. Chung, Esq.
<PAGE>
EXHIBIT E
FORM OF GUARANTOR SUPPLEMENT
GUARANTOR SUPPLEMENT, dated as of __________ __, among HARVARD INDUSTRIES,
INC., a Delaware corporation (the "Company"), [NEW SUBSIDIARY GUARANTOR], a
__________ corporation (the "New Subsidiary Guarantor") and NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, a national banking association, as trustee (the
"Trustee") to the Indenture dated as of November 24, 1998 (as amended to the
date hereof, the "Indenture") among the Company, the Subsidiary Guarantors named
therein and the Trustee.
W I T N E S S E T H :
WHEREAS, Section 9.1 of the Indenture provides that the Company and the
Trustee may, among other things, amend the Indenture or the Securities without
notice to or consent of any Securityholder to add Guarantees with respect to the
Securities or to secure the Securities;
WHEREAS, Section 10.7 of the Indenture provides that until such time as all
Guarantees by the Subsidiary Guarantors under the Indenture shall have been
released in accordance with Section 10.9 of the Indenture, the Company shall
cause each Subsidiary that Guarantees the Company's obligations under the Senior
Credit Facility (other than a Foreign Subsidiary) to execute and deliver this
Guarantor Supplement pursuant to which such Subsidiary shall agree to be bound
by the provisions of Article X of the Indenture; and
WHEREAS, the New Subsidiary Guarantor shall execute and deliver to the
Trustee this Guarantor Supplement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
a. Defined Terms. Capitalized terms used and not defined herein shall have
the meaning specified in or pursuant to the Indenture.
b. Guarantee. The New Subsidiary Guarantor hereby agrees to unconditionally
assume all the obligations of a Subsidiary Guarantor under the Indenture as
described therein.
c. Trustee. The Trustee accepts the modification of the Indenture effected
by this Guarantor Supplement, but only upon the terms and conditions set forth
in the Indenture. Without limiting the generality of the foregoing, the Trustee
assumes no responsibility for the correctness of the recitals herein contained.
The Trustee makes no representation and shall have no responsibility as to the
validity and sufficiency of this Guarantor Supplement.
d. Effect on Indenture. As supplemented by this Guarantor Supplement, the
Indenture is hereby ratified and confirmed in all aspects.
<PAGE>
2
e. Counterparts. This Guarantor Supplement may be executed in counterparts,
each of which when so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
f. Governing Law and Submission to Jurisdiction. This Guarantor Supplement
shall be governed by, and construed in accordance with, the laws of the State of
New York but without giving effect to applicable principles of conflicts of law
to the extent that the application of the laws of another Jurisdiction would be
required thereby. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Guarantor
Supplement to be duly executed as of the day and year first above written.
[NEW SUBSIDIARY GUARANTOR]
By:
----------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
----------------------------
Name:
Title:
HARVARD INDUSTRIES, INC.
By:
----------------------------
Name:
Title:
<PAGE>
EXHIBIT F
FORM OF CERTIFICATE OF TRANSFER
Harvard Industries, Inc.
3 Werner Way
Suite 210
Lebanon, New Jersey 08833
Attention: Chief Financial Officer
Norwest Bank Minnesota, National Association
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Re: 14 1/2% Senior Secured Securities due 2003
Reference is hereby made to the Indenture, dated as of November 24, 1998
(the "Indenture"), by and among Harvard Industries, Inc.(the "Company"), the
Subsidiary Guarantors named therein and Norwest Bank Minnesota, National
Association, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
__________________ (the "Transferor") owns and proposes to transfer the
Security or Securities or interest in such Security or Securities specified in
Annex A hereto, in the principal amount of $____ in such Security or Securities
or interests (the "Transfer"), to ______ (the "Transferee"), as further
specified in Annex A hereto. In connection with the Transfer, the Transferor
hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] Check if Transferee will take delivery of a beneficial interest in the
144A Global Security or a Definitive Security Pursuant to Rule 144A. The
Transfer is being effected pursuant to and in accordance with Rule 144A under
the United States Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Security is being transferred to a Person that the
Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Security for its own account, or for one or more accounts
with respect to which such Person exercises sole investment discretion, and such
Person and each such account is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and
such Transfer is in compliance with any applicable blue sky securities laws of
any state of the United States. Upon consummation of the proposed Transfer in
accordance with the terms of the Indenture, the transferred beneficial interest
or Definitive Security will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the 144A Global Security
and/or the Definitive Security and in the Indenture and the Securities Act.
2. [ ] Check if Transferee will take delivery of a beneficial interest in the
Regulation S Global Security or a Definitive Security pursuant to Regulation S.
The Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and, accordingly, the Transferor hereby
further certifies that (i) the Transfer is not being made to a person in the
United States and (x) at
<PAGE>
2
the time the buy order was originated, the Transferee was outside the United
States or such Transferor and any Person acting on its behalf reasonably
believed and believes that the Transferee was outside the United States or (y)
the transaction was executed in, on or through the facilities of a designated
offshore securities market and neither such Transferor nor any Person acting on
its behalf knows that the transaction was prearranged with a buyer in the United
States, (ii) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities
Act, (iii) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act and (iv) if the proposed
transfer is being made prior to the expiration of the Restricted Period, the
transfer is not being made to a U.S. Person or for the account or benefit of a
U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Security will be subject to the restrictions
on Transfer enumerated in the Private Placement Legend printed on the Regulation
S Global Security, and/or the Definitive Security and in the Indenture and the
Securities Act.
3. [ ] Check and complete if Transferee will take delivery of a beneficial
interest in the IAI Global Security or a Definitive Security pursuant to any
provision of the Securities Act other than Rule 144A or Regulation S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Securities and
Restricted Definitive Securities and pursuant to and in accordance with the
Securities Act and any applicable blue sky securities laws of any state of the
United States, and accordingly the Transferor hereby further certifies that
(check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Issuers or a subsidiary
thereof;
or
(c) [ ] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that it has not engaged in any general solicitation
within the meaning of Regulation D under the Securities Act and the Transfer
complies with the transfer restrictions applicable to beneficial interests in a
Restricted Global Security or Restricted Definitive Securities and the
requirements of the exemption claimed, which certification is supported by ( 1)
a certificate executed by the Transferee and (2) if such Transfer is in respect
of a principal amount of Securities at the time of transfer of less than
$250,000, an Opinion of Counsel provided by the Transferor or the Transferee (a
copy of which the Transferor has attached to this certification), to the effect
that such Transfer is in compliance with the Securities Act. Upon consummation
of the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Security will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the IAI Global Security and/or the Definitive Securities and in the Indenture
and the Securities Act.
<PAGE>
3
4. [ ] Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Security or of an Unrestricted Definitive Security.
(a) [ ] Check if Transfer is Pursuant to Rule 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Security will no longer be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Global Securities, on
Restricted Definitive Securities and in the Indenture.
(b) [ ] Check if Transfer is Pursuant to Regulation S. (i) The Transfer is
being effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Security will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Securities, on Restricted Definitive Securities and in the Indenture.
(c) [ ] Check if Transfer is Pursuant to Other Exemption. (i) The Transfer
is being effected pursuant to and in compliance with an exemption from the
registration requirements of the Securities Act other than Rule 144, Rule 903 or
Rule 904 and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any State of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Security will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Securities or Restricted Definitive Securities and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuers.
----------------------------
[Insert Name of Transferor]
By:
----------------------------
Name:
Title:
Dated: ___________, ____
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Security (CUSIP _____), or
(ii) [ ] Regulation S Global Security, (CUSIP _____), or
(iii) [ ] IAI Global Security (CUSIP _____); or
(b) [ ] a Restricted Definitive Security.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Security (CUSIP _____), or
(ii) [ ] Regulation S Global Security (CUSIP _____), or
(iii) [ ] a IAI Global Security (CUSIP _____), or
(iv) [ ] Unrestricted Global Security (CUSIP _____); or
(b) [ ] a Restricted Definitive Security; or
(c) [ ] an Unrestricted Definitive Security,
in accordance with the terms of the Indenture.
<PAGE>
EXHIBIT G
FORM OF CERTIFICATE OF EXCHANGE
Harvard Industries, Inc.
3 Werner Way
Suite 210
Lebanon, New Jersey 08833
Attention: Chief Financial Officer
Norwest Bank Minnesota, National Association
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Re: 14 1/2% Senior Secured Securities due 2003
(CUSIP ____________________)
Reference is hereby made to the Indenture, dated as of November 24, 1998
(the "Indenture"), by and among Harvard Industries, Inc. (the "Company"), the
Subsidiary Guarantors named therein and Norwest Bank Minnesota, National
Association, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
________________ (the "Owner") owns and proposes to exchange the Security
or Securities or interest in such Security or Securities specified herein, in
the principal amount of $______ in such Security or Securities or interests (the
"Exchange"). In connection with the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Securities or Beneficial Interests in a
Restricted Global Security for Unrestricted Definitive Securities or Beneficial
Interests in an Unrestricted Global Security
(a) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Security to beneficial interest in an Unrestricted Global Security. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Security for a beneficial interest in an Unrestricted Global Security in
an equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Global Securities and pursuant to and in accordance with the
United States Securities Act of 1933, as amended (the "Securities Act"), (iii)
the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the beneficial interest in an Unrestricted Global
Security is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
(b) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Security to Unrestricted Definitive Security. In connection with the
Exchange of the Owner's
<PAGE>
2
beneficial interest in a Restricted Global Security for an Unrestricted
Definitive Security, the Owner hereby certifies (i) the Definitive Security is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Restricted Global Securities and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Definitive Security is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(c) [ ] Check if Exchange is from Restricted Definitive Security to
beneficial interest in an Unrestricted Global Security. In connection with the
Owner's Exchange of a Restricted Definitive Security for a beneficial interest
in an Unrestricted Global Security, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to Restricted Definitive Securities and pursuant to and
in accordance with the Securities Act, (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
(d) [ ] Check if Exchange is from Restricted Definitive Security to
Unrestricted Definitive Security. In connection with the Owner's Exchange of a
Restricted Definitive Security for an Unrestricted Definitive Security, the
Owner hereby certifies (i) the Unrestricted Definitive Security is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to
Restricted Definitive Securities and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Unrestricted Definitive Security
is being acquired in compliance with any applicable blue sky securities laws of
any state of the United States.
2. Exchange of Restricted Definitive Securities or Beneficial Interests in
Restricted Global Securities for Restricted Definitive Securities or Beneficial
Interests in Restricted Global Securities
(a) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Security to Restricted Definitive Security. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Security for
a Restricted Definitive Security with an equal principal amount, the Owner
hereby certifies that the Restricted Definitive Security is being acquired for
the Owner's own account without transfer. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the Restricted
Definitive Security issued will continue to be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Definitive Security and in the Indenture and the Securities Act.
(b) [ ] Check if Exchange is from Restricted Definitive Security to
beneficial interest in a Restricted Global Security. In connection with the
Exchange of the Owner's Restricted Definitive Security for a beneficial interest
in the [CHECK ONE] [ ] 144A Global Security, [ ] Regulation S Global Security,
[ ] IAI Global Security with an equal principal amount, the Owner hereby
certifies (i) the beneficial interest is being acquired for the Owner's own
account without transfer and (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to the Restricted Global Securities
and pursuant to and in accordance with the Securities Act, and in compliance
with any applicable blue sky securities laws of any state of the United States.
Upon consummation of the proposed Exchange in accordance with the terms of the
Indenture, the beneficial interest issued will be subject to
<PAGE>
3
the restrictions on transfer enumerated in the Private Placement Legend printed
on the relevant Restricted Global Security and in the Indenture and the
Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuers.
----------------------------
[Insert Name of Owner]
By:
----------------------------
Name:
Title:
Dated: ___________, ____
<PAGE>
October 15, 1998
AGREEMENT BETWEEN HARVARD INDUSTRIES, INC.
AND THE PENSION BENEFIT GUARANTY CORPORATION
I. Preliminary Statement
The following are the terms of the agreement ("Agreement") between: (a)
Harvard Industries, Inc. and the members of its controlled group (as that term
is defined by section 4001(a)(14) of the Employee Retirement Income Security Act
of 1974, as amended, 29 U.S.C. ss.ss. 1301-1461 ("ERISA")) ("Harvard") and (b)
the Pension Benefit Guaranty Corporation ("PBGC"), regarding the single employer
defined benefit pension plans for which Harvard is a contributing sponsor (as
that term is defined by section 4001(a)(13) of ERISA) ("Harvard Plans").(1) This
Agreement is enforceable pursuant to its terms, and is contingent on
consummation of Harvard's "Consolidated Plan under Chapter 11 of the Bankruptcy
Code" (as may be amended or modified, the "Plan of Reorganization") in the
Chapter 11 cases captioned In re Doehler-Jarvis, Inc., et al., Case Nos. 97-953
through 97-962 (SLR) (Bankr. D. Del.), The Plan of Reorganization shall
expressly provide for implementation of the provisions of this Agreement. A copy
of this Agreement shall be annexed to the Plan of Reorganization. The Official
Committee of Unsecured Creditors of Doehler-Jarvis, Inc., et al. (the
"Committee") has accepted the terms of this Agreement, but shall have no
obligations thereunder. This Agreement shall be effective on confirmation of the
Plan of Reorganization, subject to the occurrence of the effective date thereof.
Provided such effective date shall have occurred, the effective date of this
Agreement shall be the confirmation date of the Plan of Reorganization (the
"Effective Date").
II. PBGC Obligations
A. Standstill on Remedies. In consideration of the performance by
Harvard of its obligations hereunder, PBGC will forbear from using the remedies
provided by section 4042(a)(4) or 4062(e) of ERISA in connection with (i) the
cessation of operations at the Toledo, Ohio facility of Doehler-Jarvis Toledo,
Inc., the cessation of operations at the Semple Avenue facility
- --------
(1) The single employer defined benefit pension plans for which Harvard is
a contributing sponsor as of the effective date of this Agreement are
set forth in Exhibit A attached hereto. The term "Harvard Plans" as
used herein includes any successor plans or any single employer defined
benefit pension plans of which Harvard becomes a contributing sponsor.
<PAGE>
of the Company's Harvard Interiors Division in St. Louis, Missouri, the
cessation of operations at the Bolivar, Tennessee facility of Harman Automotive,
Inc., the sale or assets of the Greeneville, Tennessee facility of
Doehler-Jarvis Greeneville, Inc., or (ii) the implementation of initial
post-confirmation exit financing (the "Initial Post-Confirmation Exit
Financing"), or any subsequent refinancing thereof within five years from the
Effective Date which does not increase the amount of principal indebtedness of
Harvard subject to security interests in any of the assets or properties of
Harvard, unless any of the following take place:
1. Harvard fails to make a required quarterly or annual
minimum funding contribution for any of the Harvard Plans, provided,
however, that if any unpaid minimum funding contribution is paid within
sixty days of the due date for the payment, then PBGC shall cease
pursuing said remedies under section 4042(a)(4) or section 4062(e) of
ERISA then pending and this standstill shall be reinstated;
2. Harvard commences a proceeding or petition for the winding
up of any of its business affairs or otherwise proposes to sell all or
substantially all of its assets, unless the conditions contained in
section IV.C. below are met; or
3. Harvard or any member of the Harvard controlled group files
or has filed against it a petition for relief under title 11 of the
United States Code, provided that this standstill shall be reinstated
should an involuntary petition for relief be withdrawn or dismissed
within 90 days of filing.
B. Termination of 1994 Settlement Agreement. In consideration for
Harvard's entering into this Agreement and upon consummation of the Plan of
Reorganization in a manner consistent with the provisions of this Agreement, the
Settlement Agreement (the "Prior Agreement") dated July 26, 1994, by and between
the Harvard Companies and PBGC, shall be terminated, and the consideration
provided to the PBGC by Harvard as set forth in this Agreement shall be in full
settlement, release and discharge of any and all rights and claims of the PBGC
against Harvard, directly or indirectly, related to or arising under the Prior
Agreement. In addition, PBGC hereby acknowledges that it shall have no pre- or
post-termination claim against Harvard by reason of the termination, settlement,
release and discharge of the Prior Agreement.
III. Harvard Obligations
A. The Plan of Reorganization and the confirmation order shall provide
that on the confirmation date, Harvard, as reorganized, shall be a contributing
sponsor of all of the Harvard Plans.
2
<PAGE>
B. Notwithstanding the notice requirements set forth in Article V.B.
herein, there shall be no plan merger or other transfer of plan assets or
liabilities between: (a) the Doehler-Jarvis Pension Plan for Wage Basis
Employees ("Doehler-Jarvis Plan"); and (b) any of the other Harvard Plans. In no
event shall there be any use of any credit balance maintained in the funding
standard account of any of the other Harvard Plans for the benefit of the
funding standard account of the Doehler-Jarvis Plan. Further, no defined benefit
pension plan that is covered by Title IV of ERISA that is not listed on Exhibit
A to this Agreement shall be merged into any of the Harvard Plans without PBGC's
consent.
C. In order to secure minimum funding contributions required for the
Doehler-Jarvis Plan and underfunding of the Doehler-Jarvis Plan, Harvard shall
provide PBGC, for the benefit of the Doehler-Jarvis Plan and PBGC, with a pledge
of new common stock of Reorganized Harvard ("New Common Stock"), in an amount
equal to what the PBGC would have received as an unsecured general creditor of
Harvard having an allowed Class 5 Claim (as such term is defined in the Plan of
Reorganization) of $18.7 million, less the amount of all contributions made to
the Doehler-Jarvis Plan after April 15, 1998 and prior to the Effective Date
(the number of shares of New Common Stock received by the PBGC pursuant to this
provision, taking into account all such contributions made prior to the
Effective Date, is referred to herein as the "Harvard Stock Pledge"). The
Harvard Stock Pledge shall be held in escrow, which shall be established and be
subject to the following terms and conditions:
1. The identity of the bank or other financial institution
acting as escrow agent for the Harvard Stock Pledge shall be designated
by the PBGC, subject to Harvard's consent, and the form of escrow
agreement shall be subject to approval of Harvard and PBGC;
2. Except to the extent released in accordance with
Article III.C.4. below, the Harvard Stock Pledge shall be maintained
and continue to be held in escrow until the earlier of (a) five years
from the Effective Date of the Plan of Reorganization or (b) the date
on which this Agreement is terminated in accordance with Article IV
hereof (such earlier date described in (a) or (b) hereof, the "Release
Date"). On the Release Date the Harvard Stock Pledge shall be delivered
to Harvard;
3. Subject to the limitations that (a) no sales of any shares
of New Common Stock may be made during the 90-day period commencing
with the consummation of the Plan of Reorganization and (b) all sales
of shares of New Common Stock after such 90-day period shall be in
compliance with and subject to the limitations set forth in Rule
144(e)(1) and (f) of the Securities Act of 1933 as if the same applied
to the PBGC, shares of New Common Stock held by the escrow
3
<PAGE>
agent will be subject to sale at any time, in the discretion of a third
party approved by Harvard and PBGC, based on prudent investment
standards. The proceeds of all such sales shall continue to be held in
escrow or delivered from escrow in accordance with the provisions of
this Agreement relating to the Harvard Stock Pledge. All references in
this Agreement to the Harvard Stock Pledge shall be deemed to include
the proceeds of any such sales of New Common Stock, and all property in
which such proceeds may be reinvested from time to time, as increased
or decreased by the investment earnings or losses thereon and any
release in accordance with Article III.C.4 below thereof.
4. The escrow agent shall deliver all property held in escrow
under the Harvard Stock Pledge, together with any accumulated dividends
or distributions, from escrow to the PBGC in the event any one of the
following has occurred: (a) Harvard has failed to make a required
quarterly or annual minimum funding contribution for the Doehler-Jarvis
Plan, and such failure has continued for sixty days from the due date
for the contribution; (b) PBGC receives a Notice of Intent to Terminate
the Doehler-Jarvis Plan in a distress termination under section 4041(c)
of ERISA; (c) Harvard commences a proceeding or petition for the
winding up of any of its business affairs or otherwise consummates the
sale of all or substantially all of its assets, unless the conditions
contained in Article IV.C. of this Agreement are met; or (d) Harvard,
in whole or in part, files or has filed against it a petition for
relief under title 11 of the United States Code, and such petition for
relief has not been withdrawn or dismissed within 90 days of filing.
5. Amounts received by PBGC from the escrow agent shall be:
(a) used to pay minimum funding contributions due from time to time to
any of the Harvard Plans; (b) used to satisfy any liability under
section 4062 of ERISA with respect to the Harvard Plans; or (c) held
until the Agreement is terminated. PBGC shall return the excess and
unused amounts so distributed, if any, to Harvard. Taxes on earnings on
the escrowed amounts so distributed shall be charged to the escrow
account. After-tax interest earned on escrowed amounts shall be
available for distribution to Harvard, PBGC, or the Harvard Plans, as
the case may be.
6. (a) In the event that, during the term of the Initial
Post-Confirmation Exit Financing, any dividend or other distributions
are paid to Harvard shareholders within five years from the Effective
Date that would cause an event of default under the Initial
Post-Confirmation Exit Financing, Harvard will not use the credit
balances that existed under the Harvard Plans on the last day of the
plan year preceding the plan year in which the dividend or distribution
was paid in determining the contribution required to be made to satisfy
the minimum funding standard
4
<PAGE>
of section 412 of the Internal Revenue Code ("IRC") for the plan year
in which the dividend or distribution was paid.
(b) In the event that, after the term of the Initial
Post-Confirmation Exit Financing, any dividend or other distributions
are paid to Harvard shareholders within five years from the Effective
Date, Harvard will not use the credit balances that existed under the
Harvard Plans on the last day of the plan year preceding the plan year
in which the dividend or distribution was paid in determining the
contribution required to be made to satisfy the minimum funding
standard of section 412 of the IRC for the plan year in which the
dividend or distribution was paid.
IV. Termination of Agreement
This Agreement shall terminate upon the earliest of A., B., C. or D.
below; but in the case of B., no earlier than five years after the confirmation
date of the Plan of Reorganization or September 30,2003, whichever is later, and
in the case of A., B. and C., only if Harvard is then current on its minimum
funding obligations to the Harvard Plans:
A. The date on which none of the Harvard Plans have any unfunded
benefit liabilities, as determined under section 4001(a)(18) of ERISA, as of the
last day of the plan year for each plan for any two consecutive plan years (the
last day of the plan year in the second consecutive year being the measurement
date); provided, however, that if the sum of the aggregate unfunded liabilities
of all Harvard Plans that have unfunded benefits as of the last day of any two
consecutive plan years is less than $1 million ("Aggregate Underfunding"),
Harvard will have satisfied the conditions of this paragraph provided it has
contributed in cash an amount equal to such Aggregate Underfunding by no later
than September 15 of the first calendar year following the end of the second
such plan year;
B. The date on which Harvard obtains ratings on its unsecured debt from
Standard & Poor's and Moody's of at least BBB- and Baa3, respectively;
C. If there is a change of the Harvard controlled group, and the
unsecured debt of the new controlled group has been rated BBB- by Standard &
Poor's and Baa3 by Moody's, or better, for the two consecutive years prior to a
rating date (which rating date is subsequent to the date of the change of the
controlled group), and such ratings are reaffirmed taking into account the
change of controlled group; or
D. The date on which all of the Harvard Plans have been successfully
terminated in standard terminations under section 4041(b) of ERISA.
5
<PAGE>
V. Notice Requirements
Harvard shall provide to the Director of PBGC's Corporate Finance and
Negotiations Department ("CFND"):
A. Copies of any notices otherwise required to be filed with the
Internal Revenue Service ("IRS") or PBGC concerning any of the Harvard Plans
within 20 days of the time the filing is made;
B. Written notice 30 days prior to any plan merger or any transfers of
liabilities or assets described in section 414(1) of the IRC to or from any of
the Harvard Plans (other than mergers or transfers involving amounts less than
three percent of assets or liabilities in any plan year);
C. Written notice 30 days prior to any change in any of the Harvard
Plan's actuarial assumptions or methods for the purposes of the minimum funding
standard of section 412 of the IRC (other than changes that are required by
law), which changes shall be subject to PBGC's consent, with consent not to be
unreasonably withheld;
D. Written notice as soon as practicable after delivery or receipt of
any notice of default under any debt instrument of Harvard;
E. A copy of plan amendments for any of the Harvard Plans within ten
days after adoption;
F. Written notice within ten days of any missed quarterly or annual
minimum funding contribution required to be made to any of the Harvard Plans;
G. During periods when Harvard's common stock is publicly traded and
its filings with the Securities and Exchange Commission are current, copies of
SEC Forms 10-K and 10-Q, within 20 days of filing; if such Forms are not timely
filed, quarterly and audited annual financial statements for Harvard;
H. Written notice, including the status of affected employees, 30 days
prior to any: (a) cessation of operations at any Harvard facility; or (b) any
sale, transfer or other disposition of assets of Harvard where such assets
represent ten percent or more of the book value of the assets of Harvard on a
consolidated basis, or have generated ten percent or more of the consolidated
revenues, or have generated ten percent or more of the consolidated operating
income of Harvard in the preceding fiscal year;
I. Written notice 30 days (or as soon as practicable) prior to any
change of the identity of any contributing sponsor of any of the Harvard Plans,
or if a contributing sponsor of any
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<PAGE>
of the Harvard Plans is to become a member of any other controlled group;
J. Annual Actuarial Valuation Reports for each of the Harvard Plans for
each plan year when prepared, but in any event by no later than December 1 of
the current plan year; and
K. A certified actuarial statement specifying each of the Harvard
Plans' credit balance at the end of the preceding plan year, and supporting
calculations, by no later than seven months after the end of each plan year,
commencing with the 1998 plan year (i.e., the initial statement must be filed no
later than August 1, 1999).
VI. Acceptance of Plan of Reorganization
The PBGC hereby agrees to support confirmation of, and vote to accept,
the Plan of Reorganization, provided such Plan continues to contain provisions
that require implementation of this Agreement. Upon consummation of the Plan of
Reorganization, all proofs of claim of the PBGC shall be deemed withdrawn, with
prejudice.
VII. Preservation of Rights
Neither the operation of the Agreement (e.g., release of Harvard Stock
Pledge) nor termination of the Agreement in accordance with the provisions
hereof shall, in and of itself, constitute a basis for PBGC to take any adverse
action against any of the Harvard Plans. Nothing in the Agreement shall restrict
or diminish Harvard's right to dispute or contest any basis that PBGC may
thereafter raise to terminate any one or more of the Harvard Plans and/or the
amount of the termination liability asserted by the PBGC in the event of the
involuntary termination of any one or more of the Harvard Plans.
VIII. Execution of Ancillary Agreement
Harvard and the PBGC shall use their best efforts to select an escrow
agent and finalize and execute a definitive escrow agreement consistent with the
provisions of this Agreement as soon as practicable and in no event later than
ten (10) days prior to confirmation of the Plan of Reorganization.
IX. General
A. Nothing in this Agreement shall relieve Harvard or any other person
of their obligations under ERISA or the IRC.
B. This Agreement and the rights and obligations of the parties
hereunder shall be governed by and construed in accordance with ERISA, the IRC,
and the laws of the District of Columbia (except the laws of the District of
Columbia governing
7
<PAGE>
choice of laws), except to the extent such laws are preempted by federal law.
C. No failure of any of the parties to this Agreement to enforce at any
time any of the provisions of this Agreement and no course of dealing between or
among any of the members of Harvard and/or the PBGC shall be construed to be a
waiver of any such provision, or shall in any way affect the validity of this
Agreement or the right of any party to enforce each and every one of the
provisions of this Agreement.
D. This Agreement constitutes the entire final agreement with respect
to the matters provided for herein, and no other agreement or understanding
exists except as expressly set forth herein.
E. This Agreement shall not be modified or amended, except by written
instrument signed by the parties hereto.
F. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
or provisions of this Agreement, which shall remain in full force and effect.
G. This Agreement shall inure to the benefit of, and may be enforced
solely by, the parties hereto, and, in each case, their respective successors
and assigns.
H. This Agreement may be executed in any number of identical
counterparts, each of which shall be deemed an original as against the party who
signed it, and all of which together shall constitute one and the same
instrument.
I. Any notices, requests or other communications hereunder shall be in
writing, and shall be deemed to have been duly given when mailed by United
States registered or certified mail postage prepaid, or upon receipt if
overnight delivery service, telegraph, telecopy, or telex is used, addressed as
follows:
To the PBGC:
Chief Negotiator and Director
Corporate Finance and Negotiations Department
Pension Benefit Guaranty Corporation
Suite 270
1200 K Street N.W.
Washington, D.C. 20005-4026
(202) 842-2643 (telefacsimile number)
General Counsel
Pension Benefit Guaranty Corporation
Suite 340
1200 K Street N.W.
Washington, D.C. 20005-4026
(202) 326-4112 (telefacsimile number)
8
<PAGE>
To Harvard:
Joseph J. Gagliardi
Senior Vice President and Chief Financial Officer
Harvard Industries, Inc.
3 Werner Way, Suite 210
Lebanon, NJ 08833
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019-6099
Attn: Stephen T. Lindo
(212) 728-8111 (telefacsimile number)
To Official Committee of
Unsecured Creditors of
Doehler-Jarvis, Inc., et al. (so long as the Committee has not been dissolved):
c/o Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attn: Lawrence A. First
(212) 859-4000 (telefacsimile number)
J. All of the parties to this Agreement hereby represent and warrant
that they have full power and authority to enter into this Agreement, that all
necessary corporate approvals or other appropriate action has been taken to
cause them to possess such power and authority and that this Agreement
constitutes a legal, valid and binding obligation of each of the parties hereto
enforceable against each of the parties hereto.
K. The captions set forth in this Agreement have been inserted for
convenience of reference only and shall not in any way affect the meaning or
construction of any of the provisions of this Agreement.
9
<PAGE>
Accepted and Agreed:
Harvard Industries, Inc. Pension Benefit Guaranty Corporation
on its own behalf and on
behalf of all of the members
of its Controlled Group:
By: /s/ Roger Pollazzi By: /s/ Andrea E. Schneider
----------------------------- ---------------------------------
Roger Pollazzi Andrea E. Schneider
Its: President and Chief Its: Chief Negotiator, and
Operating Officer Director, Corporate Finance and
Negotiations Department
Dated: November 24, 1998 Dated: November 17, 1998
----------------- -----------------
Accepted and Acknowledged:
Official Committee of Unsecured
Creditors of Doehler-Jarvis, Inc.,
et al.
By: /s/ Richard Kuersteiner
-----------------------
Richard Kuersteiner
Its: Co-Chairman
Dated: November 19, 1998
-----------------
By: /s/ Don Navarro
---------------
Don Navarro
Its: Co-Chairman
Dated: November 19, 1998
-----------------
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<PAGE>
EXHIBIT A TO AGREEMENT BETWEEN HARVARD INDUSTRIES, INC.
AND THE PENSION BENEFIT GUARANTY CORPORATION
SINGLE EMPLOYER DEFINED BENEFIT PENSION PLANS
FOR WHICH HARVARD IS A CONTRIBUTING SPONSOR
Doehler-Jarvis Pension Plan for Wage Basis Employees
Harvard Industries Albion Division Hourly-Rate Employees' Pension Plan
Harvard Industries, Inc. Bryan Division Hourly-Rate Employees' Pension Plan
Harvard Industries, Inc. Spencerville Division Hourly-Rate Employees' Pension
Plan
Harvard Industries Jackson Division Hourly-Rate Employees' Pension Plan
Harvard Retirement Plan
Harvard Retirement Plan for Frozen Pension Benefits
Retirement Plan for Union Employees, Harman Automotive, Inc.
<PAGE>
Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT, dated as of November 24, 1998, by and
among HARVARD INDUSTRIES, INC., a Delaware corporation (the "Company"), and the
parties listed on Annex A hereto (the "Initial Holders").
This Agreement is being entered into pursuant to Article 7.5 of the
Debtors' Consolidated Plan under Chapter 11 of the Bankruptcy Code filed with
the United States Bankruptcy Court for the District of Delaware by the Debtors
and the Official Committee of Unsecured Creditors as co-proponents on July 10,
1998 (the "Plan of Reorganization"). The Plan of Reorganization provides for
the issuance of New Common Stock (as hereinafter defined).
The parties hereto desire to provide certain registration rights to
the Initial Holders with respect to the shares of New Common Stock.
Accordingly, the parties hereto agree as follows:
1. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
"Blackout Period" shall mean a period commencing on the date on which
the Company provides notice that: (i) the Shelf Registration is no longer
effective; (ii) the prospectus included in the Shelf Registration no longer
complies with the requirements therefor prescribed by Section 10(a) of the
Securities Act; or (iii) subject to Section 2.1(b), there is a Material
Disclosure Event and the Board of Directors of the Company has elected (in its
good faith reasonable judgment) to require the suspension of the sale by the
Holder of Registrable New Common Stock pursuant to the Shelf Registration, and
shall end on the date when the Holder either receives copies of the
supplemented or amended prospectus contemplated by Section 2.4(g) or such
earlier time that the Holder is otherwise advised in writing by the Company
that use of the prospectus may be resumed.
"Commission" means the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Exchange Act shall include a reference to the
comparable section, if any, of any such similar Federal statute.
"Holder" means a registered holder of Registrable New
Common Stock.
"Initial Holders" has the meaning assigned to it in the
preamble hereof.
<PAGE>
"Material Disclosure Event" means any pending or imminent event
relating to the Company which, based on the good faith, reasonable opinion of
the Board of Directors of the Company and the advice of competent outside
counsel to the Board of Directors of the Company, (i) requires disclosure of
material, non-public information relating to such event in the Shelf
Registration Statement so that such registration statement would not be
materially misleading, (ii) is otherwise not required to be publicly disclosed
at the time (e.g., on a Form 8-K or Form 10- Q) under applicable federal or
state securities laws, and (iii) if publicly disclosed at the time of such
event, would have a material adverse effect on the business and financial
condition of the Company.
"New Common Stock" means any shares of common stock, par value $.01
per share, of the Company now or hereafter authorized to be issued, and any and
all securities of any kind whatsoever of the Company which may be issued on or
after the date hereof in respect of, or in exchange for, shares of New Common
Stock pursuant to a merger, consolidation, stock split, stock dividend,
recapitalization of the Company or otherwise.
"Person" means a corporation, an association, a partnership, an
organization, a business, a trust, an individual, or any other entity or
organization, including a government or political subdivision or an
instrumentality or agency thereof.
"Registrable New Common Stock" means (i) the shares of New Common
Stock issued by the Company to an Initial Holder pursuant to the Plan of
Reorganization or (ii) any New Common Stock issued with respect to the New
Common Stock referred to in clause (i) hereof by way of a stock dividend, stock
split or reverse stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or otherwise. As to any particular
Registrable New Common Stock, such securities shall cease to be Registrable New
Common Stock when (i) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement, (ii) they shall have been distributed to the public pursuant to Rule
144 (or any successor provision) under the Securities Act, (iii) they shall
have been otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of them shall not require the registration under the
Securities Act, or (iv) they shall have ceased to be outstanding.
"Registration Expenses" means all expenses incident to the
registration and disposition of the Registrable New Common Stock pursuant to
Section 2 hereof, including, without limitation, all registration, filing and
applicable national securities exchange fees; all fees and expenses of
complying with state securities or blue sky laws (including fees and
disbursements of counsel to the underwriters or the Holders in connection with
"blue sky" qualification of the Registrable New Common Stock and determination
of their eligibility for investment under the laws of the various
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<PAGE>
jurisdictions); all duplicating and printing expenses; all messenger and
delivery expenses; the fees and disbursements of counsel for the Company and of
its independent public accountants, including the expenses of "cold comfort"
letters or, in connection with a registration pursuant to Section 2.3 hereof
only, any special audits required by, or incident to, such registration; all
fees and disbursements of underwriters (other than underwriting discounts and
commissions); all transfer taxes; and the reasonable fees and expenses of one
counsel to the Holders; provided, however, that Registration Expenses shall
exclude and the Holders shall pay underwriting discounts and commissions in
respect of the Registrable New Common Stock being registered.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act shall include a reference to the
comparable section, if any, of any such similar Federal statute.
2. Shelf Registration; Registration Under Securities Act, etc.
2.1 Shelf Registration. (a) Within fifteen days following the date
hereof, the Company shall file with the Commission, at the Company's expense, a
"shelf" registration statement on an appropriate form pursuant to Rule 415
under the Act covering all Registrable New Common Stock (the "Shelf
Registration"). The Company shall use its best efforts to have the Shelf
Registration declared effective as promptly as practicable after such filing
(but not later than 75 days after the date hereof) and to keep the Shelf
Registration continuously effective three years following the date on which the
Shelf Registration is declared effective (subject to Blackout Periods) (the
"Shelf Registration Period"). The Company shall, to the extent necessary,
supplement or amend the Shelf Registration (in each case, at the Company's
expense) to keep the Shelf Registration effective during the Shelf Registration
Period. The Company further agrees to supplement or amend any Shelf
Registration, as required by the registration form utilized by the Company, by
the instructions applicable to such registration form or by the Securities Act
or the rules and regulations thereunder or as reasonably requested by any
Holder. The Company shall furnish to the Holders copies, in substantially the
form proposed to be used and/or filed, of any such supplement or amendment at
least 30 days prior to its being used and/or filed with the Commission. The
Company hereby consents to the use (in compliance with applicable law) of the
prospectus or any amendment or supplement thereto by each of the selling
Holders of Registrable New Common Stock in connection with the offering and
sale of the Registrable New Common Stock covered by the prospectus or any
amendment or supplement thereto. The Company shall pay all Registration
Expenses incurred in connection with the Shelf Registration, whether or not it
becomes effective. In no event shall the Shelf Registration include securities
other than Registrable New Common Stock, unless the Holders of all Registrable
New Common Stock consent to such inclusion. Nothing herein shall obligate the
Company to incur or
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<PAGE>
pay for fees and disbursements of underwriters in connection with a
distribution under the Shelf Registration.
(b) The Holder agrees that it will not sell any Registrable New
Common Stock pursuant to the Shelf Registration during any Blackout Period. The
Company agrees (i) that the Company will use its best efforts to ensure that
there is not more than one Blackout Period in any 12-month period, (ii) to
cause each Blackout Period to end as soon as reasonably practicable and (iii)
that no Blackout Period shall exceed 30 consecutive days. The Company further
agrees that no other holder of any shares of the Company's capital stock will
be permitted to sell any such shares of the Company's capital stock pursuant to
a registration statement during a Blackout Period. If one or more Blackout
Periods occur, the Shelf Registration Period shall be extended by such number
of days coincident with the aggregate number of days included in all Blackout
Periods.
2.2 Registration on Request.
(a) Request. Subject to the provisions of Section 2.2(h)
below, (i) if the Shelf Registration remains continuously effective during the
Shelf Registration Period in accordance with the terms hereof, at any time or
from time to time after the expiration of the Shelf Registration Period and
until the fifth anniversary hereof, or (ii) if for any reason the Shelf
Registration does not become effective within 75 days after the date hereof or
ceases to be effective at any time prior to the expiration of the Shelf
Registration Period, at any time or from time to time after the date which is
75 days from the date hereof (if the Shelf Registration fails to become
effective) or the date on which the Shelf Registration ceases to be effective,
as the case may be, and until the fifth anniversary hereof, the Holders,
individually and jointly, of more than 10% of issued and outstanding shares of
New Common Stock (the "Initiating Holders") shall have the right to require the
Company to effect the registration under the Securities Act of all or part of
the Registrable New Common Stock held by such Initiating Holders, by delivering
a written request therefor to the Company specifying the number of shares of
Registrable New Common Stock and the intended method of distribution. The
Company shall promptly give written notice of such requested registration to
all other Holders, and thereupon the Company shall, as expeditiously as
possible, use its best efforts to (A) effect the registration under the
Securities Act (including by means of a shelf registration pursuant to Rule 415
under the Securities Act if so requested in such request and if the Company is
then eligible to use such a registration) of the Registrable New Common Stock
which the Company has been so requested to register by the Initiating Holders,
and all other Registrable New Common Stock which the Company has been requested
to register by any other Holder (together with the Initiating Holders, the
"Selling Holders") by written request given to the Company within 10 days after
the giving of written notice by the Company, all to the extent necessary to
permit distribution in accordance with the intended method of distribution set
forth in the written request or requests delivered by the Selling Holders, and
(B) if requested by the Initiating Holders,
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<PAGE>
obtain acceleration of the effective date of the registration statement
relating to such registration.
(b) Registration of Other Securities. Whenever the Company
shall effect a registration pursuant to this Section 2.2, no securities (other
than Registrable New Common Stock) shall be included among the securities
covered by such registration (i) if, in connection with an underwritten
offering by any Selling Holders of Registrable New Common Stock, the managing
underwriter of such offering shall have advised the Company and the Selling
Holders in writing that the inclusion of such other securities would adversely
affect such offering or (ii) if such offering is not an underwritten offering,
unless the Selling Holders of not less than 66 2/3% of the Registrable New
Common Stock to be covered by such registration shall have consented in writing
to the inclusion of such other securities.
(c) Registration Statement Form. Registrations under this
Section 2.2 shall be on such appropriate registration form of the Commission as
shall be selected by the Company and as shall be reasonably acceptable to the
Selling Holders. The Company agrees to include in any such registration
statement all information which, in the opinion of counsel to the Selling
Holders and counsel to the Company, is required to be included.
(d) Expenses. The Company shall pay all Registration
Expenses in connection with any registration requested pursuant to this
Section 2.2.
(e) Effective Registration Statement. A registration
requested pursuant to this Section 2.2 shall not be deemed to have been
effected (including for purposes of paragraph (h) of this Section 2.2) (i)
unless a registration statement with respect thereto has become effective and
has been kept continuously effective for a period of at least 120 days (or such
shorter period which shall terminate when all the Registrable New Common Stock
covered by such registration statement have been sold pursuant thereto), (ii)
if after it has become effective, such registration is interfered with by any
stop order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason not attributable to the Selling
Holders and has not thereafter become effective, or (iii) if the conditions to
closing specified in the underwriting agreement, if any, entered into in
connection with such registration are not satisfied for any reason not
attributable to the Selling Holders or waived.
(f) Selection of Underwriters. The underwriters of each
underwritten offering of the Registrable New Common Stock to be registered
shall be selected by the Selling Holders and shall be reasonably satisfactory
to the Company.
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<PAGE>
(g) Priority in Requested Registration. If the managing
underwriter of any underwritten offering shall advise the Company in writing
(with a copy to each Selling Holder) that, in its opinion, the number of shares
of Registrable New Common Stock requested to be included in such registration
exceeds the number of shares which can be sold in such offering within a price
range acceptable to the Initiating Holders of Registrable New Common Stock, the
Company will include in such registration that number of shares of Registrable
New Common Stock which the Company is so advised can be sold in such offering.
The Registrable New Common Stock requested to be included in such registration
shall be reduced first, pro rata among those Selling Holders that were not
Initiating Holders on the basis of the percentage of Registrable New Common
Stock of such Selling Holder requesting such registration and, thereafter, pro
rata among the Initiating Holders that requested such registration of
Registrable New Common Stock on the basis of the percentage of Registrable New
Common Stock of such Selling Holders requesting such registration. In
connection with any such registration to which this Section 2.2(g) is
applicable, no securities other than Registrable New Common Stock shall be
covered by such registration.
(h) Limitations on Registration on Request. Notwithstanding
anything to the contrary contained herein, the registration rights granted to
the Holders in Section 2.2(a) are subject to the following limitations: (i) the
Holders shall be entitled to require the Company to, and the Company shall be
required to, effect no more than two registrations pursuant to Section
2.2(a)(i) hereof and no more than four registrations pursuant to Section
2.2(a)(ii) hereof, (ii) the Company shall not be required to effect a
registration pursuant to Section 2.2(a) if, with respect thereto, the managing
underwriter, the Commission, the Securities Act or the rules and regulations
thereunder, or the form on which the registration statement is to be filed,
would require the conduct of an audit other than the regular audit conducted by
the Company at the end of its fiscal year, but rather the filing may be delayed
until the completion of such regular audit (unless the Holders requesting such
registration agree to pay the fees and expenses of the Company in connection
with such an audit other than the regular audit) and (iii) the Holders shall
not be entitled to require the Company to, and the Company shall not be
required to, effect a registration pursuant to Section 2.2(a) within three (3)
months following the effective date of another registration pursuant to Section
2.2(a).
(i) Postponement. The Company shall be entitled once in any
12-month period to postpone for a reasonable period of time (but not exceeding
45 days) (the "Postponement Period") the filing of any registration statement
required to be prepared and filed by it pursuant to this Section 2.2 if the
Company determines, in its reasonable judgment, that such registration and
offering would materially interfere with any material financing, corporate
reorganization or other material transaction involving the Company or any
subsidiary, or would require premature disclosure thereof, and promptly gives
the Selling Holders written notice of such determination, containing a
general statement of the reasons for such postponement and an approximation of
the
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<PAGE>
anticipated delay. If the Company shall so postpone the filing of a
registration statement, the Selling Holders of a majority of the shares of
Registrable New Common Stock to be registered shall have the right to withdraw
the request for registration in respect of the Registrable New Common Stock by
giving written notice to the Company at any time and, in the event of any such
withdrawal, such request shall not be counted for purposes of the requests for
registration to which the Holders are entitled pursuant to this Section 2.2.
2.3 Incidental Registration.
(a) Right to Include Registrable New Common Stock. If the
Company at any time prior to the expiration of the Holders' right to request
the registration of Registrable New Common Stock pursuant to Section 2.2(a)
hereof proposes to register any of its securities under the Securities Act by
registration on Form S-1, S-2 or S-3 or any successor or similar form(s)
(except registrations on such Form or similar form(s) solely for registration
of securities in connection with an employee stock option, stock purchase,
stock bonus or similar plan, pursuant to a dividend reinvestment plan, pursuant
to a merger, exchange, offer or transaction of the type specified in Rule
145(a) under the Securities Act or pursuant to a "shelf" registration), whether
or not for sale for its own account, it will each such time give prompt written
notice to the Holders of its intention to do so and of the Holders' rights
under this Section 2.3 and the Holders shall be entitled to include, subject to
the provisions of this Agreement, Registrable New Common Stock on the same
terms and conditions (if any) as apply to other comparable securities of the
Company sold in connection with such registration. Upon the written request of
any Holder (a "Requesting Holder"), specifying the maximum number of shares of
Registrable New Common Stock intended to be disposed of by such Requesting
Holder, made as promptly as practicable and in any event within 15 days after
the receipt of any such notice, the Company shall use its best efforts to
effect the registration under the Securities Act of all Registrable New Common
Stock which the Company has been so requested to register by the Requesting
Holders; provided, however, that if, at any time after giving written notice of
its intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company shall give written notice of such determination and its
reasons therefor to the Holders and (i) in the case of a determination not to
register, shall be relieved of its obligation under this Section 2.3 to
register any Registrable New Common Stock in connection with such registration
(but not from any obligation of the Company to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of the Holders
to request that such registration be effected as a registration under Section
2.2, and (ii) in the case of a determination to delay registering, shall be
permitted to delay registering any Registrable New Common Stock, for the same
period as the delay in registering such other securities. No registration
effected under this Section 2.3 shall
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relieve the Company of its obligation to effect any registration upon request
under Section 2.2. The Company will pay all Registration Expenses in connection
with any registration of Registrable New Common Stock requested pursuant to
this Section 2.3.
(b) Right to Withdraw. Any Requesting Holder shall have the
right to withdraw its request for inclusion of Registrable New Common Stock in
any registration statement pursuant to this Section 2.3 at any time by giving
written notice to the Company of its request to withdraw.
(c) Priority in Incidental Registrations. If the managing
underwriter of any underwritten offering shall inform the Company by letter of
its opinion that the number of shares of Registrable New Common Stock when
added to the number of other securities to be offered in such registration,
would materially adversely affect such offering, then the Company shall include
in such registration that number of shares of Registrable New Common Stock
which the Company is so advised by the managing underwriter can be sold in (or
during the time of) such offering without materially adversely affecting such
offering (the "Section 2.3 Common Stock Sale Amount") in the following order of
priority: (i) all of the securities proposed by the Company to be sold for its
own account (if any); (ii) thereafter, to the extent the Section 2.3 Common
Stock Sale Amount is not exceeded in clause (i), the Registrable New Common
Stock requested by the Requesting Holders to be included in such registration
pursuant to Section 2.3(a) pro rata among the Requesting Holders on the basis
of the percentage of Registrable New Common Stock of such Requesting Holders
requested to be included in such registration; and (iii) thereafter, to the
extent the Section 2.3 Common Stock Sale Amount is not exceeded, any other
securities of the Company requested to be included in such registration.
(d) Plan of Distribution. Any participation by the Holders
in a registration by the Company shall be in accordance with the Company's plan
of distribution.
2.4 Registration Procedures. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
New Common Stock under the Securities Act as provided in Sections 2.1, 2.2 and
2.3 hereof, the Company shall as expeditiously as possible:
(a) prepare and file with the Commission as soon as practicable
the requisite registration statement to effect such registration (and
shall include all financial statements required by the Commission to
be filed therewith) and thereafter use its best efforts to cause such
registration statement to become effective; provided, however, that
before filing such registration statement (including all exhibits) or
any amendment or supplement thereto or comparable statements under
securities or blue sky laws of any
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jurisdiction, the Company shall furnish such documents to each
Holder selling Registrable New Common Stock covered by such
registration statement and each underwriter, if any, participating in
the offering of the Registrable New Common Stock and their respective
counsel, which documents will be subject to the review and comments
of each such Holder, each underwriter and their respective counsel;
and provided further, that (i) as to registration pursuant to Section
2.1 or 2.2 hereof, the Company may discontinue any registration of
its securities which are not Registrable New Common Stock and, (ii)
as to registration pursuant to Section 2.3 hereof, the Company may
discontinue any registration of securities covered thereby, in each
case, at any time prior to the effective date of the registration
statement relating thereto;
(b) notify each Holder selling Registrable New Common Stock
covered by such registration statement of the Commission's requests
for amending or supplementing the registration statement and the
prospectus, and prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of
the Securities Act with respect to the disposition of all Registrable
New Common Stock covered by such registration statement for such
period as shall be required for the disposition of all of such
Registrable New Common Stock in accordance with the intended method
of distribution thereof; provided that, except with respect to the
Shelf Registration and any other such registration statement filed
pursuant to Rule 415 under the Securities Act, such period need not
exceed 120 days;
(c) furnish, without charge, to each Holder selling Registrable
New Common Stock covered by such registration statement and each
underwriter such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each
case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus filed
under Rule 424 under the Securities Act, in conformity with the
requirements of the Securities Act, and such other documents, as such
Holders and such underwriters may reasonably request;
(d) use its best efforts (i) to register or qualify all
Registrable New Common Stock and other securities covered by such
registration statement under such securities or blue sky laws of such
States of the United States of America where an exemption is not
available and as any Holder or Holders
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selling Registrable New Common Stock covered by such registration
statement or any managing underwriter shall reasonably request, (ii)
to keep such registration or qualification in effect for so long as
such registration statement remains in effect, and (iii) to take any
other action which may be reasonably necessary or advisable to enable
the Holders to consummate the disposition in such jurisdictions of
the securities to be sold by such Holder or Holders; provided,
however, that the Company shall not for any purpose be required to
execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction where it is not
so qualified;
(e) use its best efforts to cause all Registrable New Common
Stock covered by such registration statement to be registered with or
approved by such other Federal or state governmental agencies or
authorities as may be necessary in the opinion of counsel to the
Company and counsel to any Holder or Holders selling Registrable New
Common Stock covered by such registration statement to consummate the
disposition of such Registrable New Common Stock;
(f) furnish to each Holder selling Registrable New Common Stock
covered by such registration statement and each underwriter, if any,
participating in the offering of the securities covered by such
registration statement, a signed counterpart of
(i) an opinion of counsel for the Company, and
(ii) a "comfort" letter signed by the independent public
accountants who have certified the Company's financial
statements included or incorporated by reference in such
registration statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of the accountants' comfort letter, with respect to events
subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in
accountants' comfort letters delivered to the underwriters in
underwritten public offerings of securities (and dated the dates such
opinions and comfort letters are customarily dated) and, in the case
of the legal opinion, such other legal matters, and, in the case of
the accountants' comfort letter, such other financial matters, as
such Holder or Holders, or the underwriters, may reasonably request;
(g) immediately notify the Holders selling Registrable New
Common Stock covered by such registration statement and each managing
underwriter, if any, participating in the offering of the securities
covered by
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such registration statement (i) when such registration statement, any
pre-effective amendment, the prospectus or any prospectus supplement
related thereto or post-effective amendment to such registration
statement has been filed, and, with respect to such registration
statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the Commission for amendments or
supplements to such registration statement or the prospectus related
thereto or for additional information; (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of such
registration statement or the initiation of any proceedings for that
purpose; (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any of the
Registrable New Common Stock for sale under the securities or blue
sky laws of any jurisdiction or the initiation of any proceeding for
such purpose; and (v) at any time when a prospectus relating thereto
is required to be delivered under the Securities Act or, in the case
of the Shelf Registration, at any time during the Shelf Registration
Period, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, in the light of the circumstances under which they were
made, and in the case of this clause (v), at the request of any
Holder or Holders selling Registrable New Common Stock covered by
such registration statement promptly prepare and furnish to such
Holder or Holders and each managing underwriter, if any,
participating in the offering of the Registrable New Common Stock, a
reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered
to the purchasers of such securities, such prospectus shall not
include 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 in the light of the circumstances
under which they were made.
(h) otherwise comply with all applicable rules and regulations
of the Commission, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the
period of at least twelve months beginning with the first full
calendar month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 promulgated
thereunder, and promptly furnish to the Holders a copy of any
amendment or supplement to such registration statement or prospectus;
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(i) cause to be maintained a transfer agent and registrar
(which, in each case, may be the Company) for the New Common Stock
from and after the date of such registration;
(j) use its best efforts to cause all Registrable New Common
Stock covered by such registration statement to be quoted on the
National Market System ("National Market System") of the National
Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") within the meaning of Rule 11Aa2-1 of the Commission if
the quoting of such Registrable New Common Stock is then permitted
under NASDAQ rules; or (ii) if no similar securities of the Company
are then so quoted, use its bests efforts to (x) secure designation
of all such Registrable New Common Stock as a NASDAQ National Market
System security or (y) failing that, cause all such Registrable New
Common Stock to be listed on a national securities exchange or (z)
failing that, to secure NASDAQ authorization for such shares and,
without limiting the generality of the foregoing, to arrange for at
least two market makers to register as such with respect to such
shares with the National Association of Securities Dealers, Inc.;
(k) deliver promptly to counsel to the Holders selling
Registrable New Common Stock covered by such registration statement
and each underwriter, if any, participating in the offering of the
Registrable New Common Stock, copies of all correspondence between
the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff
with respect to such registration statement;
(l) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the registration statement;
(m) provide a CUSIP number for all Registrable New Common Stock,
no later than the effective date of the registration statement;
(n) make available its employees and personnel and otherwise
provide reasonable assistance to the underwriters (taking into
account the needs of the Company's businesses) in their marketing of
Registrable New Common Stock; and
(o) in the case of a Shelf Registration, upon the occurrence of
any event or the discovery of any facts, each as contemplated by
Section 2.4(g)(v) hereof, use its best efforts to prepare a
supplement or post-effective amendment to the registration statement
or the related prospectus or any document incorporated therein by
reference or file any other required documents so that, thereafter,
such prospectus will not contain at
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the time of such delivery any untrue statement of a material
fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
The Company may require the Holders selling Registrable New Common Stock
covered by such registration statement to furnish the Company such information
regarding the Holders and the distribution of the Registrable New Common Stock
as the Company may from time to time reasonably request in writing. In the
event of a registration effected pursuant to Section 2.1, 2.2(a) or 2.3(a)
hereof, if a Holder fails to provide such information and the failure by such
Holder to furnish such information would prevent or unreasonably delay the
registration statement relating to such registration from being declared
effective by the Commission, the Company may exclude such Holder's Registrable
New Common Stock from such registration, which right of the Company shall, in
the case of a registration effected pursuant to Section 2.1 or 2.2(a) hereof,
be subject to the consent of the Holders of not less than a majority of the
shares of Registrable New Common Stock to be included in such registration
(other than such Holder's Registrable New Common Stock).
The Holders agree that upon receipt of any notice from the Company of
the happening of any event of the kind described in paragraph (g)(iii) or (v)
of this Section 2.4, each of the Holders will discontinue its disposition of
Registrable New Common Stock pursuant to the registration statement relating to
such Registrable New Common Stock until, in the case of paragraph (g)(v) of
this Section 2.4, its receipt of the copies of the supplemented or amended
prospectus contemplated by paragraph (g)(v) of this Section 2.4 and, if so
directed by the Company, will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies, then in its possession, of the
prospectus relating to such Registrable New Common Stock current at the time of
receipt of such notice. If the disposition by the Holders of their securities
is discontinued pursuant to the immediately preceding sentence, the Company
shall extend the period of effectiveness of the registration statement by the
number of days during the period from and including the date of the giving of
notice to and including the date when the Holders shall have received copies of
the supplemented or amended prospectus contemplated by paragraph (g)(v) of this
Section 2.4; and, if the Company shall not so extend such period, the Holders'
request pursuant to which such registration statement was filed shall not be
counted for purposes of the requests for registration to which the Holders are
entitled pursuant to Section 2.2 hereof.
2.5 Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offering by the Selling Holders pursuant to a
registration requested under Section 2.1 or 2.2, the Company shall enter into a
customary underwriting agreement with such underwriter or underwriters. Such
underwriting
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agreement shall be reasonably satisfactory in form and substance to the Selling
Holders and shall contain such representations and warranties by, and such
other agreements on the part of, the Company and such other terms as are
generally prevailing in agreements of that type, including, without limitation,
such customary provisions relating to indemnification and contribution by the
Company. The Selling Holders shall be parties to such underwriting agreement
and may, at their option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
the Selling Holders and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of the Selling Holders. No Selling
Holder shall be required to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such Selling Holder, its ownership of and
title to the Registrable New Common Stock, and its intended method of
distribution; and any liability of any Selling Holder to any underwriter or
other Person under such underwriting agreement shall be limited to liability
arising from misstatements in or omissions from its representations and
warranties and shall be limited to an amount equal to the net proceeds that it
derives from such registration.
(b) Incidental Underwritten Offerings. In the case of a
registration pursuant to Section 2.3 hereof, if the Company shall have
determined to enter into any underwriting agreements in connection therewith,
all of the Requesting Holders' Registrable New Common Stock to be included in
such registration shall be subject to such underwriting agreements. The
Requesting Holders may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of the Requesting Holders and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of the Requesting Holders.
No Requesting Holder shall be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such Requesting Holder, its
ownership of and title to the Registrable New Common Stock, and its intended
method of distribution; and any liability of any Requesting Holder to any
underwriter or other Person under such underwriting agreement shall be limited
to liability arising from misstatements in or omissions from its
representations and warranties and shall be limited to an amount equal to the
net proceeds that it derives from such registration.
2.6 Preparation; Reasonable Investigation.
In connection with the preparation and filing of each
registration statement under the Securities Act pursuant to this Agreement, the
Company will give the participating Holders, their underwriters, if any, and
their respective counsel, accountants and other representatives and agents the
opportunity to participate in the preparation of such registration statement,
each
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prospectus included therein or filed with the Commission, and, to the extent
practicable, each amendment thereof or supplement thereto, and give each of
them such access to its books and records and such opportunities to discuss the
business of the Company with its officers and employees and the independent
public accountants who have certified its financial statements, and supply all
other information reasonably requested by each of them, as shall be necessary
or appropriate, in the opinion of the participating Holders' and such
underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
2.7 Indemnification.
(a) Indemnification by the Company. The Company agrees that
in the event of any registration of any securities of the Company under the
Securities Act pursuant to this Agreement, the Company shall, and hereby does,
indemnify and hold harmless each Holder, its respective directors, officers,
partners, members, agents and affiliates and each other Person who participates
as an underwriter in the offering or sale of such securities and each other
Person, if any, who controls such Holder or any such underwriter within the
meaning of the Securities Act, against any losses, claims, damages, or
liabilities, joint or several, to which such Holder or any such director,
officer, partner, member, agent or affiliate or underwriter or controlling
Person may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities, joint or several (or actions or
proceedings, whether commenced or threatened, in respect thereof), arise out of
or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, (ii) any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances in which they were made not
misleading, or (iii) any violation by the Company of any Federal, state or
common law rule or regulation applicable to the Company or relating to action
required of or inaction by the Company in connection with any such
registration, and the Company shall reimburse such Holder and each such
director, officer, partner, member, agent or affiliate, underwriter and
controlling Person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company through an
instrument duly executed by or on behalf of the Holders or underwriter, as the
case may be, specifically stating that it is for use in the preparation thereof;
and provided, further, that
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the Company shall not be liable to any Person who participates as an
underwriter in the offering or sale of Registrable New Common Stock or any
other Person, if any, who controls such underwriter within the meaning of the
Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense
arises out of such Person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of
Registrable New Common Stock to such Person if such statement or omission was
corrected in such final prospectus. Such indemnity shall remain in full force
regardless of any investigation made by or on behalf of either Holder or any
such director, officer, partner, agent or affiliate or controlling Person and
shall survive the transfer of such securities by such Holder.
(b) Indemnification by the Holders. As a condition to
including any Registrable New Common Stock in any registration statement, the
Company shall have received an undertaking reasonably satisfactory to it from
each Holder so including any Registrable New Common Stock to indemnify and hold
harmless (in the same manner and to the same extent as set forth in paragraph
(a) of this Section 2.7) the Company, and each director of the Company, each
officer of the Company and each other Person, if any, who controls the Company
within the meaning of the Securities Act, with respect to any statement or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, but only to the
extent such statement or alleged statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company through an instrument duly executed by such Holder specifically
stating that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement; provided, however, that the liability of such indemnifying party
under this Section 2.7(b) shall be limited to the amount of net proceeds
received by such indemnifying party in the offering giving rise to such
liability. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Company or any such director,
officer or controlling Person and shall survive the transfer of such securities
by such Holder.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subsections of this Section 2.7,
such indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action or proceeding; provided, however, that the failure
of any indemnified party to give notice as provided herein shall not relieve
the indemnifying party of its obligations under the preceding subsections of
this Section 2.7, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice, and shall not relieve the
indemnifying party from any liability
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which it may have to the indemnified party otherwise than under this Section
2.7. In case any such action or proceeding is brought against an indemnified
party, the indemnifying party shall be entitled to participate therein and,
unless in the opinion of outside counsel to the indemnified party a conflict of
interest between such indemnified and indemnifying parties may exist in respect
of such claim, to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party; provided, however,
that if the defendants in any such action or proceeding include both the
indemnified party and the indemnifying party and if in the opinion of outside
counsel to the indemnified party there may be legal defenses available to such
indemnified party and/or other indemnified parties which are different from or
in addition to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to defend such
action or proceeding on behalf of such indemnified party or parties and the
indemnifying party shall be obligated to pay the fees and expenses of such
separate counsel or counsels. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and approval
by the indemnified party of such counsel, the indemnifying party shall not be
liable to such indemnified party for any legal expenses subsequently incurred
by the latter in connection with the defense thereof other than reasonable
costs of investigation (unless the proviso in the preceding sentence shall be
applicable). No indemnifying party shall be liable for any settlement of any
action or proceeding effected without its written consent which shall not be
unreasonably withheld. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation.
(d) Contribution. If the indemnification provided for in
this Section 2.7 shall for any reason be held by a court to be unavailable to
an indemnified party under subsection (a) or (b) hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under subsection (a) or (b) hereof, the indemnified
party and the indemnifying party under subsection (a) or (b) hereof shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with
investigating the same), (i) in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand, and the
indemnified party on the other, which resulted in such loss, claim, damage or
liability, or action in respect thereof, with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations, or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law or if the allocation provided in this clause (ii) provides a
greater amount to the indemnified party than clause (i) above, in such
proportion as shall be appropriate to reflect not only the relative fault but
also the relative benefits received by the indemnifying party and the
indemnified party from the offering of the securities covered
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by such registration statement as well as any other relevant equitable
considerations. The parties hereto agree that it would not be just and equitable
if contributions pursuant to this Section 2.7(d) were to be determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately preceding
sentence of this Section 2.7(d). 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 Holders' obligations to contribute as provided
in this subsection (d) are several and not joint and shall be in proportion to
the relative value of their respective Registrable New Common Stock covered by
such registration statement. In addition, no Person shall be obligated to
contribute hereunder any amounts in payment for any settlement of any action or
claim effected without such Person's prior written consent, which consent shall
not be unreasonably withheld. Notwithstanding anything in this subsection (d) to
the contrary, no indemnifying party (other than the Company) shall be required
to contribute any amount in excess of the net proceeds received by such party
from the sale of the Registrable New Common Stock in the offering to which the
losses, claims, damages or liabilities of the indemnified parties relate.
(e) Other Indemnification. Indemnification and contribution
similar to that specified in the preceding subsections of this Section 2.7
(with appropriate modifications) shall be given by the Company and the Holders
with respect to any required registration or other qualification of securities
under any Federal, state or blue sky law or regulation of any governmental
authority other than the Securities Act. The indemnification agreements
contained in this Section 2.7 shall be in addition to any other rights to
indemnification or contribution which any indemnified party may have pursuant
to law or contract and shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any indemnified party
and shall survive the transfer of any of the Registrable New Common Stock by
any of the Holders.
(f) Indemnification Payments. The indemnification and
contribution required by this Section 2.7 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred;
provided, however, that such periodic payments shall only be made upon delivery
to the indemnifying party of an agreement by the indemnified party to repay the
amounts advanced to the extent it is ultimately determined that the indemnified
party is not entitled to indemnification pursuant to this Section 2.7 or
otherwise. The parties hereto agree that for each of them such agreement shall
be deemed to be contained herein.
2.8 Unlegended Certificates. In connection with the offering of
any Registrable New Common Stock registered pursuant to this Section 2, the
Company shall facilitate the timely preparation and delivery to the Holders and
the underwriters, if any, participating in such offering, of unlegended
certificates representing ownership of
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<PAGE>
such Registrable New Common Stock and/or Registrable Warrants being sold in
such denominations and registered in such names as requested by the Holders or
such underwriters.
2.9 Limitation on Sale of Securities. If any registration of
Registrable New Common Stock shall be in connection with an underwritten public
offering, the Company agrees (x) not to effect any public sale or distribution
of any issue of the same class or series as the Registrable New Common Stock
being registered in an underwritten public offering (other than pursuant to an
employee stock option, stock purchase or similar plan, pursuant to a dividend
reinvestment plan, pursuant to a merger, exchange offer or a transaction of the
type specified in Rule 145(a) under the Securities Act), any securities of the
Company similar to any such issue or any securities of the Company or of any
security convertible into or exchangeable or exercisable for any such issue of
the Company during the 15 days prior to, and during the 45-day period (or such
longer period, not in excess of 90 days, as may be reasonably requested by the
underwriter of such offering) beginning on the effective date of such
registration statement (except as part of such registration) and (y) that any
agreement entered into after the date of this Agreement pursuant to which the
Company issues or agrees to issue any privately placed securities shall contain
a provision under which holders of such securities agree not to effect any
public sale or distribution of any such securities during the period referred
to in the foregoing clause (x), including any sale pursuant to Rule 144 under
the Securities Act (except as part of such registration, if permitted).
2.10 No Required Sale. Nothing in this Agreement shall be deemed
to create an independent obligation on the part of any of the Holders to sell
any Registrable New Common Stock pursuant to any effective registration
statement.
3. Rule 144. The Company shall take all actions reasonably necessary
to enable holders of Registrable New Common Stock to sell such securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144, or (b) any similar rule or regulation
hereafter adopted by the Commission including, without limiting the generality
of the foregoing, filing on a timely basis all reports required to be filed by
the Exchange Act. Upon the request of any Holder, the Company will deliver to
such holder a written statement as to whether it has complied with such
requirements.
4. Amendments and Waivers. This Agreement may not be modified or
amended, or any of the provisions hereof waived, temporarily or permanently,
except pursuant to the written consent of the Holders of not less than a
majority of the shares of Registrable New Common Stock and the Company.
5. Adjustments. In the event of any change in the capitalization of
the Company as a result of any stock split, stock dividend, reverse split,
combination,
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<PAGE>
recapitalization, merger, consolidation, or otherwise, the provisions of this
Agreement shall be appropriately adjusted.
6. Notice. All notices and other communications hereunder shall be in
writing and, unless otherwise provided herein, shall be deemed to have been
given when received by the party to whom such notice is to be given at its
address set forth below, or such other address for the party as shall be
specified by notice given pursuant hereto:
(a) If to any Holder, the address of such Holder set forth on Annex A
attached hereto;
(b) If to the Company, to it at:
Harvard Industries, Inc.
3 Werner Way
Lebanon, New Jersey 08833
Attn: [ ]
With a copy to:
7. Assignment. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns. This Agreement may not be assigned by the
Company. Any Holder may, at its election, at any time or from time to time,
assign its rights under this Agreement, in whole or in part, to any transferee
of Registrable New Common Stock.
8. Remedies. The parties hereto agree that money damages or other
remedy at law would not be sufficient or adequate remedy for any breach or
violation of, or a default under, this Agreement by them and that, in addition
to all other remedies available to them, each of them shall be entitled to an
injunction restraining such breach, violation or default or threatened breach,
violation or default and to any other equitable relief, including without
limitation specific performance, without bond or other security being required.
In any action or proceeding brought to enforce any provision of this Agreement
(including the indemnification provisions thereof), the successful party shall
be entitled to recover reasonable attorneys' fees in addition to its costs and
expenses and any other available remedy.
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<PAGE>
9. No Inconsistent Agreements. The Company will not, on or after the
date of this Agreement, enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the Holders in this Agreement
or otherwise conflicts with the provisions hereof, other than any customary
lock-up agreement with the underwriters in connection with any registration and
offering by the Company of its securities to the public (an "Offering")
effected hereunder, pursuant to which the Company shall agree not to register
for sale, and the Company shall agree not to sell or otherwise dispose of New
Common Stock or any securities convertible into or exercisable or exchangeable
for New Common Stock, as applicable, for a specified period following such
Offering. The Company hereby represents and warrants that the rights granted to
the Holders hereunder do not in any way conflict with and are not inconsistent
with any other agreements to which the Company is a party or by which it is
bound. The Company further agrees that if any other registration rights
agreement entered into after the date of this Agreement with respect to any of
its securities contains terms which are more favorable to, or less restrictive
on, the other party thereto than the terms and conditions contained in this
Agreement are (insofar as they are applicable) to the Holders, then the terms
and conditions of this Agreement shall immediately be deemed to have been
amended without further action by the Company or the Holders so that the
Holders shall be entitled to the benefit of any such more favorable or less
restrictive terms or conditions.
10. Headings. Headings of the sections and paragraphs of this
Agreement are for convenience only and shall be given no substantive or
interpretive effect whatsoever.
11. Governing Law; Jurisdiction. (a) This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of New York, without giving effect to the conflicts of law principles thereof.
(b) Each of the parties hereto irrevocably and unconditionally
consents to the jurisdiction of the federal courts and courts of the state of
New York situated in New York County, New York in respect of the interpretation
and enforcement of the provisions of this Agreement, and hereby agrees that
service of process in any such action, suit or proceeding against the other
party with respect to this Agreement may be made upon it in any manner
permitted by the laws of New York or the federal laws of the United States.
12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
13. Invalidity of Provision. The invalidity or unenforceability of
any provision of this Agreement in any jurisdiction shall not affect the
validity or
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<PAGE>
enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of this Agreement, including that provision, in any
other jurisdiction. If any restriction or provision of this Agreement is held
unreasonable, unlawful or unenforceable in any respect, such restriction or
provision shall be interpreted, revised or applied in a manner that renders it
lawful and enforceable to the fullest extent possible under law.
14. Further Assurances. Each party hereto shall do and perform or
cause to be done and performed all further acts and things and shall execute
and deliver all other agreements, certificates, instruments, and documents as
any other party hereto reasonably may request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
15. Entire Agreement. This Agreement and the other writings referred
to herein or delivered in connection herewith contain the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior and contemporaneous arrangements or understandings with respect thereto.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
HARVARD INDUSTRIES, INC.
By: /s/ D. Craig Bowman
-----------------------------
Name:
Title:
[INITIAL HOLDERS]
[ ]
--------------------------
By:
-----------------------------
Name:
Title:
[ ]
--------------------------
By:
-----------------------------
Name:
Title:
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<PAGE>
[ ]
--------------------------
By:
-----------------------------
Name:
Title:
[ ]
--------------------------
By:
-----------------------------
Name:
Title:
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<PAGE>
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of November 23, 1998
By and Among
HARVARD INDUSTRIES, INC.,
THE SUBSIDIARY GUARANTORS NAMED HEREIN
and
LEHMAN BROTHERS INC.,
as Initial Purchaser
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<PAGE>
TABLE OF CONTENTS
Page
----
1. Definitions ......................................................... 1
2. Securities Subject to This Agreement ................................ 3
3. Registered Exchange Offer ........................................... 3
4. Shelf Registration .................................................. 4
5. Liquidated Damages .................................................. 6
6. Registration Procedures ............................................. 6
7. Registration Expenses ............................................... 14
8. Indemnification and Contribution .................................... 14
9. Rule 144A ........................................................... 17
10. Participation in Underwritten Registrations ......................... 17
11. Selection of Underwriters ........................................... 17
12. Miscellaneous ....................................................... 17
i
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
into on November 23, 1998 by and among Harvard Industries, Inc., a Florida
corporation ("Harvard"), the subsidiary guarantors set forth on Annex A attached
hereto (the "Subsidiary Guarantors" and, together with Harvard, the "Company")
and Lehman Brothers Inc. (the "Initial Purchaser").
This Agreement is entered into in connection with the Amended and Restated
Purchase Agreement, dated November 23, 1998, by and among the Company and the
Initial Purchaser (the "Purchase Agreement"), which provides for the sale by the
Company to the Initial Purchaser of $25,000,000 aggregate principal amount of
Harvard's 14 1/2% Senior Secured Notes due 2003 (the "Notes"). The Notes will be
fully and unconditionally guaranteed jointly and severally, on a senior basis
(the "Guarantees") by the Subsidiary Guarantors and each newly acquired or
created domestic subsidiary of Harvard and will be secured to the extent set
forth in a Collateral Agreement to be entered by and among the Company, the
Subsidiary Guarantors and Wilmington Trust Company, as collateral agent. The
Notes and the Guarantees are collectively referred to herein as the
"Securities." In order to induce the Initial Purchaser to enter into the
Purchase Agreement, the Company has agreed to provide the registration rights
set forth in this Agreement for the benefit of the Initial Purchaser and its
direct and indirect transferees and assigns. The execution and delivery of this
Agreement is a condition to the Initial Purchaser's obligations to purchase the
Securities under the Purchase Agreement. Capitalized terms used but not
specifically defined herein have the respective meanings ascribed thereto in the
Purchase Agreement.
The parties hereby agree as follows:
1. Definitions. As used in this Agreement, the following capitalized terms
shall have the following meanings:
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Closing Date: The date on which the Securities were sold.
Commission: The Securities and Exchange Commission.
Consummate: A registered Exchange Offer shall be deemed "Consummated"
for purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Securities Act of the Exchange Offer Registration
Statement relating to the New Securities to be issued in the Exchange
Offer, (ii) the maintenance of such Registration Statement continuously
effective and the keeping of the Exchange Offer open for a period not less
than the minimum period required pursuant to Section 3(b) hereof and (iii)
the delivery by the Company of the New Securities in the same aggregate
principal amount as the aggregate principal amount of Transfer Restricted
Securities that were validly tendered by Holders thereof pursuant to the
Exchange Offer.
Effectiveness Target Date: As defined in Section 5(a) hereof.
Event Date: As defined in Section 5(b) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The registration by the Company under the Securities
Act of the New Securities pursuant to a Registration Statement pursuant to
which the Company offers the Holders of all outstanding Transfer Restricted
Securities the opportunity to exchange all such
<PAGE>
2
outstanding Transfer Restricted Securities held by such Holders for New
Securities in an aggregate amount equal to the aggregate amount of the
Transfer Restricted Securities tendered in such exchange offer by such
Holders.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the Prospectus which forms a part
thereof.
Exempt Resales The transactions in which the Initial Purchaser
proposes to sell the Securities to certain "qualified institutional
buyers," as such term is defined in Rule 144A under the Securities Act, and
to certain non-U.S. persons.
Holders: As defined in Section 2(b) hereof.
Indenture: The Indenture, dated as of the Closing Date, among Harvard,
the Subsidiary Guarantors and Wilmington Trust Company, as trustee (the
"Trustee"), pursuant to which the Securities are to be issued, as such
Indenture is amended or supplemented from time to time in accordance with
the terms thereof.
Initial Purchaser: As defined in the preamble hereto.
Liquidated Damages: As defined in Section 5(a) hereof.
NASD: National Association of Securities Dealers, Inc.
Securities: The Securities to be issued pursuant to the Indenture in
the Exchange Offer.
Participant: As defined in Section 8(a) hereof.
Person: An individual, partnership, corporation, limited liability
company, trust or unincorporated organization, or a government or agency or
political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
Registration Default: As defined in Section 5(a) hereof.
Registration Statement: Any registration statement of the Company
relating to (a) an offering of New Securities pursuant to an Exchange Offer
or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, which is filed pursuant to
the provisions of this Agreement, in either case, including the Prospectus
included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
Securities Act: The Securities Act of 1933, as amended.
Shelf Filing Deadline: As defined in Section 4 hereof.
<PAGE>
3
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb),
as amended.
Transfer Restricted Securities: Each Security, until the earliest to
occur of (a) the date on which such Security has been exchanged by a person
other than a Broker-Dealer for a New Security in the Exchange Offer, (b)
following the exchange by a Broker-Dealer in the Exchange Offer of a
Security for a New Security, the date on which such New Security is sold to
a purchaser who receives from such Broker-Dealer on or prior to the date of
such sale a copy of the prospectus contained in the Exchange Offer
Registration Statement, (c) the date on which such Security has been
effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (d) the date on which
such Security is eligible to be distributed to the public pursuant to Rule
144 under the Securities Act.
Under Registration or Underwritten Offering: A registration in which
securities of the Company are sold to an underwriter for reoffering to the
public.
2. Securities Subject to This Agreement.
(a) Transfer Restricted Securities. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to
be a holder of Transfer Restricted Securities (each, a "Holder") whenever
such Person owns Transfer Restricted Securities.
3. Registered Exchange Offer.
(a) Unless the Exchange Offer shall not be permissible under
applicable law or Commission policy (after the procedures set forth in
Section 6(a) below have been complied with) or one of the events set forth
in Section 4(a)(ii) has occurred, the Company shall (i) cause to be filed
with the Commission promptly after the Closing Date, but in no event later
than 60 days after the Closing Date, a Registration Statement under the
Securities Act relating to the New Securities and the Exchange Offer, (ii)
use its best efforts to cause such Registration Statement to become
effective no later than 120 days after the Closing Date, (iii) in
connection with the foregoing, file (A) all pre-effective amendments to
such Registration Statement as may be necessary in order to cause such
Registration Statement to become effective, (B) if applicable, a
post-effective amendment to such Registration Statement pursuant to Rule
430A under the Securities Act and (C) cause all necessary filings in
connection with the registration and qualification of the New Securities to
be made under the Blue Sky laws of such jurisdictions as are necessary to
permit Consummation of the Exchange Offer, and (iv) unless the Exchange
Offer would not be permitted by applicable law or Commission policy, the
Company will commence the Exchange Offer and use its best efforts to issue
on or prior to 30 business days after the date on which such Registration
Statement was declared effective by the Commission, New Securities in
exchange for all Securities tendered prior thereto in the Exchange Offer.
The Exchange Offer shall be on the appropriate form permitting registration
of the New Securities to be offered in exchange for the Transfer Restricted
Securities and to permit resales of New Securities held by Broker-Dealers
as contemplated by Section 3(c) below. The 60, 120 and 30
<PAGE>
4
business day periods referred to in (i), (ii) and (iv) of this Section 3(a)
shall not include any period during which the Company is pursuing a
Commission ruling pursuant to Section 6(a)(i) below.
(b) The Company shall use its best efforts to cause the Exchange Offer
Registration Statement to be effective continuously and shall keep the
Exchange Offer open for a period of not less than the minimum period
required under applicable federal and state securities laws to Consummate
the Exchange Offer; provided, however, that in no event shall such period
be less than 20 business days. The Company shall cause the Exchange Offer
to comply in all material respects with all applicable federal and state
securities laws. No securities other than the New Securities shall be
included in the Exchange Offer Registration Statement. The Company shall
use its best efforts to cause the Exchange Offer to be Consummated on the
earliest practicable date after the Exchange Offer Registration Statement
has become effective, but in no event later than 30 business days
thereafter.
(c) The Company shall indicate in a "Plan of Distribution" section
contained in the Prospectus contained in the Exchange Offer Registration
Statement that any Broker-Dealer who holds Securities that are Transfer
Restricted Securities and that were acquired for its own account as a
result of market-making activities or other trading activities (other than
Transfer Restricted Securities acquired directly from the Company), may
exchange such Securities pursuant to the Exchange Offer; however, such
Broker-Dealer may be deemed to be an "underwriter" within the meaning of
the Securities Act and must, therefore, deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of the
New Securities received by such Broker-Dealer in the Exchange Offer, which
prospectus delivery requirement may be satisfied by the delivery by such
Broker-Dealer of the Prospectus contained in the Exchange Offer
Registration Statement. Such "Plan of Distribution" section shall also
contain all other information with respect to such resales by
Broker-Dealers that the Commission may require in order to permit such
resales pursuant thereto, but such "Plan of Distribution" shall not name
any such Broker-Dealer or disclose the amount of New Securities held by any
such Broker-Dealer except to the extent required by the Commission as a
result of a change in policy announced after the date of this Agreement.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) below to the extent necessary to
ensure that it is available for resales of New Securities acquired by
Broker-Dealers for their own accounts as a result of market-making activities or
other trading activities and to ensure that it conforms with the requirements of
this Agreement; the Securities Act and the policies, rules and regulations of
the Commission as announced from time to time, for a period of 180 days from the
date on which the Exchange Offer Registration Statement is declared effective.
The Company shall provide sufficient copies of the latest version of such
Prospectus to Broker-Dealers promptly upon request at any time during such
180-day period in order to facilitate such resales.
4. Shelf Registration.
(a) Shelf Registration. If (i) the Company is not required to file an
Exchange Offer Registration Statement or to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy (after the procedures
<PAGE>
5
set forth in Section 6(a) below have been complied with) or (ii) if any
Holder of Transfer Restricted Securities that is a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act) or an
institutional "accredited investor" (as defined in Rule 50 1(A)(l), (2),
(3) or (7) under the Securities Act) shall notify the Company at least 20
business days prior to the Consummation of the Exchange Offer (A) that such
Holder is prohibited by applicable law or Commission policy from
participating in the Exchange Offer or (B) that such Holder may not resell
the New Securities acquired by it in the Exchange Offer to the public
without delivering a prospectus and that the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for
such resales by such Holder or (C) that such Holder is a Broker-Dealer and
holds Securities acquired directly from the Company or one of its
affiliates, then the Company shall in lieu of, or in the event of (ii)
above, in addition to, effecting the registration of the New Securities
pursuant to the Exchange Offer Registration Statement use its best efforts
to:
(x) cause to be filed a shelf registration statement pursuant to
Rule 415 under the Securities Act, which may be an amendment to the
Exchange Offer Registration Statement (in either event, the "Shelf
Registration Statement"), on or prior to the earlier to occur of (1)
the 60th day after the date on which the Company determines that it is
not required to file the Exchange Offer Registration Statement or (2)
the 60th day after the date on which the Company receives notice from
a Holder of Transfer Restricted Securities as contemplated by clause
(ii) above (such earlier date being the "Shelf Filing Deadline"),
which Shelf Registration Statement shall provide for resales of all
Transfer Restricted Securities the Holders of which shall have
provided the information required pursuant to Section 4(b) hereof; and
(y) cause such Shelf Registration Statement to be declared
effective by the Commission on or before the 120th day after the Shelf
Filing Deadline.
The Company shall use its best efforts to keep such Shelf Registration
Statement continuously effective, supplemented and amended as required by
the provisions of Sections 6(b) and (c) hereof to the extent necessary to
ensure that it is available for resales of Securities by the Holders of
Transfer Restricted Securities entitled to the benefit of this Section 4(a)
and to ensure that it conforms with the requirements of this Agreement, the
Securities Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period ending on the second anniversary
of the Closing Date.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf
Registration Statement pursuant to this Agreement unless and until such
Holder furnishes to the Company in writing, within 20 business days after
receipt of a request therefor, such information as the Company may
reasonably request for use in connection with any Shelf Registration
Statement or Prospectus or preliminary Prospectus included therein. No
Holder of Transfer Restricted Securities shall be entitled to Liquidated
Damages pursuant to Section 5 hereof unless and until such Holder shall
have used its best efforts to provide all such reasonably requested
information. Each Holder as to which any Shelf Registration Statement is
being effected agrees to furnish promptly to the Company all
<PAGE>
6
information required to be disclosed in order to make the information
previously furnished to the Company by such Holder not materially
misleading.
5. Liquidated Damages
(a) If (a) any of the Registration Statements required by this Agreement is
not filed with the Commission on or prior to the date specified for such filing
in this Agreement, (b) any of such Registration Statements has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (c) the
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (d) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within two business days
by a post-effective amendment to such Registration Statement that cures such
failure and that is itself immediately declared effective (each such event
referred to in clauses (a) through (d), a "Registration Default"), additional
cash interest ("Liquidated Damages") shall accrue to each Holder of the
Securities commencing upon the occurrence of such Registration Default in an
amount equal to 0.50% per annum per $1,000 principal amount of Securities held
by such Holder. The amount of Liquidated Damages will increase by an additional
0.50% per annum per $1,000 principal amount of Securities with respect to each
subsequent 12 week period until all Registration Defaults have been cured, up to
a maximum amount of Liquidated Damages for all Registration Defaults of 2.00%
per annum per $1,000 principal amount of Securities. All accrued Liquidated
Damages shall be paid to Holders by the Company on a quarterly basis every March
1, June 1, September 1 and December 1, as applicable, in the same manner as
interest is paid pursuant to the Indenture. Following the cure of all
Registration Defaults relating to any particular Transfer Restricted Securities,
the accrual of Liquidated Damages with respect to such Transfer Restricted
Securities will cease.
All obligations of the Company set forth in the preceding paragraph that
have accrued and are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
Transfer Restricted Security shall have been satisfied in full.
(b) The Company shall notify the Trustee within one business day after each
and every date on which an event occurs in respect of which Liquidated Damages
are required to be paid (an "Event Date"). Liquidated Damages shall be paid by
depositing Liquidated Damages with the Trustee, in trust, for the benefit of the
Holders of the Securities, on or before the applicable Interest Payment Date
(whether or not any payment other than Liquidated Damages is payable on such
Securities), in immediately available funds in sums sufficient to pay the
Liquidated Damages then due to such Holders. Each obligation to pay Liquidated
Damages shall be deemed to accrue from the applicable date of the occurrence of
the Registration Default.
6. Registration Procedures.
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company shall comply with all of the provisions of
Section 6(c) below, shall use its best efforts to effect such exchange to
permit the sale of Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof, and shall
comply with all of the following provisions:
<PAGE>
7
(i) If in the reasonable opinion of counsel to the Company, there
is a question as to whether the Exchange Offer is permitted by
applicable law, the Company hereby agrees to seek a no-action letter
or other favorable decision from the Commission allowing the Company
to Consummate an Exchange Offer for such Securities. The Company
hereby agrees to pursue the issuance of such a decision to the
Commission staff level but shall not be required to take commercially
unreasonable action to effect a change of Commission policy. The
Company hereby agrees, however, to (A) participate in telephonic
conferences with the Commission, (B) deliver to the Commission staff
an analysis prepared by counsel to the Company setting forth the legal
bases, if any, upon which such counsel has concluded that such an
Exchange Offer should be permitted and (C) diligently pursue a
resolution (which need not be favorable) by the Commission staff of
such submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation thereof, a written representation to the
Company (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the
effect that (A) it is not an affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement
or understanding with any person to participate in, a distribution of
the New Securities to be issued in the Exchange Offer and (C) it is
acquiring the New Securities in its ordinary course of business. In
addition, all such Holders of Transfer Restricted Securities shall
otherwise cooperate in the Company's preparations for the Exchange
Offer. Each Holder hereby acknowledges and agrees that any
Broker-Dealer and any such Holder using the Exchange Offer to
participate in a distribution of the securities to be acquired in the
Exchange Offer (1) could not under Commission policy as in effect on
the date of this Agreement rely on the position of the Commission
enunciated in Morgan Stanley and Co.. Inc. (available June 5, 1991)
and Exxon Capital Holdings Corporation (available May 13, 1988), as
interpreted in the Commission's letter to Shearman & Sterling dated
July 2, 1993, and similar no-action letters (including Brown & Wood
LLP (available February 7, 1997), and any no-action letter obtained
pursuant to clause (i) above) and (2) must comply with the
registration and prospectus delivery requirements of the Securities
Act in connection with a secondary resale transaction and that such a
secondary resale transaction should be covered by an effective
registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation
S-K if the resales are of New Securities obtained by such Holder in
exchange for Securities acquired by such Holder directly from the
Company.
(iii) Prior to the effectiveness of the Exchange Offer
Registration Statement, the Company shall provide a supplemental
letter to the Commission (A) stating that the Company is registering
the Exchange Offer in reliance on the position of the Commission
enunciated in Exxon Capital Holdings Corporation (available May 13,
1988), Morgan Stanley and Co.. Inc. (available June 5, 1991), Brown &
Wood LLP (available February 7, 1997) and, if applicable, any
no-action letter obtained pursuant to clause (i) above and (B)
including a representation that the Company has not entered into any
arrangement or understanding with any Person to distribute the New
Securities to be received in the Exchange Offer and that, to the best
of the Company's information and belief, each Holder participating in
the Exchange Offer is acquiring the New Securities
<PAGE>
8
in its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution of
the New Securities received in the Exchange Offer.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company shall comply with all the provisions of
Section 6(c) below and shall use its best efforts to effect such
registration to permit the sale of the Transfer Restricted Securities being
sold in accordance with the intended method or methods of distribution
thereof, and pursuant thereto the Company will as expeditiously as possible
prepare and file with the Commission a Registration Statement relating to
the registration on any appropriate form under the Securities Act, which
form shall be available for the sale of the Transfer Restricted Securities
in accordance with the intended method or methods of distribution thereof.
(c) General Provisions. In connection with any Registration Statement
and any Prospectus required by this Agreement to permit the sale or resale
of Transfer Restricted Securities (including, without limitation, any
Registration Statement and the related Prospectus required to permit
resales of Securities by Broker-Dealers), the Company shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
for the period specified in Section 3 or 4 of this Agreement, as
applicable; upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to
contain a material misstatement or omission or (B) not to be effective
and usable for resale of Transfer Restricted Securities during the
period required by this Agreement, the Company shall file promptly an
appropriate amendment to such Registration Statement, in the case of
clause (A), correcting any such misstatement or omission, and, in the
case of either clause (A) or (B), use its best efforts to cause such
amendment to be declared effective and such Registration Statement and
the related Prospectus to become usable for their intended purpose(s)
as soon as practicable thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as applicable,
or such shorter period as will terminate when all Transfer Restricted
Securities covered by such Registration Statement have been sold;
cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424
under the Securities Act, and to comply fully with the applicable
provisions of Rules 424 and 430A under the Securities Act in a timely
manner; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof
set forth in such Registration Statement or supplement to the
Prospectus;
(iii) in the case of a Shelf Registration, advise the
underwriter(s), if any, and selling Holders promptly and, if requested
by such Persons, to confirm such advice in writing, (A) when the
Prospectus or any Prospectus supplement or posteffective amendment has
been filed, and, with respect to any Registration Statement or any
post-effective amendment thereto, when the same has become effective,
(B) of any
<PAGE>
9
request by the Commission for amendments to the Registration Statement
or amendments or supplements to the Prospectus or for additional
information relating thereto, (C) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration
Statement under the Securities Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes, or (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein untrue, or that requires the making
of any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading. If
at any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky
laws, the Company shall use its best efforts to obtain the withdrawal
or lifting of such order at the earliest possible time;
(iv) in the case of a Shelf Registration, furnish to each of the
selling or exchanging Holders and each of the underwriter(s), if any,
before filing with the Commission, copies of any Registration
Statement or any Prospectus included therein or any amendments or
supplements to any such Registration Statement or Prospectus
(including all documents incorporated by reference after the initial
filing of such Registration Statement, if any), which documents will
be subject to the review of such Holders and underwriter(s), if any,
for a period of at least five business days, and the Company will not
file any such Registration Statement or Prospectus or any amendment or
supplement to any such Registration Statement or Prospectus (including
all such documents incorporated by reference) to which selling Holders
of a majority in aggregate principal amount of Transfer Restricted
Securities covered by such Registration Statement or the
underwriter(s), if any, shall reasonably object within five business
days after the receipt thereof. A selling Holder or underwriter, if
any, shall be deemed to have reasonably objected to such filing if
such Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains a material misstatement
or omission;
(v) in the case of a Shelf Registration, promptly prior to the
filing of any document that is to be incorporated by reference into a
Registration Statement or Prospectus, if any, provide copies of such
document to the selling Holders and to the underwriter(s), if any,
make the Company's representatives available for discussion of such
document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as such
selling Holders or underwriter(s), if any, reasonably may request;
(vi) in the case of a Shelf Registration, make available at
reasonable times for inspection by the selling Holders, any
underwriter participating in any disposition pursuant to such
Registration Statement, and any attorney or accountant retained by
such selling Holders or any of the underwriter(s), all financial and
other records, pertinent corporate documents and properties of the
Company and cause the Company's officers, directors, managers and
employees to supply all information
<PAGE>
10
reasonably requested by any such Holder, underwriter, attorney or
accountant in connection with such Registration Statement subsequent
to the filing thereof and prior to its effectiveness;
(vii) in the case of a Shelf Registration, if requested by any
selling Holders or the underwriter(s), if any, promptly incorporate in
any Registration Statement or Prospectus, pursuant to a supplement or
post-effective amendment if necessary, such information as such
selling Holders and underwriter(s), if any, may reasonably request to
have included therein, including, without limitation, information
relating to the "Plan of Distribution" of the Transfer Restricted
Securities, information with respect to the principal amount of
Transfer Restricted Securities being sold to such underwriter(s), the
purchase price being paid therefor and any other terms of the offering
of the Transfer Restricted Securities to be sold in such offering, and
make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is
notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment;
(viii) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating
agencies, if so requested by the Holders of a majority in aggregate
principal amount of Securities covered thereby or the underwriter(s),
if any;
(ix) in the case of a Shelf Registration, furnish to each selling
Holder and each of the underwriter(s), if any, without charge, at
least one copy of the Registration Statement, as first filed with the
Commission, and of each amendment thereto, including all documents
incorporated by reference therein, if any, and all exhibits (including
exhibits incorporated therein by reference);
(x) in the case of a Shelf Registration, deliver to each selling
Holder and each of the underwriter(s), if any, without charge, as many
copies of the Prospectus (including each preliminary prospectus) and
any amendment or supplement thereto as such Persons reasonably may
request; the Company hereby consents to the use of the Prospectus and
any amendment or supplement thereto by each of the selling Holders and
each of the underwriter(s), if any, in connection with the offering
and the sale of the Transfer Restricted Securities covered by the
Prospectus or any amendment or supplement thereto;
(xi) in the case of a Shelf Registration, enter into such
agreements (including an underwriting agreement) and make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the
disposition of the Transfer Restricted Securities pursuant to any
Registration Statement contemplated by this Agreement, all to such
extent as may be requested by any purchaser or by any Holder of
Transfer Restricted Securities or underwriter in connection with any
sale or resale pursuant to any Registration Statement contemplated by
this Agreement, and in connection with an Underwritten Registration,
the Company shall:
(A) upon request, furnish to each selling Holder and each
underwriter, if any, in such substance and scope as they may
request and as are
<PAGE>
11
customarily made by issuers to underwriters in primary
underwritten offerings, upon the date of the effectiveness of the
Shelf Registration Statement:
(1) a certificate, dated the date of the effectiveness
of the Shelf Registration Statement, signed by (y) the
Chairman of the Board, its President or a Vice President and
(z) the Chief Financial Officer of Harvard, confirming, as
of the date thereof, such matters as such parties may
reasonably request;
(2) an opinion, dated the date of the effectiveness of
the Shelf Registration Statement, of counsel for Harvard,
covering such matters as such parties may reasonably
request, and in any event including a statement to the
effect that such counsel has participated in conferences
with officers and other representatives of the Company,
representatives of the independent public accountants for
the Company, the Initial Purchaser's representatives and the
Initial Purchaser's counsel in connection with the
preparation of such Registration Statement and the related
Prospectus and have considered the matters required to be
stated therein and the statements contained therein,
although such counsel has not independently verified the
accuracy, completeness or fairness of such statements, and
that such counsel advises that, on the basis of the
foregoing (relying as to materiality to a large extent upon
facts provided to such counsel by officers and other
representatives of the Company and without independent check
or verification), no facts came to such counsel's attention
that caused such counsel to believe that the applicable
Registration Statement, at the time such Registration
Statement or any post-effective amendment thereto became
effective, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such
Registration Statement as of its date, contained an untrue
statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading. Without limiting the foregoing, such counsel may
state further that such counsel assumes no responsibility
for, and has not independently verified, the accuracy,
completeness or fairness of the financial statements, notes
and schedules and other financial included in any
Registration Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary comfort letter, dated the date of the
effectiveness of the Shelf Registration Statement, from each
of Harvard's independent accountants, in the customary form
and covering matters of the type customarily covered in
comfort letters by underwriters in connection with primary
underwritten offerings.
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions
and procedures of
<PAGE>
12
Section 8 hereof with respect to all parties to be indemnified
pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the
Company pursuant to this clause (xi), if any.
If at any time the representations and warranties of the Company
contemplated in clause (A)(1) above cease to be true and correct, the
Company shall so advise the Initial Purchaser and the underwriter(s), if
any, and each selling Holder promptly and, if requested by such Persons,
shall confirm such advice in writing.
(xii) in the case of a Shelf Registration, prior to any public
offering of Transfer Restricted Securities, cooperate with the selling
Holders, the underwriter(s), if any, and their respective counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders or underwriter(s) may reasonably
request and do any and all other acts or things necessary or advisable
to enable the disposition in such jurisdictions of the Transfer
Restricted Securities covered by the Shelf Registration Statement;
provided, however, that the Company shall not be required to register
or qualify as a foreign corporation where it is not now so qualified
or to take any action that would subject it to service of process in
suits or to taxation, other than as to matters and transactions
relating to the Registration Statement, in any jurisdiction where it
is not now so subject;
(xiii) in the case of a Shelf Registration, shall issue, upon the
request of any Holder of Securities covered by the Shelf Registration
Statement, New Securities in the same amount as the Securities
surrendered to the Company by such Holder in exchange therefor or
being sold by such Holder, such New Securities to be registered in the
name of such Holder or in the name of the purchaser(s) of such
Securities, as the case may be; in return, the Securities held by such
Holder shall be surrendered to the Company for cancellation;
(xiv) in the case of a Shelf Registration, cooperate with the
selling Holders and the underwriter(s), if any, to facilitate the
timely preparation and delivery of certificates representing Transfer
Restricted Securities to be sold and not bearing any restrictive
legends and enable such Transfer Restricted Securities to be in such
denominations and registered in such names as the Holders or the
underwriter(s), if any, may request at least two business days prior
to any sale of Transfer Restricted Securities made by such
underwriter(s);
(xv) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may
be necessary to enable the seller or sellers thereof or the
underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause
(xii) above;
<PAGE>
13
(xvi) if any fact or event contemplated by clause (c)(iii)(D)
above shall exist or have occurred, prepare a supplement or
post-effective amendment to the Registration Statement or related
Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading;
(xvii) obtain CUSIP numbers for all Transfer Restricted
Securities not later than the effective date of the Registration
Statement and provide certificates for the Transfer Restricted
Securities;
(xviii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter") that is required to be retained in accordance with the
rules and regulations of the NASD, and use its best efforts to cause
such Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the
disposition of such Transfer Restricted Securities; provided, however,
that the Company shall not be required to register or qualify as a
foreign corporation where it is not now so qualified or to take any
action that would subject it to service of process in suits or to
taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so
subject;
(xix) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as practicable, a
consolidated earning statement meeting the requirements of Rule 158
(which need not be audited) for the twelve-month period (A) commencing
at the end of any fiscal quarter in which Transfer Restricted
Securities are sold to underwriters in a firm or best efforts
Underwritten Offering or (B) if not sold to underwriters in such an
offering, beginning with the first month of the respective Company's
first fiscal quarter commencing after the effective date of the
Registration Statement;
(xx) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required
by this Agreement, and, in connection therewith, cooperate with the
Trustee and the Holders of Securities to effect such changes to the
Indenture as may be required for such Indenture to be so qualified in
accordance with the terms of the TIA, and execute and use its best
efforts to cause the Trustee to execute all documents that may be
required to effect such changes and all other forms and documents
required to be filed with the Commission to enable such Indenture to
be so qualified in a timely manner; and
(xxi) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13
and Section 15 of the Exchange Act.
<PAGE>
14
Each Holder agrees by acquisition of a Transfer Restricted Security
that, upon receipt of any notice from the Company of the existence of any
fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will
forthwith discontinue disposition of Transfer Restricted Securities
pursuant to the applicable Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 6(c)(xvi) hereof or until it is advised in writing
(the "Advice") by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings
that are incorporated by reference in the Prospectus. If so directed by the
Company, each Holder will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Transfer Restricted Securities
that was current at the time of receipt of such notice. In the event the
Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4
hereof, as applicable, shall be extended by the number of days during the
period from and including the date of the giving of such notice pursuant to
Section 6(c)(iii)(D) hereof to and including the date when each selling
Holder covered by such Registration Statement shall have received the
copies of the supplemented or amended Prospectus contemplated by Section
6(c)(xvi) hereof or shall have received the Advice.
7. Registration Expenses.
All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i)
all registration and filing fees and expenses (including filings made by
any purchaser or Holder with the NASD (and, if applicable, the fees and
expenses of any "qualified independent underwriter" and its counsel that
may be required by the rules and regulations of the NASD)); (ii) all fees
and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing
certificates for the New Securities to be issued in the Exchange Offer and
printing of Prospectuses), and associated messenger and delivery services
and telephone; (iv) all fees and disbursements of counsel for the Company;
(v) all application and filing fees in connection with listing Securities
on a national securities exchange or automated quotation system, and the
obtaining of a rating of the Securities, if applicable; and (vi) all fees
and disbursements of independent certified public accountants of Harvard
and the Subsidiary Guarantors (including the expenses of any special audit
and comfort letters required by or incident to such performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit
and the fees and expenses of any Person, including special experts,
retained by the Company.
8. Indemnification and Contribution.
(a) In connection with a Shelf Registration Statement or in connection with
any delivery of a Prospectus contained in an Exchange Offer Registration
Statement by any participating Broker-Dealer or the Initial Purchaser, as
applicable, who seeks to sell New Securities, the Company shall indemnify and
hold harmless each Holder of Transfer Restricted Securities included within any
such Shelf Registration Statement and each participating Broker-Dealer or the
Initial Purchaser selling New Securities, and each person, if any, who controls
any such person within the meaning of Section 15 of the Securities Act (each, a
"Participant") from and against any loss, claim, damage or liability, joint or
<PAGE>
15
several, or any action in respect thereof (including, but not limited to, any
loss, claim, damage, liability or action relating to purchases and sales of
Securities) to which such Participant or controlling person may become subject,
under the Securities Act 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 to make the statements
therein not misleading, and shall reimburse each Participant promptly upon
demand for any legal or other expenses reasonably incurred by such Participant
in connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that (i) the Company 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, any untrue statement or alleged untrue statement or omission
or alleged omission made in any such Registration Statement or any prospectus
forming part thereof or in any such amendment or supplement in reliance upon and
in conformity with written information furnished to the Company by or on behalf
of any Participant specifically for inclusion therein; and provided further that
as to any preliminary Prospectus, the indemnity agreement contained in this
Section 8(a) shall not inure to the benefit of any such Participant or any
controlling person of such Participant on account of any loss, claim, damage,
liability or action arising from the sale of the New Securities to any person by
that Participant if (i) that Participant failed to send or give a copy of the
Prospectus, as the same may be amended or supplemented, to that person within
the time required by the Securities Act and (ii) the untrue statement or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact in such preliminary Prospectus was corrected in the Prospectus,
unless, in each case, such failure resulted from non-compliance by the Company
with Section 6(c). The foregoing indemnity agreement is in addition to any
liability which the Company may otherwise have to any Participant or to any
controlling person of that Participant.
(b) Each Participant, severally and not jointly, shall indemnify and hold
harmless the Company, each of its directors, officers, employees or agents and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act, from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof, to which the Company or any
such director, officer, employee or agent or controlling person may become
subject, under the Securities Act 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
preliminary Prospectus, Registration Statement or Prospectus 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 to make the
statements therein 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 written information furnished to
the Company by or on behalf of that Participant specifically for inclusion
herein, and shall reimburse the Company and any such director, officer, employee
or agent or controlling person for any legal or other expenses reasonably
incurred by the Company or any such director, officer, employee or agent or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred. The foregoing indemnity agreement is in addition to any
liability which any Participant may otherwise have to the Company or any such
director, officer, employee or agent or controlling person.
(c) Promptly after receipt by an indemnified party under this Section 8 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 under this Section 8, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify the
<PAGE>
16
indemnifying party shall not relieve it from any liability which it may have
under this Section 8 except to the extent it has been materially prejudiced 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 8. If any such claim or
action shall be brought against an indemnified party, and it shall have notified
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 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 8 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
the indemnified party shall have the right to employ separate counsel to
represent jointly the indemnified party and those other Participants and their
respective officers, employees and controlling persons who may be subject to
liability arising out of any claim in respect of which indemnity may be sought
by the Participants against the indemnifying party under this Section 8 if, in
the reasonable judgment of the indemnified party it is advisable for the
indemnified party and those Participants, officers, employees and controlling
persons to be jointly represented by separate counsel, and in that event the
fees and expenses of such separate counsel shall be paid by the indemnifying
party. In no event shall the indemnifying parties be liable for the fees and
expenses of more than one counsel (in addition to local counsel). Each
indemnified party, as a condition of the indemnity agreements contained in
Section 8, shall use its best efforts to cooperate with the indemnifying party
in the defense of any such action or claim. No indemnifying party shall (i)
without the prior written consent of the indemnified parties (which consent
shall not be unreasonably withheld), settle or compromise or consent to the
entry of any judgment with respect to any pending or threatened claim, action,
suit or proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding or (ii) 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 of 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.
(d) If the indemnification provided for in this Section 8 shall for any
reason be unavailable to or insufficient to hold harmless an indemnified party
under Section 8(a) or 8(b) in respect of any loss, claim, damage or liability,
or any action in respect thereof, referred to therein, 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, in such proportion as
shall be appropriate to reflect the relative fault of the Company on the one
hand and the Participants on the other with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or the
Participants, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Participants agree that it would not be just and equitable
if contributions pursuant to this Section 8(d) were to be determined by pro rata
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation which 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
<PAGE>
17
8(d) shall be deemed to include, for purposes of this Section 8(d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8(d), no Participant shall be required to contribute
any amount in excess of the amount by which proceeds received by such
Participant from an offering of the Notes exceeds the amount of any damages
which such Participant 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 1
1(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Participants'
obligations to contribute as provided in this Section 8(d) are several and not
joint.
9. Rule 144A.
The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding, to make available to any Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
from such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Securities Act in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144A.
10. Participation in Underwritten Registrations.
No Holder may participate in any Underwritten Registration hereunder unless
such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on
the basis provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all reasonable questionnaires, powers of attorney, indemnities, underwriting
agreements, lock-up letters and other documents required under the terms of such
underwriting arrangements.
11. Selection of Underwriters.
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such 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 the Transfer Restricted Securities included in
such offering; provided that such investment bankers and managers must be
reasonably satisfactory to the Company.
12. Miscellaneous.
(a) Remedies. The Company agrees that monetary damages (including
Liquidated Damages) would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Agreement
and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not on or after the
date of this Agreement enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions hereof. The
Company has not previously entered into any agreement granting any
registration rights with respect to its securities to any Person. The
rights granted to the Holders hereunder do
<PAGE>
18
not in any way conflict with and are not inconsistent with the rights
granted to the holders of the Company's securities under any agreement in
effect on the date hereof.
(c) Adjustments Affecting the Securities. The Company will not take
any action, or permit any change to occur, with respect to Securities that
would materially and adversely affect the ability of the Holders to
Consummate any Exchange Offer unless such action or change is required by
applicable law.
(d) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless the Company
has obtained the written consent of Holders of a majority of the
outstanding principal amount of Transfer Restricted Securities.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders whose
securities are being tendered pursuant to the Exchange Offer and that does
not affect directly or indirectly the rights of other Holders whose
securities are not being tendered pursuant to such Exchange Offer may be
given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities being tendered or registered.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class
mail (registered or certified, return receipt requested), telex,
telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address of such Holder maintained by
the Registrar under the Indenture; and
(ii) if to the Company:
Theodore Vogtman
Harvard Industries, Inc.
3 Werner Way
Lebanon, New Jersey 08833
Facsimile: 908-236-0071
With a copy to:
Christopher E. Manno, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Facsimile: 212-728-8111
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if
mailed; when answered back, if telexed; when receipt acknowledged, if
telecopied; and on the next business day, if timely delivered to an air
courier guaranteeing overnight delivery.
<PAGE>
19
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be
binding upon a successor or assign of a Holder unless and to the extent
such successor or assign acquired Transfer Restricted Securities from such
Holder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
(k) Entire Agreement. This Agreement together with the other
transaction documents is intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive statement of
the agreement and understanding of the parties hereto in respect of the
subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Transfer Restricted Securities. This Agreement supersedes
all prior agreements and understandings among the parties with respect to
such subject matter.
(l) Required Consents. Whenever the consent or approval of Holders of
a specified percentage of Transfer Restricted Securities is required
hereunder, Transfer Restricted Securities held by the Company or its
affiliates (as such term is defined in Rule 405 under the Securities Act)
shall not be counted in determining whether such consent or approval was
given by the Holders of such required percentage.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
HARVARD INDUSTRIES, INC.
By: /s/ D. Craig Bowman
------------------------------
Name: D. Craig Bowman
Title: Secretary and Vice
President, Law
DOEHLER-JARVIS, INC.
HARVARD TRANSPORTATION CORPORATION
DOEHLER-JARVIS GREENE VILLE, INC.
POTTSTOWN PRECISION CASTING, NC.
DOEHLER-JARVIS TECHNOLOGIES, NC.
DOEHLER-JARVIS TOLEDO, NC.
HARMAN AUTOMOTIVE, NC.
HAYES-ALBION CORPORATION
THE KINGSTON-WARREN CORPORATION
On behalf of each of the above
Subsidiary Guarantors
By: /s/ D. Craig Bowman
------------------------------
Name: D. Craig Bowman
Title: Vice President
Accepted as of the date thereof:
LEHMAN BROTHERS INC.
By: /s/ Thom Bernard
- --------------------------------
Name: Thom Bernard
Title:
<PAGE>
================================================================================
$115,000,000
CREDIT AGREEMENT
among
HARVARD INDUSTRIES, INC.,
DOEHLER-JARVIS, INC.,
HARVARD TRANSPORTATION CORPORATION,
DOEHLER-JARVIS GREENEVILLE, INC.,
POTTSTOWN PRECISION CASTING, INC.,
DOEHLER-JARVIS TECHNOLOGIES, INC.,
DOEHLER-JARVIS TOLEDO, INC.,
HARMAN AUTOMOTIVE, INC.,
HAYES-ALBION CORPORATION, and
THE KINGSTON-WARREN CORPORATION
as Borrowers,
The Several Lenders
from Time to Time Parties Hereto,
LEHMAN BROTHERS INC.,
as Arranger,
LEHMAN COMMERCIAL PAPER INC.,
as Syndication Agent,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Administrative Agent
Dated as of November 24, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
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SECTION 1. DEFINITIONS..............................................................................2
1.1 Defined Terms...............................................................2
1.2 Other Definitional Provisions..............................................31
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS.........................................................32
2.1 Term Loan Commitments......................................................32
2.2 Procedure for Term Loan Borrowing..........................................32
2.3 Repayment of Term Loans....................................................32
2.4 Revolving Credit Commitments...............................................33
2.5 Procedure for Revolving Credit Borrowing...................................34
2.6 Swing Line Commitment......................................................35
2.7 Procedure for Swing Line Borrowing; Refunding of Swing Line Loans..........35
2.8 Repayment of Loans; Evidence of Debt.......................................37
2.9 Commitment Fees, etc. .....................................................38
2.10 Termination or Reduction of Revolving Credit Commitments..................39
2.11 Optional Prepayments......................................................39
2.12 Mandatory Prepayments and Commitment Reductions...........................40
2.13 Conversion and Continuation Options.......................................42
2.14 Minimum Amounts and Maximum Number of Eurodollar Tranches.................42
2.15 Interest Rates and Payment Dates..........................................43
2.16 Computation of Interest and Fees..........................................43
2.17 Inability to Determine Interest Rate......................................44
2.18 Pro Rata Treatment and Payments...........................................44
2.19 Requirements of Law.......................................................46
2.20 Taxes.....................................................................48
2.21 Indemnity.................................................................49
2.22 Illegality................................................................50
2.23 Change of Lending Office..................................................50
2.24 Reliance on Notices; Appointment of the Borrower Representative...........50
SECTION 3. LETTERS OF CREDIT.......................................................................51
3.1 Issuance...................................................................51
3.2 Loans Automatic; Participations............................................52
3.3 Cash Collateral............................................................53
3.4 Fees and Expenses..........................................................54
3.5 Request for Issuance of Letters of Credit..................................54
3.6 Obligation Absolute........................................................54
3.7 Indemnification; Nature of Lenders' Duties.................................55
SECTION 4. REPRESENTATIONS AND WARRANTIES..........................................................56
4.1 Financial Condition........................................................56
4.2 No Change..................................................................57
4.3 Corporate Existence; Compliance with Law...................................57
4.4 Corporate Power; Authorization; Enforceable Obligations....................57
4.5 No Legal Bar...............................................................58
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4.6 No Material Litigation.....................................................58
4.7 No Default.................................................................58
4.8 Ownership of Property; Liens...............................................58
4.9 Intellectual Property......................................................59
4.10 Taxes.....................................................................59
4.11 Federal Regulations.......................................................59
4.12 Labor Matters.............................................................59
4.13 ERISA.....................................................................60
4.14 Investment Company Act; Other Regulations.................................60
4.15 Subsidiaries..............................................................60
4.16 Use of Proceeds...........................................................61
4.17 Environmental Matters.....................................................61
4.18 Accuracy of Information, etc..............................................62
4.19 Security Documents........................................................62
4.20 Solvency..................................................................63
4.21 Regulation H..............................................................63
4.22 Year 2000 Matters.........................................................63
4.23 Deposit and Disbursement Accounts.........................................63
4.24 Government Contracts......................................................63
4.25 Customer and Trade Relations..............................................64
4.26 Agreements and Other Documents............................................64
SECTION 5. CONDITIONS PRECEDENT....................................................................64
5.1 Conditions to Initial Extension of Credit..................................64
5.2 Conditions to Each Extension of Credit.....................................68
SECTION 6. AFFIRMATIVE COVENANTS...................................................................69
6.1 Financial Statements.......................................................69
6.2 Certificates; Other Information............................................70
6.3 Collateral Reports.........................................................71
6.4 Payment of Obligations.....................................................73
6.5 Conduct of Business and Maintenance of Existence, etc......................73
6.6 Maintenance of Property; Insurance.........................................73
6.7 Inspection of Property; Books and Records; Discussions.....................74
6.8 Notices....................................................................75
6.9 Environmental Laws.........................................................75
6.10 Interest Rate Protection..................................................76
6.11 Additional Collateral, etc................................................76
6.12 Further Assurances........................................................77
6.13 Cash Management Systems...................................................78
6.14 Supplemental Disclosure...................................................80
6.15 Intellectual Property.....................................................80
6.16 Landlords' Agreements, Mortgagee Agreements and Bailee Letters............80
6.17 Further Assurances........................................................81
6.18 Year 2000 Matters.........................................................81
SECTION 7. NEGATIVE COVENANTS......................................................................81
7.1 Financial Condition Covenants..............................................81
7.2 Limitation on Indebtedness.................................................83
7.3 Limitation on Liens........................................................84
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ii
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7.4 Limitation on Fundamental Changes..........................................85
7.5 Limitation on Disposition of Property......................................86
7.6 Limitation on Restricted Payments..........................................86
7.7 Limitation on Capital Expenditures.........................................87
7.8 Limitation on Investments..................................................87
7.9 Limitation on Modifications of Debt Instruments, etc. .....................88
7.10 Limitation on Transactions with Affiliates................................89
7.11 Limitation on Sales and Leasebacks........................................89
7.12 Limitation on Changes in Fiscal Periods...................................89
7.13 Limitation on Negative Pledge Clauses.....................................89
7.14 Limitation on Restrictions on Subsidiary Distributions....................89
7.15 Limitation on Lines of Business...........................................90
7.16 Materials of Environmental Concern........................................90
7.17 Change of Corporate Name or Location......................................90
7.18 No Speculative Transactions...............................................90
7.19 Reorganization Payments...................................................90
SECTION 8. EVENTS OF DEFAULT.......................................................................91
SECTION 9. THE AGENTS..............................................................................94
9.1 Appointment................................................................94
9.2 Delegation of Duties.......................................................94
9.3 Exculpatory Provisions.....................................................94
9.4 Reliance by Agents.........................................................94
9.5 Notice of Default..........................................................95
9.6 Non-Reliance on Agents and Other Lenders...................................95
9.7 Indemnification............................................................96
9.8 Agent in Its Individual Capacity...........................................96
9.9 Successor Agents...........................................................96
9.10 Authorization to Release Liens............................................97
9.11 The Arranger..............................................................97
9.12 Dissemination of Information..............................................97
SECTION 10. MISCELLANEOUS..........................................................................98
10.1 Amendments and Waivers....................................................98
10.2 Notices...................................................................99
10.3 No Waiver; Cumulative Remedies...........................................100
10.4 Survival of Representations and Warranties...............................100
10.5 Payment of Expenses......................................................101
10.6 Successors and Assigns; Participations and Assignments...................101
10.7 Adjustments; Set-off.....................................................104
10.8 Counterparts.............................................................105
10.9 Severability.............................................................105
10.10 Integration.............................................................105
10.11 GOVERNING LAW...........................................................105
10.12 Submission To Jurisdiction; Waivers.....................................105
10.13 Acknowledgments.........................................................106
10.14 Confidentiality.........................................................106
10.15 Release of Collateral Security..........................................107
10.16 Accounting Changes......................................................107
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10.17 Delivery of Lender Addenda...............................................107
10.18 Reinstatement...........................................................107
10.19 No Strict Construction..................................................108
10.20 WAIVERS OF JURY TRIAL...................................................108
10.21 Maximum Liability.......................................................108
10.22 Right of Contribution...................................................109
</TABLE>
iv
<PAGE>
ANNEX:
A Closing Checklist
SCHEDULES:
1.1A Location of Eligible Inventory
1.1B Mortgaged Property
4.1 Disposition of Assets
4.2 Changes
4.3 Federal Employee ID Numbers
4.4 Consents, Authorizations, Filings and Notices
4.6 Material Litigations
4.10 Taxable Years for which Returns are Being Audited
4.12 Agreements
4.13 Reportable Events and Plans
4.15 Subsidiaries
4.19(a) UCC Filing Jurisdictions
4.19(b) Mortgage Filing Jurisdictions
4.21 Flood Hazard Properties
4.23 Bank Accounts
4.24 Government Contracts
4.26 Contracts, Leases and Other Documents
4.27 Disposition of Assets
5.1(i) Reorganization Payments
6.5 Corporate and Trade Names
6.6 Insurance Policies
6.13 Relationship and Concentration Account Banks
7.2(d) Existing Indebtedness
7.3(f) Existing Liens
7.10 Transactions with Affiliates
EXHIBITS:
A Form of Collateral Agreement
B Form of Compliance Certificate
C Form of Closing Certificate
D Form of Mortgage
E Form of Assignment and Acceptance
F-1 Form of Legal Opinion of Willkie Farr & Gallagher
F-2 Form of Legal Opinion of Local Counsel
G-1 Form of Term Note
G-2 Form of Revolving Credit Note
G-3 Form of Swing Line Note
H Form of Exemption Certificate
I Form of Lender Addendum
J Form of Borrowing Base Certificate
K Form of Notice of Conversion/Continuation
L Form of Collateral Report
v
<PAGE>
CREDIT AGREEMENT, dated as of November 24, 1998, among HARVARD
INDUSTRIES, INC., a Delaware corporation (successor by merger to Harvard Merger
Corp., a Delaware corporation, and Harvard Industries, Inc., a Florida
corporation) ("Harvard" or the "Borrower Representative"), DOEHLER-JARVIS, INC.,
a Delaware corporation, HARVARD TRANSPORTATION CORPORATION, a Michigan
corporation, DOEHLER-JARVIS GREENEVILLE, INC., a Delaware corporation, POTTSTOWN
PRECISION CASTING, INC., a Delaware corporation, DOEHLER-JARVIS TECHNOLOGIES,
INC., a Delaware corporation, DOEHLER-JARVIS TOLEDO INC., a Delaware
corporation, HARMAN AUTOMOTIVE, INC., a Michigan corporation, HAYES-ALBION
CORPORATION, a Michigan corporation, THE KINGSTON-WARREN CORPORATION, a New
Hampshire corporation (together with the Borrower Representative, jointly and
severally, the "Borrowers"), the several banks and other financial institutions
or entities from time to time parties to this Agreement (the "Lenders"), LEHMAN
BROTHERS INC., as advisor and arranger (in such capacity, the "Arranger"),
LEHMAN COMMERCIAL PAPER INC., as syndication agent (in such capacity, the
"Syndication Agent"), and GENERAL ELECTRIC CAPITAL CORPORATION, as
administrative agent (in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, on May 8, 1997 (the "Petition Date"), the Borrowers
(collectively, the "Debtors") filed voluntary petitions under Section 301 of the
Bankruptcy Code with the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court") initiating their chapter 11 cases (the
"Cases");
WHEREAS, the Debtors' plan of reorganization dated August 19,
1998 (the "Plan of Reorganization") has been confirmed pursuant to Section 1129
of the Bankruptcy Code;
WHEREAS, the Borrowers have requested that the Lenders make
available term loans, revolving credit and letter of credit facilities in an
aggregate principal amount not to exceed $115,000,000 and the proceeds of which
will be used (a) to refinance, in part, indebtedness and other obligations of
the Borrowers under the Borrowers' existing $175,000,000 senior secured
debtor-in-possession credit facility, (b) to refinance, in part, indebtedness
and other obligations of the Borrowers under the Borrowers' existing $25,000,000
junior secured debtor-in-possession credit facility (together with the
$175,000,000 facility, the "DIP Credit Facilities"), (c) to pay certain fees and
expenses in connection with the Plan of Reorganization as confirmed by the
Bankruptcy Court, (d) to finance the working capital needs of the Borrowers in
the ordinary course of business and (e) for general corporate purposes; and
WHEREAS, the Lenders are willing to make such credit
facilities available upon and subject to the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and the
agreements hereinafter set forth, the parties hereto hereby agree as follows:
<PAGE>
2
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms listed
in this Section 1.1 shall have the respective meanings set forth in this Section
1.1.
"Accounts": as to any Person, all rights to receive payment
for goods sold or leased by such Person or for services rendered in the
ordinary course of business of such Person to the extent not evidenced
by an instrument or chattel paper, including any rights in, to and
under all purchase orders or receipts now owned or hereafter acquired
for goods and services, and all collateral security and guarantees with
respect to any of the foregoing.
"Administrative Agent": as defined in the Preamble.
"Advance Rate": (i) with respect to Eligible Accounts, up to
85%, (ii) with respect to Eligible Inventory, valued on a first-in,
first-out basis (at the lower of cost or market), (a) in the case of
raw materials and finished goods Inventory, up to 60%, (b) in the case
of work-in-process Inventory, up to 25%, and (c) in the case of
Eligible Tooling Inventory, up to 33%.
"Affiliate": as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, either
to (a) vote 5% or more of the securities having ordinary voting power
for the election of directors (or persons performing similar functions)
of such Person or (b) direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise;
provided, that the term "Affiliate" shall specifically exclude the
Agents and each Lender.
"Agents": the collective reference to the Syndication Agent
and the Administrative Agent.
"Aggregate Exposure": with respect to any Lender at any time,
an amount equal to (a) until the Closing Date, the aggregate amount of
such Lender's Commitments at such time and (b) thereafter, the sum of
(i) the aggregate then unpaid principal amount of such Lender's Term
Loans and (ii) the amount of such Lender's Revolving Credit Commitment
then in effect or, if the Revolving Credit Commitments have been
terminated, the amount of such Lender's Revolving Extensions of Credit
then outstanding.
"Aggregate Exposure Percentage" with respect to any Lender at
any time, the ratio (expressed as a percentage) of such Lender's
Aggregate Exposure at such time to the Aggregate Exposure of all
Lenders at such time.
<PAGE>
3
"Agreement": this Credit Agreement, as amended, supplemented
or otherwise modified from time to time.
"Applicable Margin": for each Type of Loan, the rate per annum
set forth under the relevant column heading below:
Base Rate Eurodollar
Loans Loans
--------- ----------
Revolving Credit Loans and
Swing Line Loans 2.125% 3.375%
Term Loans 2.250% 3.500%
"Application": an application, in such form as the Issuing
Lender may specify from time to time, requesting the Issuing Lender to
open a Letter of Credit.
"Appraisal": the appraisal prepared by Norman Levy Associates,
Inc., dated April 29, 1998, performed at the request of The CIT
Group/Business Credit, Inc.
"Arranger": as defined in the Preamble.
"Asset Sale": any Disposition of Property or series of related
Dispositions of Property (excluding any such Disposition permitted by
clause (b), (c), (d), (e), (f) or (g) of Section 7.5) which yields
gross proceeds to the Borrowers or any of their Subsidiaries (valued at
the initial principal amount thereof in the case of non-cash proceeds
consisting of notes or other debt securities and valued at fair market
value in the case of other non-cash proceeds) in excess of $150,000 for
any such Disposition and in excess of $1,000,000 per annum for all such
Dispositions during any fiscal year.
"Assignee": as defined in Section 10.6(c).
"Assignor": as defined in Section 10.6(c).
"Availability": the difference between (a) the lesser of (i)
the Total Revolving Credit Commitments, less Reserves, and (ii) the
Borrowing Base, minus (b) the aggregate Revolving Extensions of Credit
for all Lenders.
"Available Revolving Credit Commitment": as to any Revolving
Credit Lender at any time, an amount equal to the excess, if any, of
(a) such Lender's Revolving Credit Commitment then in effect over (b)
such Lender's Revolving Extensions of Credit then outstanding (after
giving pro forma effect to repayment of any Swing Line Loan to be
refunded with the proceeds of any Revolving Credit Loan); provided,
that in calculating any Lender's Revolving Extensions of Credit for the
purpose of determining such Lender's Available Revolving Credit
Commitment pursuant to Section 2.9(a), the
<PAGE>
4
aggregate principal amount of Swing Line Loans then outstanding shall
be deemed to be zero.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978, as
heretofore and hereafter amended, and codified as 11 U.S.C. ss.ss.101
et seq.
"Bankruptcy Court": as defined in the Recitals.
"Base Rate": for any day, a rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Prime Rate in effect on such day, (b) the Base CD Rate in effect on
such day plus 1% and (c) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean
the rate of interest per annum publicly announced from time to time by
the Reference Lender as its prime or base rate in effect at its
principal office in New York City (the Prime Rate not being intended to
be the lowest rate of interest charged by the Reference Lender in
connection with extensions of credit to debtors); "Base CD Rate" shall
mean the sum of (a) the product of (i) the Three-Month Secondary CD
Rate and (ii) a fraction, the numerator of which is one and the
denominator of which is one minus the C/D Reserve Percentage and (b)
the C/D Assessment Rate; and "Three-Month Secondary CD Rate" shall
mean, for any day, the secondary market rate for three-month
certificates of deposit reported as being in effect on such day (or, if
such day shall not be a Business Day, the next preceding Business Day)
by the Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the current
practices of the Board, be published in Federal Reserve Statistical
Release H.15(519) during the week following such day), or, if such rate
shall not be so reported on such day or such next preceding Business
Day, the average of the secondary market quotations for three-month
certificates of deposit of major money center banks in New York City
received at approximately 10:00 A.M., New York City time, on such day
(or, if such day shall not be a Business Day, on the next preceding
Business Day) by the Reference Lender from three New York City
negotiable certificate of deposit dealers of recognized standing
selected by it. Any change in the Base Rate due to a change in the
Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective Rate shall be effective as of the opening of business on the
effective day of such change in the Prime Rate, the Three- Month
Secondary CD Rate or the Federal Funds Effective Rate, respectively.
"Base Rate Loans": Loans the rate of interest applicable to
which is based upon the Base Rate.
"Benefitted Lender": as defined in Section 10.7(a).
"Board": the Board of Governors of the Federal Reserve System
of the United States (or any successor).
"Borrower Accounts": as defined in Section 6.13.
<PAGE>
5
"Borrower Representative": as defined in the Preamble.
"Borrowers": as defined in the Preamble.
"Borrowing Base": on any date of determination, the sum
(without duplication) of (i) the product of (A) the aggregate
outstanding Eligible Accounts of the Borrowers on such date and (B) the
applicable Advance Rate, plus (ii) the product of (x) the aggregate
Eligible Inventory of the Borrowers and their Subsidiaries on such
date, and (y) the applicable Advance Rate, minus (iii) any Reserves
established by the Administrative Agent at such time; provided, that
for purposes of any calculation of the Borrowing Base, the amount of
aggregate Revolving Extensions of Credit of all Lenders based upon
Eligible Inventory which constitutes Eligible Tooling Inventory shall
in no event exceed $2,000,000, and the aggregate Revolving Extensions
of Credit of all Lenders based upon all Eligible Inventory shall in no
event exceed $20,000,000. The Borrowing Base shall be determined by the
Administrative Agent in its reasonable judgment by reference to the
most recent Borrowing Base Certificate as may be adjusted by the
Collateral Reports delivered to the Administrative Agent; provided that
the Administrative Agent shall be entitled to rely upon the information
set forth therein and shall be under no obligation to inquire as to the
accuracy thereof. The Administrative Agent shall determine the
Borrowing Base in effect with respect to the period covered by such
Collateral Reports and the Borrowing Base so determined shall remain in
effect until the next determination thereof pursuant to this sentence.
"Borrowing Base Certificate": a borrowing base certificate
substantially in the form of Exhibit J.
"Borrowing Date": any Business Day specified by the Borrower
Representative as a date on which the Borrower Representative requests
the relevant Lenders to make Loans hereunder.
"Business Day": (i) for all purposes other than as covered by
clause (ii) below, a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by
law to close and (ii) with respect to all notices and determinations in
connection with, and payments of principal and interest on, Eurodollar
Loans, any day which is a Business Day described in clause (i) and
which is also a day for trading by and between banks in Dollar deposits
in the interbank eurodollar market.
"Capital Expenditures": for any period, with respect to any
Person, the aggregate of all expenditures (by the expenditure of cash
or the incurrence of Indebtedness) by such Person and its Subsidiaries
for the acquisition or leasing (pursuant to a capital lease) of fixed
or capital assets or additions to equipment (including replacements,
capitalized repairs and improvements during such period) which should
be capitalized under GAAP on a consolidated balance sheet of such
Person and its Subsidiaries.
<PAGE>
6
"Capital Lease Obligations": as to any Person, the obligations
of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal
property, or a combination thereof, which obligations are required to
be classified and accounted for as capital leases on a balance sheet of
such Person under GAAP, and, for the purposes of this Agreement, the
amount of such obligations at any time shall be the capitalized amount
thereof at such time determined in accordance with GAAP.
"Capital Stock": any and all shares, interests, participations
or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person
(other than a corporation) and any and all warrants, rights or options
to purchase any of the foregoing.
"Cases": as defined in the Recitals.
"Cash Collateral Account": as defined in Section 3.3.
"Cash Equivalents": (a) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or
issued by any agency thereof and backed by the full faith and credit of
the United States, in each case maturing within one year from the date
of acquisition; (b) certificates of deposit, time deposits, eurodollar
time deposits or overnight bank deposits having maturities of nine
months or less from the date of acquisition issued by any Lender or by
any commercial bank organized under the laws of the United States of
America or any state thereof having combined capital and surplus of not
less than $500,000,000; (c) commercial paper of an issuer rated at
least A-2 by Standard & Poor's Ratings Services ("S&P") or P-2 by
Moody's Investors Service, Inc. ("Moody's"), or carrying an equivalent
rating by a nationally recognized rating agency, if both of the two
named rating agencies cease publishing ratings of commercial paper
issuers generally, and maturing within nine months from the date of
acquisition; (d) repurchase obligations of any Lender or of any
commercial bank satisfying the requirements of clause (b) of this
definition, having a term of not more than 30 days with respect to
securities issued or fully guaranteed or insured by the United States
government; (e) securities with maturities of one year or less from the
date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States, by any political
subdivision or taxing authority of any such state, commonwealth or
territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or
foreign government (as the case may be) are rated at least A by S&P or
A by Moody's; (f) securities with maturities of six months or less from
the date of acquisition backed by standby letters of credit issued by
any Lender or any commercial bank satisfying the requirements of clause
(b) of this definition; or (g) shares of money market mutual or similar
funds which invest exclusively in assets satisfying the requirements of
clauses (a) through (f) of this definition.
<PAGE>
7
"C/D Assessment Rate": for any day as applied to any Base Rate
Loan, the annual assessment rate in effect on such day which is payable
by a member of the Bank Insurance Fund maintained by the Federal
Deposit Insurance Corporation (the "FDIC") classified as
well-capitalized and within supervisory subgroup "B" (or a comparable
successor assessment risk classification) within the meaning of 12
C.F.R. ss. 327.4 (or any successor provision) to the FDIC (or any
successor) for the FDIC's (or such successor's) insuring time deposits
at offices of such institution in the United States.
"C/D Reserve Percentage": for any day as applied to any Base
Rate Loan, that percentage (expressed as a decimal) which is in effect
on such day, as prescribed by the Board, for determining the maximum
reserve requirement for a Depositary Institution (as defined in
Regulation D of the Board as in effect from time to time) in respect of
new non-personal time deposits in Dollars having a maturity of 30 days
or more.
"Closing Checklist": the checklist, including all appendices,
exhibits or schedules thereto, listing certain documents and
information to be delivered in connection with this Agreement, the
other Loan Documents and the transactions contemplated thereunder,
substantially in the form attached hereto as Annex A.
"Closing Date": the date on which the conditions precedent set
forth in Section 5.1 shall have been satisfied.
"Code": the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral": all Property of the Borrowers, now owned or
hereafter acquired, upon which a Lien is purported to be created by any
Security Document.
"Collateral Agreement": the Collateral Agreement to be
executed and delivered by each Borrower, substantially in the form of
Exhibit A, as the same may be amended, supplemented or otherwise
modified from time to time.
"Collateral Report": a collateral report substantially in the
form of Exhibit L.
"Collection Account": that certain account of the
Administrative Agent, account number 502-328-54 in the name of the
Administrative Agent at Bankers Trust Company in New York, New York, or
such other account as the Administrative Agent shall specify.
"Commitment": as to any Lender, the sum of the Term Loan
Commitment, and the Revolving Credit Commitment of such Lender.
"Commitment Fee Rate": 3/4 of 1% per annum.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with a Borrower within the
meaning of Section 4001 of ERISA or
<PAGE>
8
is part of a group which includes a Borrower and which is treated as a
single employer under Section 414 of the Code.
"Compliance Certificate": a certificate duly executed by a
Responsible Officer substantially in the form of Exhibit B.
"Concentration Account": as defined in Section 6.13(a).
"Concentration Account Bank": as defined in Section 6.13(a).
"Confirmation Order": an order of the Bankruptcy Court
confirming the Plan of Reorganization in the Cases.
"Consolidated Current Assets": at any date, all amounts (other
than cash and Cash Equivalents) which would, in conformity with GAAP,
be set forth opposite the caption "total current assets" (or any like
caption) on a consolidated balance sheet of the Borrowers and their
Subsidiaries at such date.
"Consolidated Current Liabilities": at any date, all amounts
which would, in conformity with GAAP, be set forth opposite the caption
"total current liabilities" (or any like caption) on a consolidated
balance sheet of the Borrowers and their Subsidiaries at such date, but
excluding (a) the current portion of any Funded Debt of the Borrowers
and their Subsidiaries and (b) without duplication of clause (a) above,
all Indebtedness consisting of Revolving Credit Loans or Swing Line
Loans to the extent otherwise included therein.
"Consolidated EBITDA": for any period, Consolidated Net Income
for such period plus, without duplication and to the extent reflected
as a charge in the statement of such Consolidated Net Income for such
period, the sum of (a) income tax expense, (b) Consolidated Interest
Expense, amortization or writeoff of debt discount and debt issuance
costs and commissions, discounts and other fees and charges associated
with Indebtedness (including the Loans), (c) depreciation and
amortization expense, (d) amortization of intangibles (including, but
not limited to, goodwill) and organization costs, (e) any
extraordinary, unusual or non-recurring expenses or losses (including,
whether or not otherwise includable as a separate item in the statement
of such Consolidated Net Income for such period, losses on sales of
assets outside of the ordinary course of business) and (f) any other
non-cash charges, and minus, to the extent included in the statement of
such Consolidated Net Income for such period, the sum of (a) interest
income (except to the extent deducted in determining Consolidated
Interest Expense), (b) any extraordinary, unusual or non-recurring
income or gains (including, whether or not otherwise includable as a
separate item in the statement of such Consolidated Net Income for such
period, gains on the sales of assets outside of the ordinary course of
business) and (c) any other non-cash income, all as determined on a
consolidated basis.
<PAGE>
9
"Consolidated Fixed Charge Coverage Ratio": for any period,
the ratio of (a) Consolidated EBITDA for such period plus the Net Cash
Proceeds of Dispositions with respect to the Designated Facilities
during such period minus the aggregate amount actually paid by the
Borrowers and their Subsidiaries in cash during such period on account
of Capital Expenditures to (b) Consolidated Fixed Charges for such
period.
"Consolidated Fixed Charges": for any period, the sum (without
duplication) of (a) Consolidated Interest Expense for such period and
(b) scheduled payments made during such period on account of principal
of Indebtedness of the Borrowers or any of their Subsidiaries
(including scheduled principal payments in respect of the Term Loans).
"Consolidated Interest Coverage Ratio": for any period, the
ratio of (a) Consolidated EBITDA for such period to (b) Consolidated
Interest Expense for such period.
"Consolidated Interest Expense": for any period, total cash
and accrued interest expense (including that attributable to Capital
Lease Obligations) of the Borrowers and their Subsidiaries for such
period with respect to all outstanding Indebtedness of the Borrowers
and their Subsidiaries (including, without limitation, all commissions,
discounts and other fees and charges owed with respect to letters of
credit and bankers' acceptance financing and net costs under Hedge
Agreements in respect of interest rates to the extent such net costs
are allocable to such period in accordance with GAAP).
"Consolidated Leverage Ratio": as at the last day of any
period of four consecutive fiscal quarters, the ratio of (a)
Consolidated Total Debt on such day to (b) Consolidated EBITDA for such
period; provided that for purposes of calculating Consolidated EBITDA
of the Borrowers and their Subsidiaries for any period, the
Consolidated EBITDA of any Person acquired by the Borrowers or their
Subsidiaries during such period shall be included on a pro forma basis
for such period (assuming the consummation of such acquisition and the
incurrence or assumption of any Indebtedness in connection therewith
occurred on the first day of such period) if the consolidated balance
sheet of such acquired Person and its consolidated Subsidiaries as at
the end of the period preceding the acquisition of such Person and the
related consolidated statements of income and stockholders' equity and
of cash flows for the period in respect of which Consolidated EBITDA is
to be calculated (i) have been previously provided to the
Administrative Agent and the Lenders and (ii) either (A) have been
reported on without a qualification arising out of the scope of the
audit by independent certified public accountants of nationally
recognized standing or (B) have been found acceptable by the
Administrative Agent.
"Consolidated Net Income": for any period, the consolidated
net income (or loss) of the Borrowers and their Subsidiaries,
determined on a consolidated basis in accordance with GAAP; provided
that there shall be excluded (a) the income (or deficit) of any Person
accrued prior to the date it becomes a Subsidiary of a Borrower or is
merged into or consolidated with a Borrower or any of its Subsidiaries,
(b) the income
<PAGE>
10
(or deficit) of any Person (other than a Subsidiary of a Borrower) in
which a Borrower or any of its Subsidiaries has an ownership interest,
except to the extent that any such income is actually received by such
Borrower or such Subsidiary in the form of dividends or similar
distributions and (c) the undistributed earnings of any Subsidiary of a
Borrower to the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary is not at the time permitted
by the terms of any Contractual Obligation (other than under any Loan
Document) or Requirement of Law applicable to such Subsidiary.
"Consolidated Total Debt": at any date, the aggregate
principal amount of all Indebtedness (excluding all performance Letters
of Credit) of the Borrowers and their Subsidiaries at such date,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Working Capital": at any date, the excess of
Consolidated Current Assets on such date over Consolidated Current
Liabilities on such date.
"Continuing Directors": any member of the board of directors
of the Borrower Representative who (a) was a member of the board on the
Closing Date or (b) was nominated for election or elected to the board
with the approval of the majority of the Continuing Directors who were
members at the time of such nomination or election.
"Contractual Obligation": 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.
"Debtors": as defined in the Recitals.
"Default": any of the events specified in Section 8, whether
or not any requirement for the giving of notice, the lapse of time, or
both, has been satisfied.
"Designated Facilities": the assets (real and personal
property) as of the Closing Date relating to the Toledo, Tiffin and
Harman businesses.
"DIP Credit Facilities": as defined in the Recitals.
"Disbursement Account": as defined in Section 6.13(f).
"Disposition": with respect to any Property, any sale, lease,
sale and leaseback, assignment, conveyance, transfer or other
disposition thereof ; the terms "Dispose" and "Disposed of" shall have
correlative meanings.
"Dollars" and "$": dollars in lawful currency of the United
States of America.
<PAGE>
11
"Domestic Subsidiary": any Subsidiary of a Borrower organized
under the laws of the United States of America, any State, territory,
possession or the District of Columbia.
"Eligible Accounts": as to any Borrower, at a particular date,
all Accounts of such Borrower arising in the ordinary course of
business, other than:
(a) Accounts which are outstanding more than 90 days
past the original invoice date except for Accounts in the
industrial and aftermarket group which may be outstanding up
to 120 days past the original invoice date;
(b) Accounts as to which the account debtor
thereunder has not been sent an invoice;
(c) Accounts which are owed by an obligor which is an
Affiliate or employee of such Borrower;
(d) Accounts which are pre-petition liabilities owed
by an obligor which has taken any of the actions or suffered
any of the events of the kind described in Section 8(f);
(e) Accounts which are owed by an obligor with
respect to whom more than 50% of the Accounts of such obligor
are more than (i) 90 days past the original invoice date for
Accounts which are not created by the industrial and
aftermarket group, and (ii) 120 days past the original invoice
date for Accounts which are created by the industrial and
aftermarket group;
(f) Accounts which are owed by account debtors
located outside the United States of America other than Canada
(excluding Quebec, Newfoundland, Nova Scotia and Prince Edward
Island), other than such Accounts in respect of sales which
are secured by standby letters of credit or other instruments
(in form and substance satisfactory to the Administrative
Agent) issued or confirmed by, and payable at, banks
satisfactory to the Administrative Agent having a place of
business in the United States of America and payable in U.S.
Dollars, which letters of credit are assigned and delivered to
the Administrative Agent; provided that the Accounts in
respect of such sales otherwise comply with all of the other
criteria set forth in this definition of Eligible Accounts and
represent sales not in excess of $5,000,000 in the aggregate
at any one time outstanding;
(g) Accounts (i) upon which such Borrower's right to
receive payment is not absolute or is contingent upon the
fulfillment of any condition whatsoever or (ii) as to which
such Borrower is not able to bring suit or otherwise enforce
its remedies against the account debtor through judicial
process or (iii) if the Account represents a progress billing
consisting of an invoice for goods sold or used or services
rendered pursuant to a contract under which the account
debtor's
<PAGE>
12
obligation to pay that invoice is subject to such Borrower's
completion of further performance under such contract or is
subject to the equitable lien of a surety bond issuer;
(h) any Account to the extent that any defense,
counterclaim, setoff or dispute is asserted as to such
Account;
(i) any Account that is not a true and correct
statement of bona fide indebtedness incurred in the amount of
the Account for merchandise sold to or services rendered and
accepted by the applicable account debtor;
(j) any Account to the extent such Borrower or any
Subsidiary thereof is liable for goods sold or services
rendered by the applicable account debtor to such Borrower or
any Subsidiary thereof but only to the extent of the potential
offset;
(k) any Account that arises with respect to goods
which are delivered on a bill-and-hold, cash-on-delivery basis
or placed on consignment, guaranteed sale or other terms by
reason of which the payment by the account debtor is or may be
conditional;
(l) any Account as to which any of the
representations or warranties pertaining to Accounts set forth
in this Agreement or the Collateral Agreement is untrue;
(m) any Account which is payable in a currency other
than Dollars;
(n) Accounts which are owed by a Governmental
Authority or an Affiliate thereof (unless, with respect to
Accounts arising from sales to the United States of America or
to any agency, department or division thereof, such Borrower
or the relevant Subsidiary thereof has complied with the
Federal Assignment of Claims Act with respect thereto);
(o) Accounts (i) which are not bona fide, valid and
legally enforceable obligations of the parties thereto or the
account debtor in respect thereof and which do not arise from
the sale and delivery of Inventory or the rendition of
services in the ordinary course of business to such parties or
account debtors, (ii) as to which either such Borrower or (to
the best of such Borrower's knowledge) any other party to such
Account is in default or is likely to become in default in the
performance or observance of any of the terms thereof in any
material respect, (iii) which are not solely owned by such
Borrower (subject to the Lien of the Administrative Agent
therein), (iv) in which such Borrower (1) has not granted a
valid and continuing first lien and first security interest in
favor of the Administrative Agent pursuant to the Security
Documents and (2) does not have good and marketable title,
free and clear of any and all Liens (except inchoate or
similar Liens, Liens permitted under Section 7.3, and Liens
created under the
<PAGE>
13
Security Documents) or rights of others enforceable as such
against all other Persons, (v) as to which all action
necessary or desirable under applicable law to protect and
perfect such lien and security interest has not been duly
taken, (vi) as to which any amounts payable under or in
connection therewith are evidenced by promissory notes or
other instruments except (1) instruments which constitute a
part of chattel paper and which have been individually marked
to show the Lien granted pursuant to the Security Documents
and (2) instruments which have been delivered to the
Administrative Agent and (vii) as to which any security
agreement, financing statement, equivalent security or lien
instrument or continuation statement covering all or any part
thereof is on file or of record in any public office, except
such as may have been filed in favor of the Administrative
Agent pursuant to the Security Documents; or
(p) Accounts which have been deemed necessary to be
excluded in the reasonable judgment of the Administrative
Agent exercised in a manner which is
customary either in the commercial finance industry or in the
lending practices of the Administrative Agent and/or the
Lenders.
Further, in respect of Tooling Accounts, no Tooling Account shall be an
Eligible Account to the extent it has not been approved with standard
procedures for parts approval.
"Eligible Inventory": as to any Borrower, at a particular
date, all Inventory of such Borrower, less any reasonable reserves
required by the Administrative Agent; provided, that the following
shall not constitute Eligible Inventory:
(a) Inventory (A) which is not solely owned by such
Borrower; or (B) which is not located on property owned or
leased by such Borrower or in a contract warehouse or located
at an outside contractor, except for such Inventory that is
listed on Schedule 1.1A, and, in the case of any such leased
property, Inventory located in a contract warehouse or outside
contractor, either (x) such Borrower has entered into an
agreement in form and substance reasonably satisfactory to the
Administrative Agent granting the Administrative Agent and its
designated representatives access to such Inventory and
waiving the lessor's or contract warehouseman's or outside
contractor's Liens, if any, on such Inventory or (y) an amount
equal to the rent and fees payable by such Borrower during the
period of six months following such date with respect to such
leased property or contract warehouse or amounts owing to such
outside contractor, as the case may be, shall be deducted from
the Eligible Inventory Value (up to the amount of such
Eligible Inventory Value) in respect of such Inventory;
(b) Inventory as to which such Borrower (x) has not
granted a valid and continuing first Lien in favor of the
Administrative Agent pursuant to the Security Documents or (y)
does not have good and marketable title, free and clear of any
and all Liens (other than inchoate warehouseman's or similar
Liens, Liens
<PAGE>
14
permitted under Section 7.3, and Liens created pursuant to the
Security Documents but including the rights of a purchaser
that has made progress payments and the rights of a surety
that has issued a bond to assure such Borrower's performance
with respect to that Inventory);
(c) Inventory as to which any security agreement,
financing statement, equivalent security or lien instrument or
continuation statement covering all or any part thereof is on
file or of record in any public office, except such as may
have been filed in favor of the Administrative Agent pursuant
to the Security Documents;
(d) Inventory which constitutes any supplies
consisting of display items or packing or shipping materials,
manufacturing supplies or replacement parts (other than raw
material), goods present outside of the United States of
America, goods returned or rejected by the customers of such
Borrower or the relevant Subsidiary (other than goods that are
undamaged and resalable in the ordinary course of business),
goods to be returned to the suppliers of such Borrower or the
relevant Subsidiary or goods in transit to third parties
(other than the agents or warehouses of such Borrower and its
Subsidiaries);
(e) Inventory which is located at any site if the
aggregate book value of Inventory at any such location is less
than $100,000;
(f) Inventory which is placed on consignment or is in
transit;
(g) Inventory which is covered by a negotiable
document of title, unless such document has been delivered to
Administrative Agent with all necessary endorsements, free and
clear of all Liens except those in favor of Administrative
Agent and Lenders;
(h) Inventory which in Administrative Agent's
reasonable determination, is excess, obsolete, unsalable,
shopworn, seconds, damaged or unfit for sale;
(i) Inventory which is not of a type held for sale
in the ordinary course of such Borrower's business;
(j) Inventory as to which Administrative Agent's
Lien, on behalf of the Agents and Lenders, therein is not a
first priority perfected Lien;
(k) Inventory as to which any of the representations
or warranties pertaining to Inventory set forth in this
Agreement or the Collateral Agreement is untrue;
(l) Inventory which consists of any costs associated
with "freight-in" charges;
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15
(m) Inventory which consists of Materials of
Environmental Concern or goods that can be transported or sold
only with licenses that are not readily available;
(n) Inventory which is not covered by casualty
insurance acceptable to the Administrative Agent;
(o) Inventory as to which all action necessary or
desirable to protect and perfect the lien and security
interest in favor of the Administrative Agent has not been
duly taken pursuant to the Security Documents; or
(p) Inventory which is otherwise unacceptable to the
Administrative Agent in its reasonable credit judgment
exercised in a manner which is customary either in the
commercial finance industry or in the lending practices of the
Administrative Agent and/or the Lenders.
"Eligible Tooling Inventory": Inventory consisting of tooling,
valued at an amount equal to the costs associated with the production
of tooling, not classified as fixed assets, which have not been billed
but have an open purchase order for delivery at a future date no later
than one (1) year from initial cost.
"Environmental Laws": any and all laws, rules, orders,
regulations, statutes, ordinances, guidelines, codes, decrees, or other
legally enforceable requirements (including, without limitation, common
law) of any international authority, foreign government, the United
States, or any state, local, municipal or other governmental authority,
regulating, relating to or imposing liability or standards of conduct
concerning protection of the environment or of human health, or
employee health and safety, as has been, is now, or may at any time
hereafter be, in effect.
"Environmental Liabilities": with respect to any Person, all
liabilities, obligations, responsibilities, response, remedial and
removal costs, investigation and feasibility study costs, capital
costs, operation and maintenance costs, losses, damages, punitive
damages, property damages, natural resource damages, consequential
damages, treble damages, costs and expenses (including all fees,
disbursements and expenses of counsel, experts and consultants), fines,
penalties, sanctions and interest incurred as a result of or related to
any claim, suit, action, investigation, proceeding or demand by any
Person, whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute or common law, including
any liabilities arising under or related to any Environmental Laws,
Environmental Permits, or in connection with any Release or threatened
Release or presence of Materials of Environmental Concern whether on,
at, in, under, from or about or in the vicinity of any real or personal
property.
"Environmental Permits": any and all permits, licenses,
approvals, registrations, notifications, exemptions and any other
authorization required under any Environmental Law.
<PAGE>
16
"Equipment": as to any Person, all "equipment," (as such term
is defined in the Uniform Commercial Code as in effect on the date
hereof in the State of New York), now owned or hereafter acquired by
such Person, wherever located and, in any event, including all such
Person's machinery and equipment, including processing equipment,
conveyors, machine tools, data processing and computer equipment with
software and peripheral equipment (other than software constituting
part of the Accounts), and all engineering, processing and
manufacturing equipment, office machinery, furniture, materials
handling equipment, tools, attachments, accessories, automotive
equipment, trailers, trucks, forklifts, molds, dies, stamps, motor
vehicles, rolling stock and other equipment of every kind and nature,
trade fixtures and fixtures not forming a part of real property, all
whether now owned or hereafter acquired, and wherever situated,
together with all additions and accessions thereto, replacements
therefor, all parts therefor, all substitutes for any of the foregoing,
fuel therefor, and all manuals, drawings, instructions, warranties and
rights with respect thereto, and all products and proceeds thereof and
condemnation awards and insurance proceeds with respect thereto.
"ERISA": the Employee Retirement Income Security Act of 1974
(or any successor legislation), as amended from time to time; and any
regulations promulgated thereunder.
"ERISA Event": with respect to any Borrower or any Commonly
Controlled Entity (a) the withdrawal of any Borrower or Commonly
Controlled Entity from a Single Employer Plan subject to Section 4063
of ERISA during a plan year in which it was a substantial employer, as
defined in Section 4001(a)(2) of ERISA, (b) the complete or partial
withdrawal of any Borrower or any Commonly Controlled Entity from any
Multiemployer Plan, (c) the filing of a notice of intent to terminate a
Single Employer Plan or the treatment of a plan amendment as a
termination under Section 4041 of ERISA, (d) the institution of
proceedings to terminate a Single Employer Plan or Multiemployer Plan
by the PBGC, (e) the failure of any Borrower or Commonly Controlled
Entity to make when due required contributions to a Multiemployer Plan
or Single Employer Plan unless such failure is cured within 30 days,
(f) any other event or condition which might reasonably be expected to
constitute grounds or for the imposition of liability under Section
4069 or 4212(c) of ERISA, (g) the termination of a Multiemployer Plan
under Section 4041A of ERISA or the Reorganization or Insolvency of a
Multiemployer Plan, (h) the loss of a Qualified Plan's qualification or
tax exempt status, or (i) the termination of a Plan described in
Section 4064 of ERISA.
"Eurocurrency Reserve Requirements": for any day as applied to
a Eurodollar Loan, the aggregate (without duplication) of the maximum
rates (expressed as a decimal fraction) of reserve requirements in
effect on such day (including, without limitation, basic, supplemental,
marginal and emergency reserves under any regulations of the Board or
other Governmental Authority having jurisdiction with respect thereto)
dealing with reserve requirements prescribed for eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in Regulation D of
the Board) maintained by a member bank of the Federal Reserve System.
<PAGE>
17
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
determined on the basis of the rate for deposits in Dollars for a
period equal to such Interest Period commencing on the first day of
such Interest Period appearing on Page 3750 of the Telerate screen as
of 11:00 A.M., London time, two Business Days prior to the beginning of
such Interest Period. In the event that such rate does not appear on
Page 3750 of the Telerate screen (or otherwise on such screen), the
"Eurodollar Base Rate" for purposes of this definition shall be
determined by reference to such other comparable publicly available
service for displaying eurodollar rates as may be selected by the
Administrative Agent or, in the absence of such availability, by
reference to the rate at which the Reference Lender is offered Dollar
deposits in an amount comparable to such Eurodollar Loan at or about
11:00 A.M., New York City time, two Business Days prior to the
beginning of such Interest Period in the interbank eurodollar market
where its eurodollar and foreign currency and exchange operations are
then being conducted for delivery on the first day of such Interest
Period for the number of days comprised therein.
"Eurodollar Loans": Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum
determined for such day in accordance with the following formula
(rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": the collective reference to Eurodollar
Loans under a single facility the then current Interest Periods with
respect to all of which begin on the same date and end on the same
later date (whether or not such Loans shall originally have been made
on the same day).
"Event of Default": any of the events specified in Section 8,
provided that any requirement for the giving of notice, the lapse of
time, or both, has been satisfied.
"Excess Cash Flow": for any fiscal year of the Borrower
Representative, the excess, if any, of (a) the sum, without
duplication, of (i) Consolidated Net Income for such fiscal year, (ii)
an amount equal to the amount of all non-cash charges (including
depreciation and amortization) deducted in arriving at such
Consolidated Net Income, (iii) decreases in Consolidated Working
Capital for such fiscal year, (iv) an amount equal to the aggregate net
non-cash loss on the Disposition of Property by the Borrowers and their
Subsidiaries during such fiscal year (other than sales of inventory in
the ordinary course of business), to the extent deducted in arriving at
such Consolidated Net Income, (v) the net increase during such fiscal
year (if any) in deferred tax liabilities or net decrease during such
fiscal year (if any) in deferred tax assets of the Borrowers and their
Subsidiaries and (vi) increases in "Other" liabilities (or any like
caption) as set forth on
<PAGE>
18
Harvard's consolidated balance sheet during such fiscal year over (b)
the sum, without duplication, of (i) an amount equal to the amount of
all non-cash credits included in arriving at such Consolidated Net
Income, (ii) the aggregate amount permitted to be paid up to the
maximum carry-over amount from the prior period by the Borrowers and
their Subsidiaries in cash during such fiscal year on account of
Capital Expenditures (excluding the principal amount of Indebtedness
incurred in connection with such expenditures and any such expenditures
financed with the proceeds of any Reinvestment Deferred Amount), (iii)
the aggregate amount of all prepayments of Revolving Credit Loans and
Swing Line Loans during such fiscal year to the extent accompanying
permanent optional reductions of the Revolving Credit Commitments and
all optional prepayments of the Term Loans and other Funded Debt during
such fiscal year, (iv) the aggregate amount of all regularly scheduled
principal payments of Funded Debt (including, without limitation, the
Term Loans) of the Borrowers and their Subsidiaries made during such
fiscal year (other than in respect of any revolving credit facility to
the extent there is not an equivalent permanent reduction in
commitments thereunder), (v) increases in Consolidated Working Capital
for such fiscal year, (vi) an amount equal to the aggregate net
non-cash gain on the Disposition of Property by the Borrowers and their
Subsidiaries during such fiscal year (other than sales of inventory in
the ordinary course of business), to the extent included in arriving at
such Consolidated Net Income, (vii) an amount equal to the Net Cash
Proceeds of the Disposition of Property by the Borrowers and their
Subsidiaries during such fiscal year, to the extent such Net Cash
Proceeds are included in Consolidated Net Income for such period,
(viii) the net decrease during such fiscal year (if any) in deferred
tax liabilities or net increase during such fiscal year (if any) in
deferred tax assets of the Borrowers and their Subsidiaries, (ix)
decreases in "Other" liabilities (or any like caption) as set forth on
Harvard's consolidated balance sheet during such fiscal year, (x) the
aggregate amount of all payments during such fiscal year under the PBGC
Agreement (as defined in the Plan of Reorganization) and certain other
payments required or contemplated in the Plan of Reorganization, and
(xi) an amount equal to the aggregate amount actually paid during such
fiscal year to pay, redeem or repurchase the Senior Secured Notes.
"Excess Cash Flow Application Date": as defined in Section
2.12(e).
"Excluded Foreign Subsidiaries": any Foreign Subsidiary in
respect of which either (i) the pledge of all of the Capital Stock of
such Subsidiary as Collateral or (ii) the guaranteeing by such
Subsidiary of the Obligations, would, in the good faith judgment of a
Borrower, result in adverse tax consequences to such Borrower or
violate applicable law in any material respect.
"Facility": each of (a) the Term Loan Commitments and the Term
Loans made thereunder (the "Term Loan Facility"), and (b) the Revolving
Credit Commitments and the extensions of credit made thereunder (the
"Revolving Credit Facility").
"Federal Funds Effective Rate": as determined by the
Administrative Agent for any day, the weighted average of the rates on
overnight federal funds transactions with
<PAGE>
19
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 which is a Business Day, the average of the quotations for
the day of such transactions received by the Reference Lender from
three federal funds brokers of recognized standing selected by it.
"Foreign Subsidiary": any Subsidiary of a Borrower that is not
a Domestic Subsidiary.
"Funded Debt": as to any Person, all Indebtedness of such
Person that matures more than one year from the date of its creation or
matures within one year from such date but is renewable or extendible,
at the option of such Person, to a date more than one year from such
date or arises under a revolving credit or similar agreement that
obligates the lender or lenders to extend credit during a period of
more than one year from such date, including, without limitation, all
current maturities and current sinking fund payments in respect of such
Indebtedness whether or not required to be paid within one year from
the date of its creation and, in the case of the Borrowers,
Indebtedness in respect of the Loans.
"Funding Office": the office specified from time to time by
the Administrative Agent as its funding office by notice to the
Borrower Representative and the Lenders.
"GAAP": generally accepted accounting principles in the United
States of America as in effect from time to time, except that for
purposes of Section 7.1, GAAP shall be determined on the basis of such
principles in effect on the date hereof and consistent with those used
in the preparation of the most recent audited financial statements
delivered pursuant to Section 4.1(b).
"Governmental Authority": 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.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has
issued a reimbursement, counterindemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends or other obligations (the "primary obligations") of
any other third Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation
of the guaranteeing 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 (1) for the
purchase or payment of any such primary obligation or (2) to maintain
working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (iii) to
purchase Property, securities or services primarily for the purpose of
assuring the owner of any such primary
<PAGE>
20
obligation of the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect
thereof; provided, however, that the term Guarantee Obligation shall
not include endorsements of instruments for deposit or collection in
the ordinary course of business. The amount of any Guarantee Obligation
of any guaranteeing person shall be deemed to be the lower of (a) an
amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee Obligation is made and
(b) the maximum amount for which such guaranteeing person may be liable
pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for
which such guaranteeing person may be liable are not stated or
determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated
liability in respect thereof as determined by the Borrowers in good
faith.
"Harvard": as defined in the Preamble.
"Hedge Agreements": all interest rate swaps, caps or collar
agreements or similar arrangements entered into by the Borrowers
providing for protection against fluctuations in interest rates or
currency exchange rates or the exchange of nominal interest
obligations, either generally or under specific contingencies.
"Indebtedness": of any Person at any date, without
duplication, (a) all indebtedness of such Person for borrowed money,
(b) all obligations of such Person for the deferred purchase price of
Property or services (other than trade payables incurred in the
ordinary course of such Person's business), (c) all obligations of such
Person evidenced by notes, bonds, debentures or other similar
instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to
Property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such Property), (e) all Capital
Lease Obligations of such Person, (f) all obligations of such Person,
contingent or otherwise, as an account party under acceptance, letter
of credit or similar facilities, (g) all obligations of such Person,
contingent or otherwise, to purchase, redeem, retire or otherwise
acquire for value any Capital Stock of such Person, (h) all Guarantee
Obligations of such Person in respect of obligations of the kind
referred to in clauses (a) through (g) above, (i) all obligations of
the kind referred to in clauses (a) through (h) above secured by (or
for which the holder of such obligation has an existing right,
contingent or otherwise, to be secured by) any Lien on Property
(including, without limitation, accounts and contract rights) owned by
such Person, whether or not such Person has assumed or become liable
for the payment of such obligation, (j) for the purposes of Section
8(e) only, all obligations of such Person in respect of Hedge
Agreements and (k) the liquidation value of any preferred Capital Stock
of such Person or its Subsidiaries held by any Person other than such
Person and its Wholly Owned Subsidiaries which is mandatorily
redeemable on or before December 31, 2003.
<PAGE>
21
"Indemnified Liabilities": as defined in Section 10.5.
"Indemnitee": as defined in Section 10.5.
"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section
4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": the collective reference to all
rights, priorities and privileges relating to intellectual property,
whether arising under United States, multinational or foreign laws or
otherwise, including, without limitation, copyrights, copyright
licenses, patents, patent licenses, trademarks, trademark licenses,
technology, know-how and processes that are owned, held or used in the
businesses of the Borrowers or any of their Subsidiaries, and all
rights to sue at law or in equity for any infringement or other
impairment thereof, including the right to receive all proceeds and
damages therefrom.
"Intercreditor Agreement": the Intercreditor Agreement among
(i) Norwest Bank Minnesota, N.A., as Trustee, (ii) the Administrative
Agent and (iii) the Borrower Representative, dated as of November 24,
1998.
"Interest Payment Date": (a) as to any Base Rate Loan, the
first day of each month to occur while such Loan is outstanding and the
final maturity date of such Loan, (b) as to any Eurodollar Loan having
an Interest Period of three months or less, the last day of such
Interest Period, (c) as to any Eurodollar Loan having an Interest
Period longer than three months, each day which is three months, or a
whole multiple thereof, after the first day of such Interest Period and
the last day of such Interest Period and (d) as to any Loan (other than
any Revolving Credit Loan that is a Base Rate Loan and any Swing Line
Loan), the date of any repayment or prepayment made in respect thereof.
"Interest Period": as to any Eurodollar Loan, (a) initially,
the period commencing on the borrowing or conversion date, as the case
may be, with respect to such Eurodollar Loan and ending one, two, three
or six months thereafter, as selected by the Borrower Representative in
its notice of borrowing or notice of conversion, as the case may be,
given with respect thereto; and (b) thereafter, each period commencing
on the last day of the next preceding Interest Period applicable to
such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower Representative by irrevocable
notice to the Administrative Agent not less than three Business Days
prior to the last day of the then current Interest Period with respect
thereto; provided that, all of the foregoing provisions relating to
Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on
a day that is not a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless the
result of such extension would be to carry such Interest
<PAGE>
22
Period into another calendar month in which event such
Interest Period shall end on the immediately preceding
Business Day;
(ii) any Interest Period that would otherwise
extend beyond the Revolving Credit Termination Date or beyond
the date final payment is due on the Term Loan, as the case
may be, shall end on the Revolving Credit Termination Date or
such due date, as applicable;
(iii) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Business Day of a calendar month; and
(iv) the Borrower Representative shall select
Interest Periods so as not to require a payment or prepayment
of any Eurodollar Loan during an Interest Period for such
Loan.
"Inventory": as to any Person, any "inventory" (as such term
is defined in Section 9-109(4) of the Uniform Commercial Code as in
effect on the date hereof in the State of New York) now or hereafter
owned by such Person.
"Investments": as defined in Section 7.8.
"Issuing Lender": as defined in Section 3.1.
"L/C Commitment": $20,000,000.
"L/C Fee Payment Date": the last day of each month and the
last day of the Revolving Credit Commitment Period.
"L/C Obligations": at any time, an amount equal to the sum of
(a) the aggregate then undrawn and unexpired amount of the then
outstanding Letters of Credit, (b) the aggregate amount of drawings
under Letters of Credit which have not then been reimbursed pursuant to
Section 3.6, and (c) all other outstanding obligations incurred by the
Agents and the Lenders at the request of the Borrower Representative,
whether direct or indirect, contingent or otherwise, due or not due, in
connection with the issuance of a reimbursement agreement or guarantee
by the Administrative Agent or purchase of a participation with respect
to any Letter of Credit.
"L/C Participants": the collective reference to all the
Revolving Credit Lenders other than the Issuing Lender.
"Lender Addendum": with respect to any initial Lender, a
Lender Addendum, substantially in the form of Exhibit I, to be executed
and delivered by such Lender on the Closing Date as provided in Section
10.17.
<PAGE>
23
"Lenders": as defined in the Preamble.
"Letter of Credit Fee": as defined in Section 3.4.
"Letters of Credit": as defined in Section 3.1.
"Lien": any mortgage, pledge, hypothecation, assignment,
deposit arrangement, easement, encumbrance, lien (statutory or other),
charge or other security interest or any preference, priority or other
security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or
other title retention agreement and any capital lease having
substantially the same economic effect as any of the foregoing).
"Loan": any loan made by any Lender pursuant to this
Agreement.
"Loan Account": as defined in Section 2.8(f).
"Loan Documents": this Agreement, the Security Documents, the
Applications, the Notes, all other agreements, instruments, documents
and certificates identified in the Closing Checklist executed and
delivered to, or in favor of, the Agents and/or the Lenders and
including all other pledges, powers of attorney, consents, assignments,
contracts, notices, and all other written matter whether heretofore,
now or hereafter executed by or on behalf of any Borrower, or any
employee of any Borrower, and delivered to the Agents or any Lender in
connection with this Agreement or the transactions contemplated hereby.
Any reference in this Agreement or any other Loan Document to a Loan
Document shall include all appendices, exhibits or schedules thereto,
and all amendments, restatements, supplements or other modifications
thereto, and shall refer to such agreement as the same may be in effect
at any and all times such reference becomes operative.
"Lock Boxes": as defined in Section 6.13(a).
"Majority Facility Lenders": with respect to any Facility, the
holders of more than 50% of the aggregate unpaid principal amount of
the Term Loans or the Total Revolving Extensions of Credit, as the case
may be, outstanding under such Facility (or, in the case of the
Revolving Credit Facility, prior to any termination of the Revolving
Credit Commitments, the holders of more than 50% of the Total Revolving
Credit Commitments).
"Majority Revolving Credit Facility Lenders": the Majority
Facility Lenders in respect of the Revolving Credit Facility.
"Material Adverse Effect": a material adverse effect on (a)
the business, assets, property or condition (financial or otherwise) of
the Borrowers and their Subsidiaries taken as a whole, (b) the validity
or enforceability of this Agreement or any of the other
<PAGE>
24
Loan Documents or the rights or remedies of the Agents or the Lenders
hereunder or thereunder, (c) the Borrowers' ability to pay any of the
Loans or any of the other Obligations in accordance with the terms of
this Agreement, or (d) the Collateral or the Administrative Agent's
Liens, on behalf of the Agents and Lenders, on the Collateral or the
priority of such Liens.
"Material Environmental Amount": an amount or amounts payable
by the Borrowers and/or any of their Subsidiaries, in the aggregate in
excess of $1,000,000 for: costs to comply with any Environmental Law;
costs of any investigation, and any remediation, of any Material of
Environmental Concern; and compensatory damages (including, without
limitation damages to natural resources), punitive damages, fines, and
penalties pursuant to any Environmental Law.
"Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products, polychlorinated biphenyls, urea- formaldehyde insulation,
asbestos, pollutants, contaminants, radioactivity, and any other
substances or forces of any kind, whether or not any such substance or
force is defined as hazardous or toxic under any Environmental Law,
that is regulated pursuant to or could give rise to liability under any
Environmental Law.
"Mortgaged Properties": the real properties listed on Schedule
1.1B, as to which the Administrative Agent for the benefit of the
Lenders shall be granted a Lien pursuant to the Mortgages.
"Mortgages": each of the mortgages and deeds of trust made by
any Borrower in favor of, or for the benefit of, the Administrative
Agent for the benefit of the Lenders, substantially in the form of
Exhibit D (with such changes thereto as shall be advisable under the
law of the jurisdiction in which such mortgage or deed of trust is to
be recorded), as the same may be amended, supplemented or otherwise
modified from time to time.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": (a) in connection with any Asset Sale or
any Recovery Event, the proceeds thereof in the form of cash and Cash
Equivalents (including any such proceeds received by way of deferred
payment of principal pursuant to a note or installment receivable or
purchase price adjustment receivable or otherwise, but only as and when
received) of such Asset Sale or Recovery Event, net of attorneys' fees,
accountants' fees, investment banking fees, amounts required to be
applied to the repayment of Indebtedness secured by a Lien expressly
permitted hereunder on any asset which is the subject of such Asset
Sale or Recovery Event (other than any Lien pursuant to a Security
Document) and other customary fees and expenses actually incurred in
connection therewith and net of taxes paid or reasonably estimated to
be payable as a result thereof (after taking into account any available
tax credits or deductions and any
<PAGE>
25
tax sharing arrangements) and (b) in connection with any issuance or
sale of equity securities or debt securities or instruments or the
incurrence of loans, the cash proceeds received from such issuance or
incurrence, net of attorneys' fees, investment banking fees,
accountants' fees, underwriting discounts and commissions and other
customary fees and expenses actually incurred in connection therewith.
"Non-Excluded Taxes": as defined in Section 2.20(a).
"Non-Funding Lender": as defined in Section 2.5(b).
"Non-U.S. Lender": as defined in Section 2.20(d).
"Notes": the collective reference to any promissory note
evidencing Loans.
"Notice of Conversion/Continuation": a notice in the form set
forth in Exhibit K.
"Obligations": the unpaid principal of and interest on
(including, without limitation, interest accruing after the maturity of
the Loans and Reimbursement Obligations and interest accruing after the
filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to any
Borrower, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) the Loans and all other
obligations and liabilities of the Borrowers to the Administrative
Agent or to any Lender (or, in the case of Hedge Agreements, any
affiliate of any Lender), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with, this
Agreement, any other Loan Document, the Letters of Credit, any Hedge
Agreement entered into with any Lender or any affiliate of any Lender
or any other document made, delivered or given in connection herewith
or therewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including, without
limitation, all fees, charges and disbursements of counsel to the
Agents or to any Lender that are required to be paid by the Borrowers
pursuant hereto) or otherwise.
"Other Taxes": any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or
similar levies arising from any payment made hereunder or from the
execution, delivery or enforcement of, or otherwise with respect to,
this Agreement or any other Loan Document.
"Participant": as defined in Section 10.6(b).
"Payment Office": the office specified from time to time by
the Administrative Agent as its payment office by notice to the
Borrower Representative and the Lenders.
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA (or any successor).
<PAGE>
26
"Person": an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or
other entity of whatever nature.
"Permitted Joint Venture": each of (a) KS-Doehler-Jarvis GmbH,
a German joint venture formed by Doehler-Jarvis, Inc. and KS Aluminum
Technologie AG and (b) Hutchinson/Kingston-Warren LLC, a Delaware
limited liability company formed by The Kingston-Warren Corporation and
Hutchinson SA.
"Petition Date": as defined in the Recitals.
"Plan": at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which a Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Plan of Reorganization": as defined in the Recitals.
"Pro Forma Balance Sheet": as defined in Section 4.1(a).
"Projections": as defined in Section 6.2(c).
"Property": any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible
or intangible, including, without limitation, Capital Stock.
"Qualified Plan": a Plan which is intended to be tax-qualified
under Section 401(a) of the Code.
"Recovery Event": any settlement of or payment in respect of
any property insurance claim or casualty insurance claim or any
condemnation proceeding relating to any asset of the Borrowers or any
of their Subsidiaries.
"Reference Lender": Bankers Trust Company.
"Refunded Swing Line Loans": as defined in Section 2.7(b).
"Refunding Date": as defined in Section 2.7(c).
"Register": as defined in Section 10.6(d).
"Regulation U": Regulation U of the Board as in effect from
time to time.
"Reimbursement Obligation": the obligation of the Borrowers to
reimburse the Issuing Lender for amounts drawn under Letters of Credit.
<PAGE>
27
"Reinvestment Deferred Amount": with respect to any
Reinvestment Event, the aggregate Net Cash Proceeds received by the
Borrowers or any of their Subsidiaries in connection therewith which
are not applied to prepay the Term Loans or reduce the Revolving Credit
Commitments pursuant to Section 2.12(c) as a result of the delivery of
a Reinvestment Notice.
"Reinvestment Event": any Recovery Event in respect of which
the Borrower Representative has delivered a Reinvestment Notice.
"Reinvestment Notice": a written notice executed by a
Responsible Officer stating that no Default or Event of Default has
occurred and is continuing and that a Borrower (directly or indirectly
through a Subsidiary) intends and expects to use all or a specified
portion of the Net Cash Proceeds of a Recovery Event to acquire assets
useful in its business.
"Reinvestment Prepayment Amount": with respect to any
Reinvestment Event, the Reinvestment Deferred Amount relating thereto
less any amount expended prior to the relevant Reinvestment Prepayment
Date to acquire assets useful in a Borrower's business.
"Reinvestment Prepayment Date": with respect to any
Reinvestment Event, the earlier of (a) the date occurring one year
after such Reinvestment Event and (b) the date on which a Borrower
shall have determined not to, or shall have otherwise ceased to,
acquire assets useful in such Borrower's business with all or any
portion of the relevant Reinvestment Deferred Amount.
"Relationship Bank": as defined in Section 6.13(a).
"Release": any release, threatened release, spill, emission,
leaking, pumping, pouring, emitting, emptying, escape, injection,
deposit, disposal, discharge, dispersal, dumping, leaching or migration
of Materials of Environmental Concern in the indoor or outdoor
environment, including the movement of Materials of Environmental
Concern through or in the air, soil, surface water, ground water or
property.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reorganization Payments": fees, expenses and other payments
of the Borrowers of the types set forth on Schedule 5.1(i).
"Reportable Event": any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the thirty day
notice period is waived under subsections .27, .28, .29, .30, .31, .32,
.34 or .35 of PBGC Reg. ss. 4043.
<PAGE>
28
"Required Lenders": at any time, the holders of more than 50%
of (a) until the Closing Date, the Commitments and (b) thereafter, the
sum of (i) the aggregate unpaid principal amount of the Term Loans then
outstanding and (ii) the Total Revolving Credit Commitments then in
effect or, if the Revolving Credit Commitments have been terminated,
the Total Revolving Extensions of Credit then outstanding.
"Required Prepayment Lenders": the Majority Facility Lenders
in respect of a Facility.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other 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.
"Reserves": reserves established by the Administrative Agent,
from time to time, in the exercise of the Administrative Agent's
reasonable credit judgment. Without limiting the generality of the
foregoing, Reserves may be established to insure the payment of rent,
charges to processors, to ensure the payment of accrued interest
expenses on Indebtedness and, if Availability is less than $15,000,000,
Obligations under Hedge Agreements.
"Responsible Officer": the chief executive officer, president
or chief financial officer of the Borrower Representative, but in any
event, with respect to financial matters, the chief financial officer
of the Borrower Representative.
"Restricted Payments": as defined in Section 7.6.
"Revolving Credit Commitment": as to any Lender, the
obligation of such Lender, if any, to make Revolving Credit Loans and
participate in Swing Line Loans and Letters of Credit, in an aggregate
principal and/or face amount not to exceed the amount set forth under
the heading "Revolving Credit Commitment" opposite such Lender's name
on Schedule 1 to the Lender Addendum delivered by such Lender, or, as
the case may be, in the Assignment and Acceptance pursuant to which
such Lender became a party hereto, as the same may be changed from time
to time pursuant to the terms hereof. The original amount of the Total
Revolving Credit Commitments is $65,000,000.
"Revolving Credit Commitment Period": the period from and
including the Closing Date to the Revolving Credit Termination Date.
"Revolving Credit Lender": each Lender which has a Revolving
Credit Commitment or which is the holder of Revolving Credit Loans.
"Revolving Credit Loans": as defined in Section 2.4(a).
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29
"Revolving Credit Percentage": as to any Revolving Credit
Lender at any time, the percentage which such Lender's Revolving Credit
Commitment then constitutes of the Total Revolving Credit Commitments
(or, at any time after the Revolving Credit Commitments shall have
expired or terminated, the percentage which the aggregate principal
amount of such Lender's Revolving Credit Loans then outstanding
constitutes of the aggregate principal amount of the Revolving Credit
Loans then outstanding).
"Revolving Credit Termination Date": November 24, 2001.
"Revolving Extensions of Credit": as to any Revolving Credit
Lender at any time, an amount equal to the sum of (a) the aggregate
principal amount of all Revolving Credit Loans made by such Lender then
outstanding, (b) such Lender's Revolving Credit Percentage of the L/C
Obligations then outstanding and (c) such Lender's Revolving Credit
Percentage of the aggregate principal amount of Swing Line Loans then
outstanding.
"SEC": the Securities and Exchange Commission (or successors
thereto or an analogous Governmental Authority).
"Security Documents": the collective reference to the
Collateral Agreement, the Mortgages and all other security documents
hereafter delivered to the Administrative Agent granting a Lien on any
Property of any Person to secure the obligations and liabilities of any
Borrower under any Loan Document.
"Senior Secured Notes": the 14 1/2% Senior Secured Notes due
2003 of Harvard, in the initial aggregate principal amount of
$25,000,000, together with any Senior Secured Notes that may be issued
in lieu of cash payment of interest, as the same may be renewed,
restated or replaced.
"Single Employer Plan": any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that,
as of any date of determination, (a) the amount of the "present fair
saleable value" of the assets of such Person will, as of such date,
exceed the amount of all liabilities of such Person, contingent or
otherwise", as of such date, as such quoted terms are determined in
accordance with applicable federal and state laws governing
determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be
greater than the amount that will be required to pay the liability of
such Person on its debts as such debts become absolute and matured, (c)
such Person will not have, as of such date, an unreasonably small
amount of capital with which to conduct its business, and (d) such
Person will be able to pay its debts as they mature. For purposes of
this definition, (i) "debt" means liability on a "claim", and (ii)
"claim" means any (x) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal,
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30
equitable, secured or unsecured or (y) right to an equitable remedy for
breach of performance if such breach gives rise to a right to payment,
whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.
"Subsidiary": as to any Person, a corporation, partnership,
limited liability company 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. Unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" in this Agreement
shall refer to a Subsidiary or Subsidiaries of a Borrower.
"Swing Line Commitment": the obligation of the Swing Line
Lender to make Swing Line Loans pursuant to Section 2.6 in an aggregate
principal amount at any one time outstanding not to exceed $10,000,000.
"Swing Line Lender": General Electric Capital Corporation, in
its capacity as the lender of Swing Line Loans.
"Swing Line Loans": as defined in Section 2.6(a).
"Swing Line Participation Amount": as defined in Section
2.7(c).
"Syndication Agent": as defined in the Preamble.
"Term Loan": as defined in Section 2.1.
"Term Loan Commitment": as to any Lender, the obligation of
such Lender, if any, to make a Term Loan to the Borrowers hereunder in
a principal amount not to exceed the amount set forth under the heading
"Term Loan Commitment" opposite such Lender's name on Schedule 1 to the
Lender Addendum delivered by such Lender, or, as the case may be, in
the Assignment and Acceptance pursuant to which such Lender became a
party hereto, as the same may be changed from time to time pursuant to
the terms hereof. The original aggregate amount of the Term Loan
Commitments is $50,000,000.
"Term Loan Lender": each Lender which has a Term Loan
Commitment or which is the holder of a Term Loan.
"Term Loan Percentage": as to any Lender at any time, the
percentage which such Lender's Term Loan Commitment then constitutes of
the aggregate Term Loan Commitments (or, at any time after the Closing
Date, the percentage which the aggregate
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31
principal amount of such Lender's Term Loans then outstanding
constitutes of the aggregate principal amount of the Term Loans then
outstanding).
"Tooling Accounts": any Account arising from the obligation of
an account debtor to reimburse a Borrower for the costs to such
Borrower of manufacturing tooling to be used by such Borrower to
manufacture Inventory to be sold to that account debtor.
"Total Revolving Credit Commitments": at any time, the
aggregate amount of the Revolving Credit Commitments then in effect.
"Total Revolving Extensions of Credit": at any time, the
aggregate amount of the Revolving Extensions of Credit of the Revolving
Credit Lenders outstanding at such time.
"Transferee": as defined in Section 10.15.
"Type": as to any Loan, its nature as a Base Rate Loan or a
Eurodollar Loan.
"Uniform Customs": the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be amended from time to time.
"Wholly Owned Subsidiary": as to any Person, any other Person
all of the Capital Stock of which (other than directors' qualifying
shares required by law) is owned by such Person directly and/or through
other Wholly Owned Subsidiaries.
1.2 Other Definitional Provisions. (a) Unless otherwise
specified therein, all terms defined in this Agreement shall have the defined
meanings when used in the other Loan Documents or any certificate or other
document made or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Borrowers and their Subsidiaries not defined in
Section 1.1 and accounting terms partly defined in Section 1.1, to the extent
not defined, shall have the respective meanings given to them under GAAP.
(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,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
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32
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Term Loan Commitments. Subject to the terms and conditions
hereof, each Term Loan Lender severally agrees to make a term loan (a "Term
Loan") to the Borrowers on the Closing Date in an amount not to exceed the
amount of the Term Loan Commitment of such Lender. The Term Loans may from time
to time be Eurodollar Loans or Base Rate Loans, as determined by the Borrower
Representative and notified to the Administrative Agent in accordance with
Sections 2.2 and 2.13.
2.2 Procedure for Term Loan Borrowing. The Borrower
Representative shall give the Administrative Agent irrevocable notice (which
notice must be received by the Administrative Agent prior to 10:00 A.M., New
York City time, one Business Day prior to the anticipated Closing Date)
requesting that the Term Loan Lenders make the Term Loans on the Closing Date
and specifying the amount to be borrowed. The Term Loans made on the Closing
Date shall initially be Base Rate Loans. Upon receipt of such notice the
Administrative Agent shall promptly notify each Term Loan Lender thereof. Not
later than 12:00 Noon, New York City time, on the Closing Date each Term Loan
Lender shall make available to the Administrative Agent at the Funding Office an
amount in immediately available funds equal to the Term Loan or Term Loans to be
made by such Lender. The Administrative Agent shall credit to the account of the
Borrower Representative on the books of the Funding Office the aggregate of the
amounts made available to the Administrative Agent by the Term Loan Lenders in
like funds as received by the Administrative Agent.
2.3 Repayment of Term Loans. The Term Loan of each Term Loan
Lender shall mature in 16 consecutive quarterly installments, commencing on
December 31, 1998, each of which shall be in an amount equal to such Lender's
Term Loan Percentage multiplied by the amount set forth below opposite such
installment:
Installment Principal Amount
----------- ----------------
December 31, 1998 $ 250,000
March 31, 1999 250,000
June 30, 1999 250,000
September 30, 1999 250,000
December 31, 1999 250,000
March 31, 2000 250,000
June 30, 2000 250,000
September 30, 2000 250,000
December 31, 2000 250,000
March 31, 2001 250,000
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33
June 30, 2001 250,000
September 30, 2001 250,000
December 31, 2001 250,000
March 31, 2002 250,000
June 30, 2002 250,000
September 30, 2002 46,250,000
2.4 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans ("Revolving Credit Loans") to the Borrowers from time to
time during the Revolving Credit Commitment Period in an aggregate principal
amount at any one time outstanding which, when added to such Lender's Revolving
Credit Percentage of the sum of (i) the L/C Obligations then outstanding and
(ii) the aggregate principal amount of the Swing Line Loans then outstanding,
does not exceed the lesser of (A) the amount of such Lender's Revolving Credit
Commitment and (B) such Lender's Revolving Credit Percentage of the Borrowing
Base then in effect. During the Revolving Credit Commitment Period the Borrowers
may use the Revolving Credit Commitments by borrowing, repaying the Revolving
Credit Loans in whole or in part, and reborrowing, all in accordance with the
terms and conditions hereof. The Revolving Credit Loans may from time to time be
Eurodollar Loans or Base Rate Loans, as determined by the Borrower
Representative and notified to the Administrative Agent in accordance with
Sections 2.5 and 2.13, provided that no Revolving Credit Loan shall be made as a
Eurodollar Loan after the day that is one month prior to the Revolving Credit
Termination Date.
(b) The Borrowers shall repay all outstanding Revolving Credit
Loans on the Revolving Credit Termination Date.
(c) Based on the most recent Borrowing Base Certificate
delivered by the Borrowers to the Administrative Agent and on other information
available to the Administrative Agent, the Administrative Agent shall in its
reasonable credit judgment determine which Accounts of the Borrowers shall be
"Eligible Accounts" for purposes of this Agreement and which Inventory of the
Borrowers shall be "Eligible Inventory" for purposes of this Agreement. In
determining whether a particular Account of any Borrower constitutes an Eligible
Account, the Administrative Agent shall not include any such Account to which
any of the exclusionary criteria set forth in the definition of Eligible
Accounts applies. In determining whether any particular Inventory of any
Borrower constitutes Eligible Inventory, the Administrative Agent shall not
include any such Inventory to which any of the exclusionary criteria set forth
in the definition of Eligible Inventory applies. The Administrative Agent
reserves the right, at any time and from time to time after the Closing Date
upon ten (10) Business Days' prior written notice to the Borrower
Representative, to adjust any such criteria, to establish new criteria and to
adjust advance rates with respect to Eligible Accounts and Eligible Inventory,
in its reasonable credit judgment and which is customary either in the
commercial finance industry or in the lending practices of the Administrative
Agent and/or the Lenders, subject to the approval of the
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34
Lenders in the case of adjustments or new criteria or changes in advance rates
which have the effect of making more credit available.
2.5 Procedure for Revolving Credit Borrowing. (a) The
Borrowers may borrow under the Revolving Credit Commitments during the Revolving
Credit Commitment Period on any Business Day, provided that the Borrower
Representative shall give the Administrative Agent irrevocable written notice
(which notice must be received by the Administrative Agent prior to 12:00 Noon,
New York City time, (a) three Business Days prior to the requested Borrowing
Date, in the case of Eurodollar Loans, or (b) one Business Day prior to the
requested Borrowing Date, in the case of Base Rate Loans), specifying (i) the
amount and Type of Revolving Credit Loans to be borrowed, (ii) the requested
Borrowing Date and (iii) in the case of Eurodollar Loans, the length of the
initial Interest Period therefor. Any Revolving Credit Loans made on the Closing
Date shall initially be Base Rate Loans. Each borrowing under the Revolving
Credit Commitments shall be in an amount equal to (x) in the case of Base Rate
Loans, $1,000,000 or a whole multiple thereof (or, if the then aggregate
Available Revolving Credit Commitments are less than $1,000,000, such lesser
amount) and (y) in the case of Eurodollar Loans, $5,000,000 or a whole multiple
of $1,000,000 in excess thereof; provided, that the Swing Line Lender may
request, on behalf of the Borrowers, borrowings under the Revolving Credit
Commitments which are Base Rate Loans in other amounts pursuant to Section 2.7.
Upon receipt of any such written notice from the Borrower Representative, the
Administrative Agent shall promptly notify each Revolving Credit Lender thereof.
Each Revolving Credit Lender will make the amount of its pro rata share of each
borrowing available to the Administrative Agent for the account of the Borrowers
at the Funding Office prior to 12:00 Noon, New York City time, on the Borrowing
Date requested by the Borrower Representative in funds immediately available to
the Administrative Agent. Such borrowing will then be made available to the
Borrowers by the Administrative Agent crediting the account of the Borrower
Representative on the books of the Funding Office with the aggregate of the
amounts made available to the Administrative Agent by the Revolving Credit
Lenders and in like funds as received by the Administrative Agent.
(b) To the extent that any Lender (a "Non-Funding Lender") has
failed to fund all payments and Loans required to be made by it or failed to
fund all payments and Loans required to be made by it or failed to fund the
purchase of all participations required to be purchased by it, the
Administrative Agent shall be entitled to set off the funding short-fall against
that Non-Funding Lender's pro rata share of all payments received from the
Borrowers. The failure of any Non-Funding Lender to make any Revolving Credit
Loan or any payment required by it hereunder or to purchase any participation in
any Swing Line Loan to be made or purchased by it on the date specified therefor
shall not relieve any other Revolving Credit Lender (each such other Revolving
Lender, an "Other Lender") of its obligations to make such Loan or purchase such
participation on such date, but neither any Other Lender nor the Administrative
Agent shall be responsible for the failure of any Non-Funding Lender to make a
Loan or to purchase a participation required hereunder. Notwithstanding anything
set forth herein to the contrary, a Non-Funding Lender shall not have any voting
or consent rights under or with respect to any Loan Document or constitute a
"Lender" or a "Revolving Credit Lender" (or be included in the calculation of
"Majority Facility Lender", "Majority Revolving Credit
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35
Facility Lender", or "Required Lenders" hereunder) for any voting or consent
rights under or with respect to any Loan Document.
2.6 Swing Line Commitment. (a) Subject to the terms and
conditions hereof, the Swing Line Lender agrees to make a portion of the credit
otherwise available to the Borrowers under the Revolving Credit Commitments from
time to time during the Revolving Credit Commitment Period by making swing line
loans ("Swing Line Loans") to the Borrowers; provided that (i) the aggregate
principal amount of Swing Line Loans outstanding at any time shall not exceed
the Swing Line Commitment then in effect (notwithstanding that the Swing Line
Loans outstanding at any time, when aggregated with the Swing Line Lender's
other outstanding Revolving Credit Loans hereunder, may exceed the Swing Line
Commitment then in effect) and (ii) the Borrowers shall not request, and the
Swing Line Lender shall not make, any Swing Line Loan if, after giving effect to
the making of such Swing Line Loan, the aggregate amount of the Available
Revolving Credit Commitments would be less than zero or the aggregate Revolving
Extensions of Credit then outstanding would exceed the Borrowing Base. During
the Revolving Credit Commitment Period, the Borrowers may use the Swing Line
Commitment by borrowing, repaying and reborrowing, all in accordance with the
terms and conditions hereof. Swing Line Loans shall be Base Rate Loans only.
(b) The Borrowers shall repay all outstanding Swing Line Loans
on the Revolving Credit Termination Date.
2.7 Procedure for Swing Line Borrowing; Refunding of Swing
Line Loans. (a) Whenever the Borrower Representative desires that the Swing Line
Lender make Swing Line Loans it shall give the Swing Line Lender irrevocable
telephonic notice confirmed promptly in writing (which telephonic notice must be
received by the Swing Line Lender not later than 12:00 Noon, New York City time,
on the proposed Borrowing Date), specifying (i) the amount to be borrowed and
(ii) the requested Borrowing Date (which shall be a Business Day during the
Revolving Credit Commitment Period). Not later than 2:00 P.M., New York City
time, on the Borrowing Date specified in a notice in respect of Swing Line
Loans, the Swing Line Lender shall make available to the Administrative Agent at
the Funding Office an amount in immediately available funds equal to the amount
of the Swing Line Loan to be made by the Swing Line Lender. The Administrative
Agent shall make the proceeds of such Swing Line Loan available to the Borrowers
on such Borrowing Date not later than 3:00 P.M. by depositing such proceeds in
the account of the Borrower Representative (or such other Borrower as the
Borrower Representative shall direct) on the books of the Funding Office with
the Administrative Agent on such Borrowing Date in immediately available funds.
(b) The Swing Line Lender, at any time and from time to time
in its sole and absolute discretion may, on behalf of the Borrowers (which
hereby irrevocably directs the Swing Line Lender to act on their behalf), on one
Business Day's notice given by the Swing Line Lender no later than 12:00 Noon,
New York City time, request each Revolving Credit Lender to make, and each
Revolving Credit Lender hereby agrees to make, a Revolving Credit Loan, in an
amount equal to such Revolving Credit Lender's Revolving Credit Percentage of
the aggregate amount of the Swing Line Loans (the "Refunded Swing Line Loans")
outstanding on the date of
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36
such notice, to repay the Swing Line Lender. Each Revolving Credit Lender shall
make the amount of such Revolving Credit Loan available to the Administrative
Agent at the Funding Office in immediately available funds, not later than 10:00
A.M., New York City time, one Business Day after the date of such notice. The
proceeds of such Revolving Credit Loans shall be immediately made available by
the Administrative Agent to the Swing Line Lender for application by the Swing
Line Lender to the repayment of the Refunded Swing Line Loans. Each of the
Borrowers irrevocably authorizes the Administrative Agent at the direction of
Swing Line Lender to charge such Borrower's accounts on the books of the Funding
Office (up to the amount available in each such account) in order to immediately
pay the amount of such Refunded Swing Line Loans to the extent amounts received
from the Revolving Credit Lenders are not sufficient to repay in full such
Refunded Swing Line Loans.
(c) If prior to the time a Revolving Credit Loan would have
otherwise been made pursuant to Section 2.7(b), one of the events described in
Section 8(f) shall have occurred and be continuing with respect to the Borrowers
or if for any other reason, as determined by the Swing Line Lender in its sole
discretion, Revolving Credit Loans may not be made as contemplated by Section
2.7(b), each Revolving Credit Lender shall, on the date such Revolving Credit
Loan was to have been made pursuant to the notice referred to in Section 2.7(b)
(the "Refunding Date"), purchase for cash an undivided participating interest in
the then outstanding Swing Line Loans by paying to the Swing Line Lender an
amount (the "Swing Line Participation Amount") equal to (i) such Revolving
Credit Lender's Revolving Credit Percentage times (ii) the sum of the aggregate
principal amount of Swing Line Loans (plus interest accrued and unpaid thereon)
then outstanding which were to have been repaid with such Revolving Credit
Loans.
(d) Whenever, at any time after the Swing Line Lender has
received from any Revolving Credit Lender such Lender's Swing Line Participation
Amount, the Swing Line Lender receives any payment on account of the Swing Line
Loans, the Swing Line Lender will distribute to such Lender its Swing Line
Participation Amount (appropriately adjusted, in the case of interest payments,
to reflect the period of time during which such Lender's participating interest
was outstanding and funded and, in the case of principal and interest payments,
to reflect such Lender's pro rata portion of such payment if such payment is not
sufficient to pay the principal of and interest on all Swing Line Loans then
due); provided, however, that in the event that such payment received by the
Swing Line Lender is required to be returned, such Revolving Credit Lender will
return to the Swing Line Lender any portion thereof previously distributed to it
by the Swing Line Lender.
(e) Except as otherwise provided herein, each Revolving Credit
Lender's obligation to make the Loans referred to in Section 2.7(b) and to
purchase participating interests pursuant to Section 2.7(c) shall be absolute
and unconditional and shall not be affected by any circumstance, including,
without limitation, (i) any setoff, counterclaim, recoupment, defense or other
right which such Revolving Credit Lender or any Borrower may have against the
Swing Line Lender, any Borrower or any other Person for any reason whatsoever;
(ii) the occurrence or continuance of a Default or an Event of Default or the
failure to satisfy any of the other conditions specified in Section 5; (iii) any
adverse change in the condition (financial or otherwise) of any Borrower; (iv)
any breach of this Agreement or any other Loan Document by
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37
any Borrower or any other Revolving Credit Lender; or (v) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing. Notwithstanding anything to the contrary contained herein, each
Revolving Credit Lender shall only have such obligations to the extent the
proceeds of the Loans or the purchase of the participating interests, as the
case may be, are in respect of Swing Line Loans made in accordance with the
terms hereof at the time such Swing Line Loan is made.
2.8 Repayment of Loans; Evidence of Debt. (a) The Borrowers
jointly and severally hereby unconditionally promise to pay to the
Administrative Agent for the account of the appropriate Lender (i) the then
unpaid principal amount of each Revolving Credit Loan of such Revolving Credit
Lender on the Revolving Credit Termination Date (or such earlier date on which
the Loans become due and payable pursuant to Section 8), (ii) the then unpaid
principal amount of each Swing Line Loan of such Swing Line Lender on the
Revolving Credit Termination Date (or such earlier date on which the Loans
become due and payable pursuant to Section 8) and (iii) the principal amount of
each Term Loan of such Term Loan Lender in installments according to the
amortization schedule set forth in Section 2.3 (or on such earlier date on which
the Loans become due and payable pursuant to Section 8). The Borrowers jointly
and severally hereby further agree to pay interest on the unpaid principal
amount of the Loans from time to time outstanding from the date hereof until
payment in full thereof at the rates per annum, and on the dates, set forth in
Section 2.15.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing indebtedness of the Borrowers to such
Lender resulting from each Loan of such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Agreement.
(c) The Administrative Agent, on behalf of the Borrowers,
shall maintain the Register pursuant to Section 10.6(d), and a subaccount
therein for each Lender, in which shall be recorded (i) the amount of each Loan
made hereunder and any Note evidencing such Loan, the Type thereof and each
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrowers to each Lender
hereunder and (iii) both the amount of any sum received by the Administrative
Agent hereunder from the Borrowers and each Lender's share thereof.
(d) The entries made in the Register and the accounts of each
Lender maintained pursuant to Section 2.8(b) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrowers therein recorded; provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrowers to repay (with applicable interest) the Loans made
to the Borrowers by such Lender in accordance with the terms of this Agreement.
(e) The Borrowers agree that, upon the request to the
Administrative Agent by any Lender, the Borrowers will execute and deliver to
such Lender a promissory note of the Borrowers evidencing any Term Loans,
Revolving Credit Loans or Swing Line Loans, as the
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38
case may be, of such Lender, substantially in the forms of Exhibit G-1, G-2 or
G-3, respectively, with appropriate insertions as to date and principal amount.
(f) The Administrative Agent shall maintain a loan account
(the "Loan Account") on its books to record: (a) all Revolving Credit Loans and
L/C Obligations, (b) all payments made by the Borrowers, and (c) all other
debits and credits as provided in this Agreement with respect to the Loans or
any other Obligations. All entries in the Loan Account shall be made in
accordance with the Administrative Agent's customary accounting practices as in
effect from time to time. The balance in the Loan Account, as recorded on the
Administrative Agent's most recent printout or other written statement, shall be
conclusive evidence (absent manifest error) of the amounts due and owing to the
Administrative Agent and the Lenders by each Borrower; provided that any failure
to so record or any error in so recording shall not limit or otherwise affect
any Borrower's duty to pay the Obligations. The Administrative Agent shall
render to the Borrowers a monthly accounting of transactions with respect to the
Loans setting forth the balance of the Loan Account as to the Borrowers. Unless
the Borrower Representative notifies the Administrative Agent in writing of any
objection to any such accounting (specifically describing the basis for such
objection), within thirty (30) days after the date thereof, each and every such
accounting shall (absent manifest error) be deemed final, binding and conclusive
upon the Borrowers in all respects as to all matters reflected therein. Only
those items expressly objected to in such notice shall be deemed to be disputed
by the Borrowers. Notwithstanding any provision herein contained to the
contrary, any Lender may elect (which election may be revoked) to dispense with
the issuance of Notes to that Lender and may rely on the Loan Account as
evidence of the amount of Obligations from time to time owing to it.
2.9 Commitment Fees, etc. (a) The Borrowers jointly and
severally agree to pay to the Administrative Agent for the account of each
Revolving Credit Lender a commitment fee for the period from and including the
Closing Date to the last day of the Revolving Credit Commitment Period, computed
at the Commitment Fee Rate on the average daily amount of the Available
Revolving Credit Commitment of such Lender during the period for which payment
is made, payable monthly in arrears on the first day of each month and on the
Revolving Credit Termination Date, commencing on the first of such dates to
occur after the date hereof.
(b) The Borrowers jointly and severally agree to pay to the
Syndication Agent the fees in the amounts and on the dates previously agreed to
in that certain letter dated October 23, 1998 by Harvard and the Syndication
Agent.
(c) The Borrowers jointly and severally agree to pay to the
Administrative Agent the fees in the amounts and on the dates agreed to in
writing by the Borrower Representative and the Administrative Agent pursuant to
that certain letter agreement dated November 24, 1998.
(d) If, on or prior to the first anniversary of the Closing
Date, the Borrowers shall voluntarily prepay all or any portion of the Term Loan
or reduce or terminate the Revolving Credit Commitment, in each case whether
before or after acceleration of the Obligations, the Borrowers shall pay to the
Administrative Agent, for the benefit of the Lenders, as liquidated damages and
compensation for the costs of being prepared to make funds available hereunder
an
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39
amount determined by multiplying 1% by (i) the principal amount of the Term
Loan prepaid, and (ii) the amount of the reduction of the Revolving Credit
Commitment.
2.10 Termination or Reduction of Revolving Credit Commitments.
The Borrowers shall have the right, upon not less than three Business Days'
notice to the Administrative Agent, to terminate the Revolving Credit
Commitments or, from time to time, to reduce the amount of the Revolving Credit
Commitments; provided that no such termination or reduction of Revolving Credit
Commitments shall be permitted if, after giving effect thereto and to any
prepayments of the Revolving Credit Loans and Swing Line Loans made on the
effective date thereof, the Total Revolving Extensions of Credit would exceed
the Total Revolving Credit Commitments. Any such reduction shall be in an amount
equal to $1,000,000, or a whole multiple thereof, and shall reduce permanently
the Revolving Credit Commitments then in effect.
2.11 Optional Prepayments. The Borrowers may at any time and
from time to time prepay the Loans, in whole or in part, without premium or
penalty, upon irrevocable notice delivered to the Administrative Agent at least
three Business Days prior thereto in the case of Eurodollar Loans and at least
one Business Day prior thereto in the case of Base Rate Loans (other than Swing
Line Loans), and on the same Business Day in the case of Swing Line Loans, which
notice shall specify the date and amount of prepayment and whether the
prepayment is of Eurodollar Loans or Base Rate Loans; provided, that if a
Eurodollar Loan is prepaid on any day other than the last day of the Interest
Period applicable thereto, the Borrowers shall also pay any amounts owing
pursuant to Section 2.21. Upon receipt of any such notice the Administrative
Agent shall promptly notify each relevant Lender thereof. If any such notice is
given, the amount specified in such notice shall be due and payable on the date
specified therein, together with (except in the case of Revolving Credit Loans
which are Base Rate Loans and Swing Line Loans) accrued interest to such date on
the amount prepaid. Partial prepayments of Term Loans and Revolving Credit Loans
shall be in an aggregate principal amount of $1,000,000 or a whole multiple
thereof. Partial prepayments of Swing Line Loans shall be in an aggregate
principal amount of $100,000 or a whole multiple thereof.
2.12 Mandatory Prepayments and Commitment Reductions. (a) If,
at any time during the Revolving Credit Commitment Period, the sum of the
aggregate outstanding Revolving Extensions of Credit of all Revolving Credit
Lenders exceeds the lesser of (i) the Borrowing Base and (ii) the aggregate
Revolving Credit Commitments then in effect, in each case, minus any Reserves
the Borrowers shall, without notice or demand, immediately prepay, in accordance
with this Section, the Revolving Credit Loans and the Swing Line Loans in an
aggregate principal amount equal to such excess, together (except in the case of
Revolving Credit Loans which are Base Rate Loans and Swing Line Loans) with
interest accrued to the date of such payment or prepayment; provided that if the
aggregate principal amount of Revolving Credit Loans and Swing Line Loans then
outstanding is less than the amount of such excess (because L/C Obligations
constitute a portion thereof), the Borrowers shall, to the extent of the balance
of such excess, replace outstanding Letters of Credit and/or deposit an amount
in cash in a cash collateral account established with the Administrative Agent
for the benefit of the Lenders on terms and conditions satisfactory to the
Administrative Agent.
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40
(b) Unless the Required Prepayment Lenders shall otherwise
agree, if any Capital Stock shall be issued, or Indebtedness incurred, by any of
the Borrowers or any of their Subsidiaries (excluding any Indebtedness incurred
in accordance with Section 7.2 as in effect on the date of this Agreement), an
amount equal to 100% of the Net Cash Proceeds thereof shall be applied within
one Business Day of the date of such issuance or incurrence toward the
prepayment of the Term Loans and outstanding Revolving Credit Loans and the
reduction of the Revolving Credit Commitments as set forth in Section 2.12(f).
(c) Unless the Required Prepayment Lenders shall otherwise
agree, if on any date any of the Borrowers or any of their Subsidiaries shall
receive Net Cash Proceeds from any Asset Sale or Recovery Event then, such Net
Cash Proceeds shall be applied within one Business Day of such date toward the
prepayment of the Term Loans and the reduction of the Revolving Credit
Commitments as set forth in Section 2.12(f) or Section 2.12(g), as applicable;
provided, that, notwithstanding the foregoing, (i) if no Default or Event of
Default shall be in existence on the date of receipt by the Borrowers or any of
their Subsidiaries thereof, the Net Cash Proceeds of Recovery Events may be
excluded from the foregoing requirement if on the date of the Borrowers' receipt
thereof they deliver a Reinvestment Notice in respect thereof to the
Administrative Agent and (ii) on each Reinvestment Prepayment Date, an amount
equal to the Reinvestment Prepayment Amount with respect to the relevant
Reinvestment Event shall be applied toward the prepayment of the Term Loans and
the reduction of the Revolving Credit Commitments as set forth in Section
2.12(g); provided, further, that the Net Cash Proceeds of Recovery Events shall
be applied to reduce the outstanding principal balance of the Revolving Credit
Loans (and not to the reduction of the Revolving Credit Commitments) and upon
such application, the Administrative Agent shall establish a Reserve against the
Borrowing Base in an amount equal to the amount of such proceeds so applied.
Thereafter, such funds shall be made available to the applicable Borrower to
provide funds to replace, restore or rebuild the Collateral as follows: (A) the
Borrower Representative shall request a Revolving Credit Loan to be made to such
Borrower in the amount requested to be released; (B) so long as the conditions
in Section 5.2 have been met, the Revolving Credit Lenders shall make such
Revolving Credit Loan; and (C) the Reserve established with respect to such Net
Cash Proceeds of Recovery Events shall be reduced by the amount of such
Revolving Credit Loan.
(d) So long as no Default or Event of Default shall be in
existence on the date of the Borrowers' receipt thereof, the proceeds of any
asset sale in respect of the Designated Facilities shall not be required to be
applied toward repayment of Loans or reduction of Commitments.
(e) Unless the Required Prepayment Lenders shall otherwise
agree, if, for any fiscal year of the Borrowers commencing with the fiscal year
ending September 30, 1999, there shall be Excess Cash Flow, the Borrowers shall,
on the relevant Excess Cash Flow Application Date, apply 100% of such Excess
Cash Flow toward the prepayment of the Term Loans and the reduction of the
Revolving Credit Commitments as set forth in Section 2.12(f); provided, however,
notwithstanding the foregoing, so long as after giving effect to the proposed
redemptions or prepayments, the Availability would be equal to or greater than
$20,000,000, 50% of Excess Cash Flow may be used to redeem or prepay the Senior
Secured Notes in an
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41
amount not to exceed $3,000,000 in any fiscal year and $5,000,000 in the
aggregate while this Agreement is outstanding. Each such prepayment of the Loans
and reduction of Revolving Credit Commitments shall be made on a date (an
"Excess Cash Flow Application Date") no later than five days after the earlier
of (i) the date on which the financial statements of Harvard referred to in
Section 6.1(a), for the fiscal year with respect to which such prepayment is
made, are required to be delivered to the Lenders and (ii) the date such
financial statements are actually delivered.
(f) Any prepayments made by the Borrowers pursuant to
paragraphs (b), (c) or (e) above (other than any prepayment with insurance
proceeds, which shall be applied in accordance with paragraph (g) below) shall
be applied as follows: first, to fees and reimbursable expenses of the
Administrative Agent then due and payable pursuant to any of the Loan Documents,
second, to interest then due and payable the Term Loans, third, to prepay the
scheduled installments of the Term Loans in inverse order of maturity, until the
Term Loans shall have been prepaid in full, fourth, to interest then due and
payable on the Swing Line Loans, fifth, to the principal balance of the Swing
Line Loans outstanding until the same shall have been repaid in full, sixth, to
interest then due and payable on Revolving Credit Loans, seventh, to the
principal balance of Revolving Credit Loans outstanding until the same shall
have been paid in full, and eighth, to any L/C Obligations to provide cash
collateral therefor in the manner set forth in Section 3.3, until all such L/C
Obligations have been fully cash collateralized in the manner set forth in said
Section 3.3.
(g) Prepayments from insurance proceeds in accordance with
Section 2.12(c) shall be applied as follows: insurance proceeds from casualties
or losses to cash or Inventory shall be applied, first, to the Swing Line Loans
and, second, to the Revolving Credit Loans; insurance proceeds from casualties
or losses to Equipment and Real Estate shall be applied to scheduled
installments of the Term Loan in inverse order of maturity. If the insurance
proceeds received exceed the outstanding principal balances of the Loans or if
the precise amount of insurance proceeds allocable to Inventory as compared to
Equipment and real estate are not otherwise determined, the allocation and
application of those proceeds shall be determined by the Administrative Agent,
subject to the approval of Required Lenders. The application of any prepayment
pursuant to this Section shall be made, first, to Base Rate Loans and, second,
to Eurodollar Loans. Each prepayment of the Loans under this Section (except in
the case of Revolving Credit Loans that are Base Rate Loans and Swing Line
Loans) shall be accompanied by accrued interest to the date of such prepayment
on the amount prepaid.
2.13 Conversion and Continuation Options. (a) The Borrower
Representative may elect from time to time to convert Eurodollar Loans to Base
Rate Loans by giving the Administrative Agent at least two Business Days' prior
irrevocable written notice of such election, provided that any such conversion
of Eurodollar Loans may only be made on the last day of an Interest Period with
respect thereto. The Borrower Representative may elect from time to time to
convert Base Rate Loans to Eurodollar Loans by giving the Administrative Agent
at least three Business Days' prior irrevocable notice of such election (which
notice shall specify the length of the initial Interest Period therefor),
provided that no Base Rate Loan under a particular Facility may be converted
into a Eurodollar Loan (i) when any Event of Default has
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42
occurred and is continuing and the Administrative Agent or the Majority Facility
Lenders in respect of such Facility have determined in its or their sole
discretion not to permit such conversions or (ii) after the date that is
forty-five (45) days prior to the final scheduled termination or maturity date
of such Facility. Upon receipt of any such notice the Administrative Agent shall
promptly notify each relevant Lender thereof.
(b) Any Eurodollar Loan may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower Representative giving irrevocable notice to the Administrative Agent,
in accordance with the applicable provisions of the term "Interest Period" set
forth in Section 1.1, of the length of the next Interest Period to be applicable
to such Loans, provided that no Eurodollar Loan under a particular Facility may
be continued as such (i) when any Event of Default has occurred and is
continuing and the Administrative Agent has or the Majority Facility Lenders in
respect of such Facility have determined in its or their sole discretion not to
permit such continuations or (ii) after the date that is one month prior to the
final scheduled termination or maturity date of such Facility, and provided,
further, that if the Borrower Representative shall fail to give any required
notice as described above in this paragraph or if such continuation is not
permitted pursuant to the preceding proviso such Loans shall be automatically
converted to Base Rate Loans on the last day of such then expiring Interest
Period. Upon receipt of any such notice the Administrative Agent shall promptly
notify each relevant Lender thereof.
(c) In the case of any conversion or continuation, such
election must be made pursuant to a Notice of Conversion/Continuation.
2.14 Minimum Amounts and Maximum Number of Eurodollar
Tranches. Notwithstanding anything to the contrary in this Agreement, all
borrowings, conversions, continuations and optional prepayments of Eurodollar
Loans hereunder and all selections of Interest Periods hereunder shall be in
such amounts and be made pursuant to such elections so that, (a) after giving
effect thereto, the aggregate principal amount of the Eurodollar Loans
comprising each Eurodollar Tranche shall be equal to $5,000,000 or a whole
multiple of $1,000,000 in excess thereof and (b) no more than five Eurodollar
Tranches shall be outstanding at any one time.
2.15 Interest Rates and Payment Dates. (a) Each Eurodollar
Loan shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin.
(b) Each Base Rate Loan shall bear interest at a rate per
annum equal to the Base Rate plus the Applicable Margin.
(c) (i) If all or a portion of the principal amount of any
Loan or Reimbursement Obligation shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise), all outstanding Loans and
Reimbursement Obligations (whether or not overdue) shall bear interest at a rate
per annum which is equal to (x) in the case of the Loans, the rate that would
otherwise be applicable thereto pursuant to the foregoing provisions of this
Section plus
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43
2% or (y) in the case of Reimbursement Obligations, the rate applicable to Base
Rate Loans under the Revolving Credit Facility plus 2%, and Letter of Credit
Fees shall be calculated based upon the Applicable Margin then in effect for
Revolving Credit Loans that are Eurodollar Loans plus 2%, and (ii) if all or a
portion of any interest payable on any Loan or Reimbursement Obligation or any
commitment fee or Letter of Credit Fee or other amount payable hereunder shall
not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such overdue amount shall bear interest at a rate per annum equal to
the rate then applicable to Base Rate Loans under the relevant Facility plus 2%
(or, in the case of any such other amounts that do not relate to a particular
Facility, the rate then applicable to Base Rate Loans under the Revolving Credit
Facility plus 2%), in each case, with respect to clauses (i) and (ii) above,
from the date of such non-payment until such amount is paid in full (after, to
the extent permitted by applicable law, as well as before judgment).
(d) Interest shall be payable in arrears on each Interest
Payment Date, provided that interest accruing pursuant to paragraph (c) of this
Section shall be payable from time to time on demand.
2.16 Computation of Interest and Fees. (a) Interest, fees and
commissions payable pursuant hereto shall be calculated on the basis of a
360-day year for the actual days elapsed, except that, with respect to Base Rate
Loans the rate of interest on which is calculated on the basis of the Prime
Rate, the interest thereon shall be calculated on the basis of a 365-(or 366-,
as the case may be) day year for the actual days elapsed. The Administrative
Agent shall as soon as practicable notify the Borrower Representative and the
relevant Lenders of each determination of a Eurodollar Rate. Any change in the
interest rate on a Loan resulting from a change in the Base Rate or the
Eurocurrency Reserve Requirements shall become effective as of the opening of
business on the day on which such change becomes effective. The Administrative
Agent shall as soon as practicable notify the Borrower Representative and the
relevant Lenders of the effective date and the amount of each such change in
interest rate.
(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrowers and the Lenders in the absence of
manifest error. The Administrative Agent shall, at the request of the Borrower
Representative, deliver to the Borrower Representative a statement showing the
quotations used by the Administrative Agent in determining any interest rate
pursuant to Section 2.15.
(c) For purposes of computing interest and fees, all payments
shall be deemed received one day following the day of receipt of immediately
available funds therefor in the Collection Account prior to 1:00 P.M. New York
City time. Payments received after 1:00 P.M. New York City time on any Business
Day shall be deemed to have been received on the following Business Day.
2.17 Inability to Determine Interest Rate. If prior to the
first day of any Interest Period:
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44
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrowers) that,
by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period, or
(b) the Administrative Agent shall have received notice from
the Majority Facility Lenders in respect of the relevant Facility that
the Eurodollar Rate determined or to be determined for such Interest
Period will not adequately and fairly reflect the cost to such Lenders
(as conclusively certified by such Lenders) of making or maintaining
their affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower Representative and the relevant Lenders as soon as practicable
thereafter. If such notice is given (x) any Eurodollar Loans under the relevant
Facility requested to be made on the first day of such Interest Period shall be
made as Base Rate Loans, (y) any Loans under the relevant Facility that were to
have been converted on the first day of such Interest Period to Eurodollar Loans
shall be continued as Base Rate Loans and (z) any outstanding Eurodollar Loans
under the relevant Facility shall be converted, on the last day of the then
current Interest Period with respect thereto, to Base Rate Loans. Until such
notice has been withdrawn by the Administrative Agent, no further Eurodollar
Loans under the relevant Facility shall be made or continued as such, nor shall
the Borrowers have the right to convert Loans under the relevant Facility to
Eurodollar Loans.
2.18 Pro Rata Treatment and Payments. (a) Each borrowing by
the Borrowers from the Lenders hereunder, each payment by the Borrowers on
account of any commitment fee and any reduction of the Commitments of the
Lenders shall be made pro rata according to the respective Term Loan Percentages
or Revolving Credit Percentages, as the case may be, of the relevant Lenders.
Each payment (other than prepayments) in respect of principal or interest
(without giving effect to any collection days) in respect of the Loans, each
payment in respect of fees payable hereunder, and each payment in respect of
Reimbursement Obligations, shall be applied to the amounts of such obligations
owing to the Lenders pro rata according to the respective amounts then due and
owing to the Lenders.
(b) Each payment (including each prepayment) of the Term Loans
outstanding shall be allocated among the Term Loan Lenders holding such Term
Loans pro rata based on the principal amount of such Term Loans held by such
Term Loan Lenders. Each prepayment in respect of Term Loans shall be applied to
the installments of such Term Loans in the inverse order of the scheduled
maturities of such installments. Amounts paid or prepaid on account of the Term
Loans may not be reborrowed.
(c) Each payment (including each prepayment) by the Borrowers
on account of principal of and interest (without giving effect to any collection
days) on the Revolving Credit Loans shall be made pro rata according to the
respective outstanding principal amounts of the Revolving Credit Loans then held
by the Revolving Credit Lenders.
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45
(d) All payments (including prepayments) to be made by the
Borrowers hereunder, whether on account of principal, interest, fees or
otherwise, shall be made without setoff or counterclaim and shall be made prior
to 2:00 P.M., New York City time, on the due date thereof to the Administrative
Agent, for the account of the Lenders, at the Payment Office, in Dollars and in
immediately available funds. The Administrative Agent shall distribute such
payments to the Lenders promptly upon receipt in like funds as received (without
giving effect to any collection days). If any payment hereunder (other than
payments on the Eurodollar Loans) becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business
Day. If any payment on a Eurodollar Loan becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day unless the result of such extension would be to extend
such payment into another calendar month, in which event such payment shall be
made on the immediately preceding Business Day. In the case of any extension of
any payment of principal pursuant to the preceding two sentences, interest
thereon shall be payable at the then applicable rate during such extension.
(e) Unless the Administrative Agent shall have been notified
in writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrowers a
corresponding amount. If such amount is not made available to the Administrative
Agent by the required time on the Borrowing Date therefor, such Lender shall pay
to the Administrative Agent, on demand, such amount with interest thereon at a
rate equal to the daily average Federal Funds Effective Rate for the period
until such Lender makes such amount immediately available to the Administrative
Agent. A certificate of the Administrative Agent submitted to any Lender with
respect to any amounts owing under this paragraph shall be conclusive in the
absence of manifest error. If such Lender's share of such borrowing is not made
available to the Administrative Agent by such Lender within three Business Days
of such Borrowing Date, the Administrative Agent shall also be entitled to
recover such amount with interest thereon at the rate per annum applicable to
Base Rate Loans under the relevant Facility, on demand, from the Borrowers.
(f) Unless the Administrative Agent shall have been notified
in writing by the Borrower Representative prior to the date of any payment being
made hereunder that the Borrowers will not make such payment to the
Administrative Agent, the Administrative Agent may assume that the Borrowers are
making such payment, and the Administrative Agent may, but shall not be required
to, in reliance upon such assumption, make available to the Lenders their
respective pro rata shares of a corresponding amount. If such payment is not
made to the Administrative Agent by the Borrowers within three Business Days of
such required date, the Administrative Agent shall be entitled to recover, on
demand, from each Lender to which any amount which was made available pursuant
to the preceding sentence, such amount with interest thereon at the rate per
annum equal to the daily average Federal Funds Effective Rate. Nothing herein
shall be deemed to limit the rights of the Administrative Agent or any Lender
against the Borrowers.
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46
(g) The Administrative Agent is authorized to, and at its sole
election may, charge to the Revolving Credit Loan balance on behalf of the
Borrowers and cause to be paid all fees, expenses, charges, costs (including
insurance premiums) and interest and principal, other than principal of the
Revolving Credit Loans, owing by the Borrowers under this Agreement or any of
the other Loan Documents if and to the extent the Borrowers fail to promptly pay
any such amounts as and when due, even if such charges would cause the balance
of the aggregate Revolving Credit Loans and the Swing Line Loans to exceed the
Available Revolving Credit Commitments of the Revolving Credit Lenders. At the
Administrative Agent's option and to the extent permitted by law, any charges so
made shall constitute part of the Revolving Credit Loans hereunder. The
Administrative Agent shall give the Borrower Representative two (2) Business
Days' prior written notice prior to charging the Loan Account with the payment
of any out-of-pocket costs and expenses incurred by the Administrative Agent
under this Agreement.
(h) If the Administrative Agent determines at any time that
any amount received by the Administrative Agent under this Agreement must be
returned to any Borrower or paid to any other Person pursuant to any insolvency
law or otherwise, then, notwithstanding any other term or condition of this
Agreement or any other Loan Document, the Administrative Agent will not be
required to distribute any portion thereof to any Lender. In addition, each
Lender will repay to the Administrative Agent on demand any portion of such
amount that the Administrative Agent has distributed to such Lender, together
with interest at such rate, if any, as the Administrative Agent is required to
pay to any Borrower or such other Person, without setoff, counterclaim or
deduction of any kind.
2.19 Requirements of Law. (a) If the adoption of or any change
in any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Letter of Credit, any
Application or any Eurodollar Loan made by it, or change the basis of
taxation of payments to such Lender in respect thereof (except for
Non-Excluded Taxes covered by Section 2.20 and changes in the rate of
tax on or calculated by reference to the overall net or gross income of
such Lender);
(ii) shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement
against assets held by, deposits or other liabilities in or for the
account of, advances, loans or other extensions of credit by, or any
other acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit, or to reduce any amount
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47
receivable hereunder in respect thereof, then, in any such case, the Borrowers
shall promptly pay such Lender, upon its demand, any additional amounts
necessary to compensate such Lender for such increased cost or reduced amount
receivable. If any Lender becomes entitled to claim any additional amounts
pursuant to this Section, it shall promptly notify the Borrower Representative
(with a copy to the Administrative Agent) of the event by reason of which it has
become so entitled.
(b) If any Lender shall have determined that the adoption of
or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under or in respect of any Letter of
Credit to a level below that which such Lender or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time to time, after
submission by such Lender to the Borrower Representative (with a copy to the
Administrative Agent) of a written request therefor, the Borrowers jointly and
severally shall pay to such Lender such additional amount or amounts as will
compensate such Lender for such reduction.
(c) A certificate as to any additional amounts payable
pursuant to this Section submitted by any Lender to the Borrower Representative
(with a copy to the Administrative Agent) shall be conclusive in the absence of
manifest error. The obligations of the Borrowers pursuant to this Section shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.
2.20 Taxes. (a) All payments made by the Borrowers under this
Agreement shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding net or gross income taxes and franchise taxes (imposed in
lieu of income taxes) imposed on any Agent or any Lender, as a result of a
present or former connection between such Agent or such Lender and the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than any such
connection arising solely from such Agent's or such Lender's having executed,
delivered or performed its obligations or received a payment under, or enforced,
this Agreement or any other Loan Document). If any such non-excluded taxes,
levies, imposts, duties, charges, fees, deductions or withholdings
("Non-Excluded Taxes") are required to be withheld from any amounts payable to
any Agent or any Lender hereunder, the amounts so payable to such Agent or such
Lender shall be increased to the extent necessary to yield to such Agent or such
Lender (after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement, provided, however, that the Borrowers shall not be required to
increase any such amounts payable to any Agent or any Lender with respect to any
Non-Excluded Taxes (i) that are attributable to such
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48
Agent's or such Lender's failure to comply with the requirements of paragraph
(d) or (e) of this Section or (ii) that are United States withholding taxes
imposed on amounts payable to such Lender at the time the Lender becomes a party
to this Agreement, except to the extent that such Lender's assignor (if any) was
entitled, at the time of assignment, to receive additional amounts from the
Borrowers with respect to such Non-Excluded Taxes pursuant to Section 2.20(a).
(b) In addition, the Borrowers jointly and severally shall pay
any Other Taxes (other than taxes excludable under paragraph (a) of this
Section) to the relevant Governmental Authority in accordance with applicable
law.
(c) Whenever any Non-Excluded Taxes or Other Taxes are payable
by the Borrowers, as promptly as possible thereafter the Borrowers shall send to
the Administrative Agent for the account of the relevant Agent or Lender, as the
case may be, a certified copy of an original official receipt received by the
Borrowers showing payment thereof or, if such a receipt is not reasonably
available, other documentation reasonably satisfactory to the Administrative
Agent evidencing such payment. If the Borrowers fail to pay any Non-Excluded
Taxes or Other Taxes when due to the appropriate taxing authority or fails to
remit to the Administrative Agent the required receipts or other required
documentary evidence, the Borrowers shall indemnify the Administrative Agent and
the Lenders for any incremental taxes, interest or penalties that may become
payable by any Agent or any Lender as a result of any such failure. The
agreements in this Section 2.20 shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
(d) Each Agent or Lender that is not a United States person
within the meaning of Section 7701(a)(30) of the Code and the regulations
thereunder (a "Non-U.S. Lender") shall deliver to the Borrower Representative
and the Administrative Agent (or, in the case of a Participant, to the Lender
from which the related participation shall have been purchased) two copies of
either U.S. Internal Revenue Service Form 1001 or Form 4224, or, in the case of
a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under
Section 871(h) or 881(c) of the Code with respect to payments of "portfolio
interest" a statement substantially in the form of Exhibit H and a Form W-8, or
any subsequent versions thereof or successors thereto properly completed and
duly executed by such Non-U.S. Lender claiming complete exemption from, or a
reduced rate of, U.S. federal withholding tax on all payments by the Borrowers
under this Agreement and the other Loan Documents. Such forms shall be delivered
by each Non-U.S. Lender on or before the date it becomes a party to this
Agreement (or, in the case of any Participant, on or before the date such
Participant purchases the related participation). In addition, each Non-U.S.
Lender shall deliver such forms promptly upon the obsolescence or invalidity of
any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender
shall promptly notify the Borrower Representative at any time it determines that
it is no longer legally able to provide any previously delivered certificate to
the Borrowers (or any other form of certification adopted by the U.S. taxing
authorities for such purpose). Notwithstanding any other provision of this
paragraph, a Non-U.S. Lender shall not be required to deliver any form pursuant
to this paragraph that such Non-U.S. Lender is not legally able to deliver.
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49
(e) An Agent or Lender that is entitled to an exemption from
or reduction of non- U.S. withholding tax under the law of the jurisdiction in
which a Borrower is located, or any treaty to which such jurisdiction is a
party, with respect to payments under this Agreement shall deliver to the
Borrower Representative (with a copy to the Administrative Agent), at the time
or times prescribed by applicable law or reasonably requested by the Borrower
Representative, such properly completed and executed documentation prescribed by
applicable law as will permit such payments to be made without withholding or at
a reduced rate, provided that such Lender is legally entitled to complete,
execute and deliver such documentation and in such Lender's reasonable judgment
such completion, execution or submission would not materially prejudice the
legal position of such Lender.
2.21 Indemnity. To induce Lenders to provide the Eurodollar
Rate option on the terms provided herein, if (i) any Eurodollar Loans are repaid
in whole or in part prior to the last day of any applicable Interest Period
(whether that repayment is made pursuant to any provision of this Agreement or
any other Loan Document or is the result of acceleration, by operation of law or
otherwise), (ii) any Borrower shall default in payment when due of the principal
amount of or interest on any Eurodollar Loan, (iii) any Borrower shall default
in making any borrowing of, conversion into or continuation of Eurodollar Loans
after the Borrower Representative has given notice requesting the same in
accordance herewith, or (iv) any Borrower shall fail to make any prepayment of a
Eurodollar Loan after the Borrower Representative has given a notice thereof in
accordance herewith, the Borrowers shall jointly and severally indemnify and
hold harmless each Lender from and against all losses, costs and expenses
resulting from or arising from any of the foregoing. Such indemnification shall
include any loss (including loss of margin) or expense arising from the
reemployment of funds obtained by it or from fees payable to terminate deposits
from which such funds were obtained. For the purpose of calculating amounts
payable to a Lender under this subsection, each Lender shall be deemed to have
actually funded its relevant Eurodollar Loan through the purchase of a deposit
bearing interest at the Eurodollar Rate in an amount equal to the amount of that
Eurodollar Loan and having a maturity comparable to the relevant Interest
Period; provided, however, that each Lender may fund each of its Eurodollar
Loans in any manner it sees fit, and the foregoing assumption shall be utilized
only for the calculation of amounts payable under this subsection. This covenant
shall survive the termination of this Agreement and the payment of the Notes and
all other amounts payable hereunder. As promptly as practicable under the
circumstances, each Lender shall provide the Borrower Representative with its
written calculation of all amounts payable pursuant to this Section 2.21, and
such calculation shall be binding on the parties hereto unless the Borrower
Representative shall object in writing within ten (10) Business Days of receipt
thereof, specifying the basis for such objection in detail.
2.22 Illegality. Notwithstanding any other provision herein,
if the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Lender to
make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the
commitment of such Lender hereunder to make Eurodollar Loans, continue
Eurodollar Loans as such and convert Base Rate Loans to Eurodollar Loans shall
forthwith be canceled and (b) such Lender's Loans then outstanding as Eurodollar
Loans, if any, shall be converted automatically to Base Rate Loans on the
respective last days of the then current
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50
Interest Periods with respect to such Loans or within such earlier period as
required by law. If any such conversion of a Eurodollar Loan occurs on a day
which is not the last day of the then current Interest Period with respect
thereto, the Borrowers shall pay to such Lender such amounts, if any, as may be
required pursuant to Section 2.21.
2.23 Change of Lending Office. Each Lender agrees that, upon
the occurrence of any event giving rise to the operation of Section 2.19,
2.20(a) or 2.22 with respect to such Lender, it will, if requested by the
Borrower Representative, use reasonable efforts (subject to overall policy
considerations of such Lender) to designate another lending office for any Loans
affected by such event with the object of avoiding the consequences of such
event; provided, that such designation is made on terms that, in the sole
judgment of such Lender, cause such Lender and its lending office(s) to suffer
no economic, legal or regulatory disadvantage, and provided, further, that
nothing in this Section shall affect or postpone any of the obligations of any
Borrower or the rights of any Lender pursuant to Section 2.19, 2.20(a) or 2.22.
2.24 Reliance on Notices; Appointment of the Borrower
Representative. (a) The Administrative Agent shall be entitled to rely upon, and
shall be fully protected in relying upon, any Notice of Conversion/Continuation
or similar notice believed by the Administrative Agent to be genuine. The
Administrative Agent may assume that each Person executing and delivering such a
notice was duly authorized, unless the responsible individual acting thereon for
the Administrative Agent has actual knowledge to the contrary. Each Borrower
hereby designates the Borrower Representative as its representative and agent on
its behalf for the purposes of issuing Notices of Conversion/Continuation,
giving instructions with respect to the disbursement of the proceeds of the
Loans, selecting interest rate options, requesting Letters of Credit, giving and
receiving all other notices and consents hereunder or under any of the other
Loan Documents and taking all other actions (including in respect of compliance
with covenants) on behalf of any Borrower under the Loan Documents. The Borrower
Representative hereby accepts such appointment. The Administrative Agent and
each Lender may regard any notice or other communication pursuant to any Loan
Document from the Borrower Representative as a notice or communication from all
Borrowers, and may give any notice or communication required or permitted to be
given to any Borrower hereunder to the Borrower Representative on behalf of such
Borrower. Each Borrower agrees that each notice, election, representation and
warranty, covenant, agreement and undertaking made on its behalf by the Borrower
Representative shall be deemed for all purposes to have been made by such
Borrower and shall be binding upon and enforceable against such Borrower to the
same extent as if the same had been made directly by such Borrower.
(b) Each Borrower hereby indemnifies the Agents and each
Lender and holds each Agent and each Lender harmless from and against any and
all liabilities, expenses, losses, damages and claims of damage or injury
asserted against any Agent or any Lender by any Person arising from or incurred
by reason of the handling of the financing arrangements of the Borrowers as
provided herein, reliance by any Agent or any Lender on any request or
instruction from the Borrowing Representative or any other action taken by any
Agent or any Lender with respect to this Section 2.24(b) except due to willful
misconduct or gross (not mere) negligence by the indemnified party.
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51
(c) All Obligations shall be joint and several, and each
Borrower shall make payment upon the maturity of the Obligations by acceleration
or otherwise, and such obligation and liability on the part of each Borrower
shall in no way be affected by any extensions, renewals and forbearance granted
by any Agent or any Lender to any Borrower, failure of any Agent or any Lender
to give any Borrower notice of borrowing or any other notice, any failure of any
Agent or any Lender to pursue or preserve its rights against any Borrower, the
release by any Agent or any Lender of any Collateral now or thereafter acquired
from any Borrower, and such agreement by each Borrower to pay upon any notice
issued pursuant thereto is unconditional and unaffected by prior recourse by any
Agent or any Lender to the other Borrowers or any Collateral for such Borrower's
Obligations or the lack thereof.
(d) Each Borrower expressly waives any and all rights of
subrogation, reimbursement, indemnity, exoneration, contribution of any other
claim which such Borrower may now or hereafter have against the other Borrowers
or other Person directly or contingently liable for the Obligations hereunder,
or against or with respect to the other Borrower's property (including, without
limitation, any property which is Collateral for the Obligations), arising from
the existence or performance of this Agreement, until termination of this
Agreement and payment in full of the Obligations or the occurrence of an Event
of Default under Section 8(f).
SECTION 3. LETTERS OF CREDIT
3.1 Issuance. Subject to the terms and conditions of this
Agreement, the Administrative Agent and the Revolving Credit Lenders agree, from
time to time prior to the Revolving Credit Termination Date, upon the request of
the Borrower Representative on behalf of the applicable Borrower and for the
account of such Borrower, to cause letters of credit ("Letters of Credit") to be
issued by a bank or other legally authorized Person selected by or acceptable to
the Administrative Agent in its sole discretion (each, an "Issuing Lender") for
the account of such Borrower and guaranteed by the Administrative Agent;
provided, however, that if the Issuing Lender is a Revolving Credit Lender, then
such Letters of Credit shall not be guaranteed by the Administrative Agent but
rather each Revolving Credit Lender shall, subject to the terms and conditions
hereinafter set forth, purchase (or be deemed to have purchased) risk
participations in all such Letters of Credit issued with the written consent of
the Administrative Agent, as more fully described in Section 3.2(b). The
aggregate amount of all such L/C Obligations shall not at any time exceed the
lesser of (i) the L/C Commitment and (ii) the Total Revolving Credit Commitments
less the aggregate outstanding principal balance of the Revolving Credit Loans
and the Swing Line Loan, and (iii) the Borrowing Base less the aggregate
outstanding principal balance of the Revolving Credit Loans and the Swing Line
Loan. No Letter of Credit shall have an expiry date which is more than one year
following the date of issuance thereof, and neither the Administrative Agent nor
Revolving Credit Lenders shall be under any obligation to cause to be issued, or
purchase risk participations in, any Letter of Credit having an expiry date
which is later than the Revolving Credit Termination Date.
3.2 Loans Automatic; Participations. (a) In the event that the
Administrative Agent or any Revolving Credit Lender shall make any payment on or
pursuant to any L/C
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52
Obligation, the Borrowers jointly and severally shall be irrevocably obligated
to reimburse such amount, and such reimbursement obligation shall then be deemed
automatically to constitute a Revolving Credit Loan under Section 2.4 of this
Agreement regardless of whether a Default or Event of Default shall have
occurred and be continuing and notwithstanding any Borrower's failure to satisfy
the conditions precedent set forth in Section 5, and each Revolving Credit
Lender shall be obligated to pay its Revolving Credit Percentage thereof in
accordance with this Agreement. The failure of any Revolving Credit Lender to
make available to the Administrative Agent for the Administrative Agent's own
account its Revolving Credit Percentage of any such Revolving Credit Loan or
payment by the Administrative Agent under or in respect of a Letter of Credit
shall not relieve any other Revolving Credit Lender of its obligation hereunder
to make available to the Administrative Agent its Revolving Credit Percentage
thereof, but no Revolving Credit Lender shall be responsible for the failure of
any other Revolving Credit Lender to make available such other Revolving Credit
Lender's Revolving Credit Percentage of any such payment.
(b) If it shall be illegal or unlawful for the Borrowers to
incur Revolving Credit Loans as contemplated by paragraph (a) above because of
an Event of Default described in Section 8(f) or otherwise or if it shall be
illegal or unlawful for any Revolving Credit Lender to be deemed to have assumed
a ratable share of the reimbursement obligations owed to an Issuing Lender, or
if the Issuing Lender is a Revolving Credit Lender, then (i) immediately and
without further action whatsoever, each Revolving Credit Lender shall be deemed
to have irrevocably and unconditionally purchased from the Administrative Agent
(or such Issuing Lender, as the case may be) an undivided interest and
participation equal to such Revolving Credit Lender's Revolving Credit
Percentage of the L/C Obligations in respect of all Letters of Credit then
outstanding and (ii) thereafter, immediately upon issuance of any Letter of
Credit, each Revolving Credit Lender shall be deemed to have irrevocably and
unconditionally purchased from the Administrative Agent (or such Issuing Lender,
as the case may be) an undivided interest and participation in such Revolving
Credit Lender's Revolving Credit Percentage of the L/C Obligations with respect
to such Letter of Credit on the date of such issuance. Each Revolving Credit
Lender shall fund its participation in all payments or disbursements made under
the Letters of Credit in the same manner as provided in this Agreement with
respect to Revolving Credit Loans.
3.3 Cash Collateral. (a) If the Borrowers are required to
provide cash collateral for any L/C Obligations pursuant to this Agreement prior
to the Revolving Credit Termination Date, the Borrowers will pay to the
Administrative Agent for the benefit of the Revolving Credit Lenders cash or
Cash Equivalents in an amount equal to 105% of the maximum amount then available
to be drawn under each applicable Letter of Credit outstanding for the benefit
of the Borrowers. Such funds or Cash Equivalents shall be held by the
Administrative Agent in a cash collateral account (the "Cash Collateral
Account") maintained at a bank or financial institution acceptable to the
Administrative Agent. The Cash Collateral Account shall be in the name of the
Administrative Agent and shall be pledged to, and subject to the sole dominion
and control of, the Administrative Agent, for the benefit of the Administrative
Agent and the Lenders, in a manner satisfactory to the Administrative Agent.
Each Borrower hereby pledges and grants to the Administrative Agent, on behalf
of Lenders, a security interest in all such funds and Cash
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53
Equivalents held in the Cash Collateral Account from time to time and all
proceeds thereof, as security for the payment of all amounts due in respect of
the L/C Obligations and other Obligations, whether or not then due.
(b) If any L/C Obligations, whether or not then due and
payable, shall for any reason be outstanding on the Revolving Credit Termination
Date, the Borrowers shall either (i) provide cash collateral therefor in the
manner described above, (ii) cause all such Letters of Credit and guaranties
thereof to be canceled and returned, or (iii) deliver a stand-by letter (or
letters) of credit in guarantee of such L/C Obligations, which stand-by letter
(or letters) of credit shall be of like tenor and duration (plus thirty (30)
additional days) as, and in an amount equal to 105% of, the aggregate maximum
amount then available to be drawn under, the Letters of Credit to which such
outstanding L/C Obligations relate and shall be issued by a Person, and shall be
subject to such terms and conditions, as are be satisfactory to the
Administrative Agent in its sole discretion.
(c) From time to time after funds are deposited in the Cash
Collateral Account by the Borrowers, whether before or after the Revolving
Credit Termination Date, the Administrative Agent may apply such funds or Cash
Equivalents then held in the Cash Collateral Account to the payment of any
amounts, in such order as the Administrative Agent may elect, as shall be or
shall become due and payable by the Borrowers to the Lenders with respect to
such L/C Obligations of Borrowers and, upon the satisfaction in full of all L/C
Obligations of Borrowers, to any other Obligations of the Borrowers then due and
payable.
(d) Neither the Borrowers nor any Person claiming on behalf of
or through the Borrowers shall have any right to withdraw any of the funds or
Cash Equivalents held in the Cash Collateral Account, except that upon the
termination of all L/C Obligations and the payment of all amounts payable by the
Borrowers to the Lenders in respect thereof, any funds remaining in the Cash
Collateral Account shall be applied to other Obligations when due and owing and
upon payment in full of such Obligations, any remaining amount shall be paid to
the Borrowers or as otherwise required by law.
3.4 Fees and Expenses. The Borrowers agree to pay to the
Administrative Agent for the benefit of the Revolving Credit Lenders, as
compensation to such Lenders for L/C Obligations incurred hereunder, (x) all
costs and expenses incurred by the Administrative Agent or any Lender on account
of such L/C Obligations, and (y) for each month during which any L/C Obligation
shall remain outstanding, a fee (the "Letter of Credit Fee") in an amount equal
to the Applicable Margin then in effect with respect to Eurodollar Loans
multiplied by the maximum amount available from time to time to be drawn under
the applicable Letter of Credit. Such fee shall be paid to the Administrative
Agent for the benefit of the Revolving Credit Lenders in arrears, on the first
day of each month. In addition, the Borrowers shall pay to any Issuing Lender,
on demand, such fees (including all per annum fees), charges and expenses of
such Issuing Lender in respect of the issuance, negotiation, acceptance,
amendment, transfer and payment of such Letter of Credit or otherwise payable
pursuant to the application and related documentation under which such Letter of
Credit is issued.
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54
3.5 Request for Issuance of Letters of Credit. The Borrower
Representative shall give the Administrative Agent at least two (2) Business
Days prior written notice requesting the issuance of any Letter of Credit,
specifying the date such Letter of Credit is to be issued, identifying the
beneficiary and the Borrower to which such Letter of Credit relates and
describing the nature of the transactions proposed to be supported thereby. The
notice shall be accompanied by the form of the Letter of Credit (which shall be
acceptable to the Issuing Lender) to be guarantied and, to the extent not
previously delivered to the Administrative Agent, copies of all agreements
between the Borrowers and the Issuing Lender pertaining to the issuance of
Letters of Credit. Notwithstanding anything contained herein to the contrary,
Letter of Credit applications by the Borrower Representative and approvals by
the Administrative Agent and the Issuing Lender may be made and transmitted
pursuant to electronic codes and security measures mutually agreed upon and
established by and among the Borrower Representative, the Administrative Agent
and the Issuing Lender.
3.6 Obligation Absolute. The obligation of the Borrowers to
reimburse the Administrative Agent and the Revolving Credit Lenders for payments
made with respect to any L/C Obligation shall be absolute, unconditional and
irrevocable, without necessity of presentment, demand, protest or other
formalities, and the obligations of each Revolving Credit Lender to make
payments to the Administrative Agent with respect to Letters of Credit shall be
unconditional and irrevocable. Such obligations of the Borrowers and the
Revolving Credit Lenders shall be paid strictly in accordance with the terms
hereof under all circumstances including the following circumstances:
(a) any lack of validity or enforceability of any Letter of
Credit or this Agreement or the other Loan Documents or any other agreement;
(b) the existence of any claim, set-off, defense or other
right which any Borrower or any of their Affiliates or any Lender may at any
time have against a beneficiary or any transferee of any Letter of Credit (or
any Persons or entities for whom any such transferee may be acting), the
Administrative Agent, any Lender, or any other Person, whether in connection
with this Agreement, the Letter of Credit, the transactions contemplated herein
or therein or any unrelated transaction (including any underlying transaction
between any Borrower or any of their Affiliates and the beneficiary for which
the Letter of Credit was procured);
(c) any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(d) payment by the Administrative Agent (except as otherwise
expressly provided in Section 3.7(b)) or any Issuing Lender under any Letter of
Credit or guarantee thereof against presentation of a demand, draft or
certificate or other document which does not comply with the terms of such
Letter of Credit or such guarantee;
(e) any other circumstance or happening whatsoever, which is
similar to any of the foregoing; or
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(f) the fact that a Default or an Event of Default shall have
occurred and be continuing.
3.7 Indemnification; Nature of Lenders' Duties. (a) In
addition to amounts payable as elsewhere provided in this Agreement, each
Borrower hereby agrees to pay and to protect, indemnify, and save harmless the
Administrative Agent and each Lender from and against any and all claims,
demands, liabilities, damages, losses, costs, charges and expenses (including
attorneys' fees and allocated costs of internal counsel) which the
Administrative Agent or any Lender may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance of any Letter of Credit or guaranty
thereof, or (ii) the failure of the Administrative Agent or any Lender seeking
indemnification or of any Issuing Lender to honor a demand for payment under any
Letter of Credit or guaranty thereof as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto government or
Governmental Authority, in each case other than to the extent solely as a result
of the gross negligence or willful misconduct of the Administrative Agent or
such Lender (as finally determined by a court of competent jurisdiction).
(b) As between the Administrative Agent and any Lender and the
Borrowers, each Borrower assumes all risks of the acts and omissions of, or
misuse of any Letter of Credit by beneficiaries of any Letter of Credit. In
furtherance and not in limitation of the foregoing, to the fullest extent
permitted by law neither the Administrative Agent nor any Lender shall be
responsible: (i) for the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document issued by any party in connection with the
application for and issuance of any Letter of Credit, even if it should in fact
prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent
or forged; (ii) for the validity or sufficiency of any instrument transferring
or assigning or purporting to transfer or assign any Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, which
may prove to be invalid or ineffective for any reason; (iii) for failure of the
beneficiary of any Letter of Credit to comply fully with conditions required in
order to demand payment under such Letter of Credit; provided that, in the case
of any payment by the Administrative Agent under any Letter of Credit or
guaranty thereof, the Administrative Agent shall be liable to the extent such
payment was made solely as a result of its gross negligence or willful
misconduct (as finally determined by a court of competent jurisdiction) in
determining that the demand for payment under such Letter of Credit or guaranty
thereof complies on its face with any applicable requirements for a demand for
payment under such Letter of Credit or guaranty thereof; (iv) for errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher;
(v) for errors in interpretation of technical terms; (vi) for any loss or delay
in the transmission or otherwise of any document required in order to make a
payment under any Letter of Credit or guarantee thereof or of the proceeds
thereof; (vii) for the credit of the proceeds of any drawing under any Letter of
Credit or guarantee thereof; and (viii) for any consequences arising from causes
beyond the control of the Administrative Agent or any Lender. None of the above
shall affect, impair, or prevent the vesting of any of Administrative Agent's or
any Lender's rights or powers hereunder or under the Agreement.
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(c) Nothing contained herein shall be deemed to limit or to
expand any waivers, covenants or indemnities made by any Borrower in favor of
any Issuing Lender in any letter of credit application, reimbursement agreement
or similar document, instrument or agreement between any Borrower and such
Issuing Lender.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Agents and the Lenders to enter into this
Agreement and to make the Loans and issue or participate in the Letters of
Credit, each Borrower hereby represents and warrants to each Agent and each
Lender that:
4.1 Financial Condition. (a) The unaudited pro forma
consolidated balance sheet of Harvard and its consolidated Subsidiaries as at
September 30, 1998 (including the notes thereto) (the "Pro Forma Balance
Sheet"), copies of which have heretofore been furnished to each Lender, has been
prepared giving effect (as if such events had occurred on such date) to (i) the
Loans to be made on the Closing Date and the use of proceeds thereof and (ii)
the payment of fees and expenses in connection with the foregoing. The Pro Forma
Balance Sheet has been prepared based on the best information available to the
Borrower as of the date of delivery thereof, and presents fairly on a pro forma
basis the estimated financial position of Harvard and its consolidated
Subsidiaries as at September 30, 1998, assuming that the events specified in the
preceding sentence had actually occurred at such date.
(b) The audited consolidated balance sheets of Harvard and its
Subsidiaries as at September 30, 1996, September 30, 1997 and the related
consolidated statements of income and of cash flows for the fiscal years ended
on such dates, reported on by and accompanied by a qualified report from Price
Waterhouse LLP, present fairly the consolidated financial condition of Harvard
and its consolidated Subsidiaries as at such date, and the consolidated results
of its operations and its consolidated cash flows for the respective fiscal
years then ended. The unaudited consolidated balance sheet of Harvard and its
Subsidiaries as at June 30, 1998, and the related unaudited consolidated
statements of income and cash flows for the nine-month period ended on such
date, present fairly the consolidated financial condition of Harvard and its
consolidated Subsidiaries as at such date, and the consolidated results of its
operations and its consolidated cash flows for the nine-month period then ended
(subject to normal year-end audit adjustments). All such financial statements,
including the related schedules and notes thereto, have been prepared in
accordance with GAAP applied consistently throughout the periods involved
(except as approved by the aforementioned firm of accountants and disclosed
therein). The Borrowers and their Subsidiaries do not have any material
Guarantee Obligations, contingent liabilities and liabilities for taxes, or any
long-term leases or unusual forward or long-term commitments, including, without
limitation, any interest rate or foreign currency swap or exchange transaction
or other obligation in respect of derivatives, which are not reflected in the
most recent financial statements, including any notes thereto, referred to in
this paragraph. During the period from September 30, 1997 to and including the
date hereof there has been no Disposition by the Borrowers or their Subsidiaries
of any material part of their business or Property except as set forth on
Schedule 4.1.
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57
4.2 No Change. Since September 30, 1997 there has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect, other than the pendency of the Cases, the Disposition
of assets as set forth on Schedule 4.1 or as otherwise set forth on Schedule
4.2.
4.3 Corporate Existence; Compliance with Law. Each of the
Borrowers and their Subsidiaries (a) is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (b) has
the corporate power and authority, and the legal right, to own and operate its
Property, to lease the Property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of Property or the conduct of its business
requires such qualification and (d) is in compliance with all Requirements of
Law except to the extent that the failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect. As of
Closing Date, the current location of each Borrower's chief executive office and
principal place of business is set forth on Schedule 4.3, and none of such
locations have changed within the six (6) months preceding the Closing Date. In
addition, Schedule 4.3 lists the federal employee identification number of each
Borrower.
4.4 Corporate Power; Authorization; Enforceable Obligations.
Each Borrower has the corporate power and authority, and the legal right, to
make, deliver and perform the Loan Documents to which it is a party and to
borrow hereunder. Each Borrower has taken all necessary corporate action to
authorize the execution, delivery and performance of the Loan Documents to which
it is a party and to authorize the borrowings on the terms and conditions of
this Agreement. No consent or authorization of, filing with, notice to or other
act by or in respect of, any Governmental Authority or any other Person is
required in connection with the transactions contemplated hereby and the
borrowings hereunder or with the execution, delivery, performance, validity or
enforceability of this Agreement or any of the Loan Documents, except (i)
consents, authorizations, filings and notices described in Schedule 4.4, which
consents, authorizations, filings and notices have been obtained or made and are
in full force and effect and (ii) the filings referred to in Section 4.19. Such
execution, delivery and performance do not contravene any provision of any
Borrower's charter or by-laws. Each Loan Document has been duly executed and
delivered on behalf of each Borrower party thereto. This Agreement constitutes,
and each other Loan Document upon execution will constitute, a legal, valid and
binding obligation of each Borrower party thereto, enforceable against each such
Borrower 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
at law).
4.5 No Legal Bar. The execution, delivery and performance of
this Agreement and the other Loan Documents, the issuance of Letters of Credit,
the borrowings hereunder and the use of the proceeds thereof will not violate
any then-existing Requirement of Law or any then-existing Contractual Obligation
of the Borrowers or any of their Subsidiaries and will not
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58
result in, or require, the creation or imposition of any Lien on any of their
respective properties or revenues pursuant to any Requirement of Law or any such
Contractual Obligation (other than the Liens created by the Security Documents).
No Requirement of Law or Contractual Obligation applicable to the Borrowers or
any of their Subsidiaries could reasonably be expected to have a Material
Adverse Effect.
4.6 No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Borrowers, threatened by or against any Borrower or any
of their Subsidiaries or against any of their respective properties or revenues
(a) with respect to any of the Loan Documents or any of the transactions
contemplated hereby or thereby, or (b) which could reasonably be expected to
have a Material Adverse Effect. Except as set forth on Schedule 4.6, as of the
Closing Date, there is no litigation, investigation or proceeding pending or
threatened which seeks damages in excess of $250,000 or injunctive relief or
alleges criminal misconduct of any Borrower.
4.7 No Default. Neither the Borrowers nor any of their
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which could reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
4.8 Ownership of Property; Liens. Each of the Borrowers and
their Subsidiaries has title in fee simple to, or a valid leasehold interest in,
all its real property, and good title to, or a valid leasehold interest in, all
its other Property, and none of such Property is subject to any Lien except as
permitted by Section 7.3.
4.9 Intellectual Property. The Borrowers and each of their
Subsidiaries owns, or is licensed to use, all Intellectual Property necessary
for the conduct of their businesses as currently conducted. No material claim
has been asserted and is pending by any Person challenging or questioning the
use of any Intellectual Property or the validity or effectiveness of any
Intellectual Property, nor do the Borrowers know of any valid basis for any such
claim. To the best of the Borrowers' knowledge, the use of Intellectual Property
by the Borrowers and their Subsidiaries does not infringe on the rights of any
Person in any material respect.
4.10 Taxes. The Borrowers and each of their Subsidiaries have
filed or caused to be filed all Federal, state and other material tax returns
which are required to be filed and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it or any of their
Property and all other taxes, fees or other charges imposed on it or any of
their Property by any Governmental Authority (other than any the amount or
validity of which are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have been
provided on the books of the Borrowers or their Subsidiaries, as the case may
be); no tax Lien has been filed which is not being treated under the Plan of
Reorganization, and, to the knowledge of the Borrowers, no claim is being
asserted, with respect to any such tax, fee or other charge. Schedule 4.10 sets
forth as of the Closing Date those taxable years for which any Borrower's tax
returns are currently being audited by the
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Internal Revenue Service or other Governmental Authority and any assessments or
threatened assessments in connection with such audit, or otherwise currently
outstanding.
4.11 Federal Regulations. No part of the proceeds of any Loans
will be used for "purchasing" or "carrying" any "margin stock" within the
respective meanings of each of the quoted terms under Regulation U as now and
from time to time hereafter in effect or for any purpose which violates the
provisions of the Regulations of the Board. If requested by any Lender or the
Administrative Agent, the Borrowers will furnish to the Administrative Agent and
each Lender a statement to the foregoing effect in conformity with the
requirements of FR Form G-3 or FR Form U-1 referred to in Regulation U.
4.12 Labor Matters. There are no strikes or other labor
disputes against the Borrowers or any of their Subsidiaries pending or, to the
knowledge of the Borrowers, threatened that (individually or in the aggregate)
could reasonably be expected to have a Material Adverse Effect. Hours worked by
and payment made to employees of the Borrowers and their Subsidiaries have not
been in violation of the Fair Labor Standards Act or any other applicable
Requirement of Law dealing with such matters that (individually or in the
aggregate) could reasonably be expected to have a Material Adverse Effect. All
payments due from the Borrowers or any of their Subsidiaries on account of
employee health and welfare insurance that (individually or in the aggregate)
could reasonably be expected to have a Material Adverse Effect if not paid have
been paid or accrued as a liability on the books of such Borrower or the
relevant Subsidiary. Schedule 4.12 sets forth any collective bargaining
agreement, management agreement, consulting agreement or any employment
agreement to which any Borrower is a party or is bound (and true and complete
copies of any agreement described on Schedule 4.12 have been delivered to the
Administrative Agent).
4.13 ERISA. Except for the commencement of the Cases and
except as set forth in Schedule 4.13, neither a Reportable Event nor an
"accumulated funding deficiency" (within the meaning of Section 412 of the Code
or Section 302 of ERISA) has occurred during the five-year period prior to the
date on which this representation is made or deemed made with respect to any
Plan, and each Plan has complied in all material respects with the applicable
provisions of ERISA and the Code. No termination of a Single Employer Plan has
occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such
five-year period. Except as set forth in Schedule 4.13, the present value of all
accrued benefits under each Single Employer Plan (based on those assumptions
used to fund such Plans) did not, as of the last annual valuation date prior to
the date on which this representation is made or deemed made, exceed the value
of the assets of such Plan allocable to such accrued benefits by a material
amount. Neither the Borrowers nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan which has resulted or
could reasonably be expected to result in a material liability under ERISA, and
neither the Borrowers nor any Commonly Controlled Entity would become subject to
any material liability under ERISA if the Borrowers or any such Commonly
Controlled Entity were to withdraw completely from all Multiemployer Plans as of
the valuation date most closely preceding the date on which this representation
is made or deemed made. No such Multiemployer Plan is in Reorganization or
Insolvent. Schedule 4.13
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lists and separately identifies all Plans. Copies of all such listed Plans,
together with copy of the latest form 5500 for each such Plan, has been
delivered to the Administrative Agent.
4.14 Investment Company Act; Other Regulations. No Borrower is
an "investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. No
Borrower is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) which limits its ability to incur Indebtedness. No
Loan Party is subject to regulation under the Public Utility Holding Company Act
of 1935, the Federal Power Act, or any other federal or state statute that
restricts or limits its ability to incur Indebtedness or to perform its
obligations hereunder. The making of the Loans by the Lenders to the Borrowers,
the incurrence of the L/C Obligations on behalf of the Borrowers, the
application of the proceeds thereof and repayment thereof and the consummation
of the Plan of Reorganization will not violate any provision of any such statute
or any rule, regulation or order issued by the Securities and Exchange
Commission.
4.15 Subsidiaries. (a) The Subsidiaries listed on Schedule
4.15 constitute all the Subsidiaries of the Borrowers at the date hereof,
Schedule 4.15 sets forth as of the Closing Date the name and jurisdiction of
incorporation of each Subsidiary and, as to each such Subsidiary, the percentage
of each class of Capital Stock owned by any Borrower.
(b) There are no outstanding subscriptions, options, warrants,
calls, rights or other agreements or commitments (other than stock options
granted to employees or directors and directors' qualifying shares) of any
nature relating to any Capital Stock of the Borrowers or any of their
Subsidiaries, except as may be disclosed on Schedule 4.15.
(c) Except as set forth on Schedule 4.15, no Borrower has any
Subsidiaries, is engaged in any joint venture or partnership with any other
Person.
4.16 Use of Proceeds. The proceeds of the Loans and Letters of
Credit shall be used to (a) to refinance indebtedness and other obligations of
the Borrowers under the DIP Credit Facilities, (b) to pay fees and expenses in
connection with the Plan of Reorganization as confirmed by the Bankruptcy Court,
(c) to finance the working capital needs of the Borrowers in the ordinary course
of business and (d) for general corporate purposes.
4.17 Environmental Matters. Other than exceptions to any of
the following that could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect:
(a) the Borrowers and their Subsidiaries: (i) are, and within
the period of all applicable statutes of limitation have been, in
compliance with all applicable Environmental Laws; (ii) hold all
Environmental Permits (each of which is in full force and effect)
required for any of their current or intended operations or for any
property owned, leased, or otherwise operated by any of them; (iii)
are, and within the period of all applicable statutes of limitation
have been, in compliance with all of their Environmental Permits; and
(iv) reasonably believe that: each of their Environmental
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61
Permits will be timely renewed and complied with, without material
expense; any additional Environmental Permits that may be required of
any of them will be timely obtained and complied with, without material
expense; and compliance with any Environmental Law that is or is
expected to become applicable to any of them will be timely attained
and maintained, without material expense.
(b) Materials of Environmental Concern are not present at, on,
under, in, or about any real property now or formerly owned, leased or
operated by the Borrowers or any of their Subsidiaries, or at any other
location (including, without limitation, any location to which
Materials of Environmental Concern have been sent for re-use or
recycling or for treatment, storage, or disposal) which could
reasonably be expected to (i) give rise to liability of the Borrowers
or any of their Subsidiaries under any applicable Environmental Law or
otherwise result in costs to the Borrowers or any of their
Subsidiaries, or (ii) interfere with the Borrowers' or any of their
Subsidiaries' continued operations, or (iii) impair the fair saleable
value of any real property owned or leased by the Borrowers or any of
their Subsidiaries.
(c) There is no judicial, administrative, or arbitral
proceeding (including any notice of violation or alleged violation)
under or relating to any Environmental Law to which the Borrowers or
any of their Subsidiaries is, or to the knowledge of the Borrowers or
any of their Subsidiaries will be, named as a party that is pending or,
to the knowledge of the Borrowers or any of their Subsidiaries,
threatened.
(d) Neither the Borrowers nor any of their Subsidiaries have
received any written request for information, or been notified that
they are a potentially responsible party under or relating to the
federal Comprehensive Environmental Response, Compensation, and
Liability Act or any similar Environmental Law, or with respect to any
Materials of Environmental Concern.
(e) Neither the Borrowers nor any of their Subsidiaries have
entered into or agreed to any consent decree, order, or settlement or
other agreement, or is subject to any judgment, decree, or order or
other agreement, in any judicial, administrative, arbitral, or other
forum for dispute resolution, relating to compliance with or liability
under any Environmental Law.
(f) Neither the Borrowers nor any of their Subsidiaries have
assumed or retained, by contract or operation of law, any liabilities
of any kind, fixed or contingent, known or unknown, under any
Environmental Law or with respect to any Materials of Environmental
Concern.
4.18 Accuracy of Information, etc. No statement or information
contained in this Agreement, any other Loan Document, the Plan of Reorganization
and the disclosure statement related thereto, or any other document, certificate
or written statement furnished to the Administrative Agent or the Lenders or any
of them, by or on behalf of any Borrower for use in connection with the
transactions contemplated by this Agreement or the other Loan Documents,
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62
contained as of the date such statement, information, document or certificate
was so furnished, any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. The projections and pro forma financial information
contained in the materials referenced above are based upon good faith estimates
and assumptions believed by management of the Borrowers to be reasonable at the
time made, it being recognized by the Lenders that such financial information as
it relates to future events is not to be viewed as fact and that actual results
during the period or periods covered by such financial information may differ
from the projected results set forth therein by a material amount. There is no
fact known to any Borrower that could reasonably be expected to have a Material
Adverse Effect that has not been expressly disclosed herein, in the other Loan
Documents or in any other documents, certificates and statements furnished to
the Agents and the Lenders for use in connection with the transactions
contemplated hereby and by the other Loan Documents.
4.19 Security Documents. (a) The Collateral Agreement is
effective to create in favor of the Administrative Agent, for the benefit of the
Agents and the Lenders, a legal, valid and enforceable security interest in the
Collateral described therein and proceeds thereof. In the case of the Pledged
Stock described in the Collateral Agreement, when any stock certificates
representing such Pledged Stock are delivered to the Administrative Agent, and
in the case of the other Collateral described in the Collateral Agreement, when
financing statements in appropriate form are filed in the offices specified on
Schedule 4.19(a) (which financing statements have been duly completed and
executed and delivered to the Administrative Agent) and such other filings as
are specified on Schedule 3 to the Collateral Agreement (all of which filings
have been duly completed), the Collateral Agreement shall constitute a fully
perfected Lien on, and security interest in, all right, title and interest of
the Borrowers in such Collateral and the proceeds thereof, as security for the
Obligations (as defined in the Collateral Agreement), in each case prior and
superior in right to any other Person (except, in the case of Collateral other
than Pledged Stock, Liens permitted by Section 7.3).
(b) Each of the Mortgages is effective to create in favor of
the Administrative Agent, for the benefit of the Agents and the Lenders, a
legal, valid and enforceable Lien on the Mortgaged Properties described therein
and proceeds thereof, and when the Mortgages are filed in the offices specified
on Schedule 4.19(b), each such Mortgage shall constitute a fully perfected Lien
on, and security interest in, all right, title and interest of the Borrowers in
the Mortgaged Properties and the proceeds thereof, as security for the
Obligations (as defined in the relevant Mortgage), in each case prior and
superior in right to any other Person (except, in the case of collateral other
than Pledged Stock, Liens permitted by Section 7.3).
4.20 Solvency. The Borrowers are, and after giving effect to
the transactions contemplated hereby and the incurrence of all Indebtedness and
obligations being incurred in connection herewith and therewith will be, in the
aggregate, Solvent.
4.21 Regulation H. No Mortgage encumbers improved real
property which is located in an area that has been identified by the Secretary
of Housing and Urban Development
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63
as an area having special flood hazards and in which flood insurance has been
made available under the National Flood Insurance Act of 1968, except as set
forth on Schedule 4.21.
4.22 Year 2000 Matters. Any reprogramming required to permit
the proper functioning, in and following the year 2000, of (i) the Borrowers'
computer systems and (ii) equipment containing embedded microchips (including
systems and equipment supplied by others or with which the Borrowers' systems
interface) and the testing of all such systems and equipment, as so
reprogrammed, will be completed by September 30, 1999. The cost to the Borrowers
of such reprogramming and testing and of the reasonably foreseeable consequences
of year 2000 to the Borrowers (including, without limitation, reprogramming
errors and the failure of others' systems or equipment) will not result in a
Default or a Material Adverse Effect. Except for such of the reprogramming
referred to in the preceding sentence as may be necessary, the computer and
management information systems of the Borrowers and their Subsidiaries are and,
with ordinary course upgrading and maintenance, will continue for the term of
this Agreement to be, sufficient to permit the Borrowers to conduct their
businesses without Material Adverse Effect. The Borrowers have provided the
Administrative Agent with all assessments and plans relating to the ability of
the Borrowers' computer systems and equipment to properly function in and
following the year 2000.
4.23 Deposit and Disbursement Accounts. Schedule 4.23 lists
all banks and other financial institutions at which any Borrower maintains
deposits and/or other accounts as of the Closing Date, including any
Disbursement Accounts, and such Schedule correctly identifies the name, address
and telephone number of each depository, the name in which the account is held,
a description of the purpose of the account, and the complete account number.
4.24 Government Contracts. Except as set forth in Schedule
4.24, as of the Closing Date, no Borrower is a party to any contract or
agreement with any Governmental Authority and no Borrower's Accounts are subject
to the Federal Assignment of Claims Act, as amended (31 U.S.C. Section 3727) or
any similar state or local law.
4.25 Customer and Trade Relations. As of the Closing Date,
there exists no actual or, to the knowledge of any Borrower, threatened
termination or cancellation of, or any material adverse modification or change
in: the business relationship of any Borrower with any customer or group of
customers whose purchases during the preceding twelve (12) months caused them to
be ranked among the ten largest customers of such Borrower; or the business
relationship of any Borrower with any supplier material to its operations.
4.26 Agreements and Other Documents. As of the Closing Date,
each Borrower has provided or made available to the Administrative Agent or its
counsel, on behalf of the Lenders, accurate and complete copies (or summaries)
of all of the following agreements or documents to which any it is subject and
each of which are listed on Schedule 4.26: ten (10) largest supply agreements
and purchase agreements not terminable by such Borrower within sixty (60) days
following written notice issued by such Borrower; any lease of Equipment having
a remaining term of one year or longer and requiring aggregate rental and other
payments in excess of $500,000 per annum; licenses and permits held by the
Borrowers, the absence of
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which could be reasonably likely to have a Material Adverse Effect; instruments
or documents evidencing Indebtedness of such Borrower and any security interest
granted by such Borrower with respect thereto; and instruments and agreements
evidencing the issuance of any equity securities, warrants, rights or options to
purchase equity securities of such Borrower.
4.27 Disposition of Assets. Except as set forth in Schedule
4.27, as of the Closing Date, the Borrowers have not disposed of assets which
are set forth in the Appraisal and which have an aggregate orderly liquidation
value of more than $250,000.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Extension of Credit. The agreement
of each Lender to make the initial extension of credit requested to be made by
it is subject to the reasonable satisfaction, prior to or concurrently with the
making of such extension of credit on the Closing Date, of the following
conditions precedent:
(a) Loan Documents. The Syndication Agent and the
Administrative Agent shall have received (i) this Agreement, executed
and delivered by a duly authorized officer of each Borrower, (ii) the
Collateral Agreement, executed and delivered by a duly authorized
officer of each Borrower, (iii) a Mortgage covering each of the
Mortgaged Properties, executed and delivered by a duly authorized
officer of each party thereto, (iv) for the account of each relevant
Lender, Notes conforming to the requirements hereof and executed and
delivered by a duly authorized officer of each Borrower, and (v) the
Intercreditor Agreement, executed and delivered by a duly authorized
officer of each party thereto.
(b) Confirmation of Plan of Reorganization. The Bankruptcy
Court shall have entered a final order in form and substance reasonably
satisfactory to the Syndication Agent and the Administrative Agent (i)
confirming in accordance with Section 1129 of the Bankruptcy Code the
Plan of Reorganization and (ii) approving the Facilities and the Senior
Secured Notes in connection with implementation of the Plan of
Reorganization, which orders shall be in full force and effect and
shall not have been stayed, reversed, vacated or otherwise modified.
(c) Consummation of Plan of Reorganization. The Plan of
Reorganization shall have been consummated pursuant to documentation
reasonably satisfactory to the Syndication Agent and the Administrative
Agent, and no provision thereof shall have been waived (except for
Section 12.2(j) of the Plan of Reorganization), amended, supplemented
or otherwise modified.
(d) Pro Forma Balance Sheet; Financial Statements. The Lenders
shall have received (i) the Pro Forma Balance Sheet, (ii) audited
consolidated financial statements of Harvard and its Subsidiaries for
the 1996 and 1997 fiscal years and (iii) unaudited interim consolidated
financial statements of Harvard and its Subsidiaries for each
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65
quarterly period ended subsequent to the date of the latest applicable
financial statements delivered pursuant to clause (ii) of this
paragraph as to which such financial statements are available, and such
financial statements shall not, in the reasonable judgment of the
Lenders, reflect any material adverse change in the consolidated
financial condition of the Borrowers and their Subsidiaries, as
reflected in the financial statements.
(e) Approvals. All governmental and third party approvals
(including landlords' and other consents) necessary or, in the
reasonable discretion of the Syndication Agent and the Administrative
Agent, advisable in connection with the reorganization, the financing
contemplated hereby and the continuing operations of the Borrowers and
their Subsidiaries shall have been obtained and be in full force and
effect, and all applicable waiting periods shall have expired without
any action being taken or threatened by any competent authority which
would restrain, prevent or otherwise impose materially adverse
conditions on the transaction or the financing contemplated hereby.
(f) Related Agreements. The Administrative Agent shall have
received (in a form reasonably satisfactory to the Syndication Agent
and the Administrative Agent) true and correct copies, certified as to
authenticity by the Borrowers, of such documents or
instruments as may be reasonably requested by the Syndication Agent,
including, without limitation, a copy of any debt instrument, security
agreement or other material contract to which any Borrower may be a
party.
(g) Termination of DIP Credit Facilities. The Syndication
Agent and the Administrative Agent shall have received evidence
reasonably satisfactory to the Agents that the DIP Credit Facilities
shall be simultaneously terminated, all amounts thereunder shall be
simultaneously paid in full and arrangements satisfactory to the Agents
shall have been made for the termination of Liens and security
interests granted in connection therewith.
(h) Fees. The Lenders, the Agents and the Arranger shall have
received all fees required to be paid, and all expenses for which
invoices have been presented (including reasonable fees, disbursements
and other charges of counsel to the Agents), on or before the Closing
Date. All such amounts will be paid with proceeds of Loans made on the
Closing Date and will be reflected in the funding instructions given by
the Borrower Representative to the Administrative Agent on or before
the Closing Date.
(i) Reorganization Payments. The Syndication Agent and the
Administrative Agent shall have received information reasonably
satisfactory to them that the Borrowers' Reorganization Payments shall
not exceed $21,500,000 in the aggregate.
(j) Lien Searches. The Administrative Agent shall have
received the results of a recent lien search in each of the
jurisdictions where assets of the Borrowers are located, and such
search shall reveal no liens on any of the assets of the Borrowers
except for liens permitted by Section 7.3 and liens to be discharged
upon consummation of the Plan of Reorganization.
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66
(k) Accounts and Inventory Field Examination. The Lenders
shall have received copies of an accounts and inventory field
examination, prepared by or on behalf of the Administrative Agent, of
the accounts receivable and inventory of the Borrowers (excluding the
Arnold, Missouri facility).
(l) Senior Secured Notes. The Agents shall have received
evidence reasonably satisfactory to them that the transactions
contemplated in the note purchase agreement with respect to the Senior
Secured Notes shall have closed simultaneously with the Closing.
(m) Closing Certificate. The Syndication Agent and the
Administrative Agent shall have received a certificate of each
Borrower, dated the Closing Date, substantially in the form of Exhibit
C, with appropriate insertions and attachments.
(n) Legal Opinions. The Syndication Agent and the
Administrative Agent shall have received the following executed legal
opinions:
(i) the legal opinion of Willkie Farr &
Gallagher, counsel to the Borrowers and their Subsidiaries,
substantially in the form of Exhibit F-1; and
(ii) the legal opinion of local counsel in each
of Iowa, Michigan, Missouri, New Hampshire, Ohio,
Pennsylvania, South Carolina, Tennessee and Virginia and of
such other special and local counsel as may be required by the
Administrative Agent.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Syndication Agent
and the Administrative Agent may reasonably require.
(o) Pledged Stock; Stock Power; Pledged Notes. The
Administrative Agent shall have received (i) the certificates
representing the shares of Capital Stock pledged pursuant to the
Collateral Agreement, together with an undated stock power for each
such certificate executed in blank by a duly authorized officer of the
pledgor thereof and (ii) each promissory note pledged to the
Administrative Agent pursuant to the Collateral Agreement endorsed
(without recourse) in blank (or accompanied by an executed transfer
form in blank satisfactory to the Syndication Agent and the
Administrative Agent) by the pledgor thereof.
(p) Filings, Registrations and Recordings. Each document
(including, without limitation, any Uniform Commercial Code financing
statement) required by the Security Documents or under law or
reasonably requested by the Administrative Agent to be filed,
registered or recorded in order to create in favor of the
Administrative Agent, for the benefit of the Agents and the Lenders, a
perfected Lien on the Collateral described therein, prior and superior
in right to any other Person (other than with respect to Liens
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67
expressly permitted by Section 7.3), shall be in proper form for
filing, registration or recordation.
(q) Title Insurance; Flood Insurance. (i) If requested by the
Administrative Agent, the Administrative Agent shall have received, and
the title insurance company issuing the policy referred to in clause
(ii) below (the "Title Insurance Company") shall have received, maps or
plats of an as-built survey of the sites of the Mortgaged Properties
certified to the Administrative Agent and the Title Insurance Company
in a manner reasonably satisfactory to them, dated a date satisfactory
to the Administrative Agent and the Title Insurance Company by an
independent professional licensed land surveyor reasonably satisfactory
to the Administrative Agent and the Title Insurance Company, which maps
or plats and the surveys on which they are based shall be made in
accordance with the Minimum Standard Detail Requirements for Land Title
Surveys jointly established and adopted by the American Land Title
Association and the American Congress on Surveying and Mapping in 1992,
and, without limiting the generality of the foregoing, there shall be
surveyed and shown on such maps, plats or surveys the following: (A)
the locations on such sites of all the buildings, structures and other
improvements and the established building setback lines; (B) the lines
of streets abutting the sites and width thereof; (C) all visible and/or
recorded access and other easements appurtenant to the sites; (D) all
roadways, paths, driveways, encroachments and overhanging projections
and similar encumbrances affecting the site, recorded or apparent from
a physical inspection of the sites; (E) any encroachments on any
adjoining property by the building structures and improvements on the
sites; (F) if the site is described as being on a filed map, a legend
relating the survey to said map; and (G) the flood zone designations,
if any, in which the Mortgaged Properties are located.
(ii) The Administrative Agent shall have received in
respect of each Mortgaged Property a mortgagee's title insurance policy
(or policies) or marked up unconditional binder for such insurance.
Each such policy shall (A) be in an amount satisfactory to the
Administrative Agent; (B) insure that the Mortgage insured thereby
creates a valid first Lien on such Mortgaged Property; (C) name the
Administrative Agent for the benefit of the Lenders as the insured
thereunder; (D) be in the form of ALTA Loan Policy - 1970 (Amended
10/17/70 and 10/17/84) (or equivalent policies); (E) contain such
endorsements and affirmative coverage as the Administrative Agent may
reasonably request and (F) be issued by title companies satisfactory to
the Administrative Agent (including any such title companies acting as
co-insurers or reinsurers, at the option of the Administrative Agent).
The Administrative Agent shall have received evidence satisfactory to
it that all premiums in respect of each such policy, all charges for
mortgage recording tax, and all related expenses, if any, have been
paid.
(iii) For any property set forth on Schedule 4.21, if
requested by the Administrative Agent, the Administrative Agent shall
have received (A) a policy of flood insurance which (1) covers any
parcel of improved real property which is encumbered by any Mortgage
(2) is written in an amount not less than the outstanding principal
amount of the indebtedness secured by such Mortgage which is reasonably
allocable to such real
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68
property or the maximum limit of coverage made available with respect
to the particular type of property under the National Flood Insurance
Act of 1968, whichever is less, and (3) has a term ending not later
than the maturity of the Indebtedness secured by such Mortgage and (B)
confirmation that the Borrowers have received the notice required
pursuant to Section 208(e)(3) of Regulation H of the Board.
(iv) The Administrative Agent shall have received a copy of
all recorded documents referred to, or listed as exceptions to title
in, the title policy or policies referred to in clause (ii) above and a
copy of all other material documents affecting the Mortgaged
Properties.
(r) Insurance. The Administrative Agent shall have received
insurance certificates and Lender loss payable endorsements satisfying
the requirements of Section 4.2 of the Collateral Agreement.
5.2 Conditions to Each Extension of Credit. The agreement of
each Lender to make any extension of credit requested to be made by it on any
date (including, without limitation, its initial extension of credit) is subject
to the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by any Borrower in or pursuant to
the Loan Documents shall be true and correct as of such date.
(b) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the
extensions of credit requested to be made on such date.
(c) Material Adverse Effect. No Material Adverse Effect shall
have occurred since the Closing Date as determined by the Majority
Lenders, other than the pendency of the Cases, the Disposition of
assets as set forth on Schedule 4.1 or as otherwise set forth on
Schedule 4.2.
Each borrowing by and issuance of a Letter of Credit on behalf of the Borrowers
hereunder shall constitute a representation and warranty by the Borrowers as of
the date of such extension of credit that the conditions contained in this
Section 5.2 have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
The Borrowers hereby agree that, so long as the Commitments
remain in effect, any Letter of Credit remains outstanding or any Loan or other
amount is owing to any Lender or any Agent hereunder, the Borrowers shall and
shall cause each of their Subsidiaries to:
6.1 Financial Statements. Furnish to each Agent and each
Lender
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(i) as soon as available, but in any event within 90 days
after the end of each fiscal year of the Borrowers (except, with
respect to the fiscal year ending September 30, 1998, within 120 days),
a copy of the audited consolidated and unaudited consolidating balance
sheet of Harvard and its consolidated Subsidiaries as at the end of the
such year and the related audited consolidated and unaudited
consolidating statements of income and of cash flows for such year,
setting forth in each case in comparative form the figures for the
previous year, reported on without a "going concern" or like
qualification or exception (except with respect to the fiscal year
ending September 30, 1998), or qualification arising out of the scope
of the audit, by Arthur Andersen LLP or other independent certified
public accountants of nationally recognized standing;
(ii) as soon as available, but in any event not later than 45
days after the end of each of the first three quarterly periods of each
fiscal year of the Borrowers (except, with respect to quarterly periods
during the fiscal year ending September 30, 1999, not later than 60
days), the unaudited consolidated and consolidating balance sheet of
Harvard and its consolidated Subsidiaries as at the end of such quarter
and the related unaudited consolidated and consolidating statements of
income and of cash flows for such quarter and the portion of the fiscal
year through the end of such quarter, setting forth in each case in
comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments); and
(iii) as soon as available, but in any event not later than 45
days after the end of each month occurring during each fiscal year of
the Borrowers the unaudited consolidated balance sheets of Harvard and
its consolidated Subsidiaries as at the end of such month and the
related unaudited consolidated statements of income and of cash flows
for such month and the portion of the fiscal year through the end of
such month, setting forth in each case in comparative form the figures
for the previous year, certified by a Responsible Officer as being
fairly stated in all material respects (subject to normal year-end
audit adjustments);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail (except that interim
statements may be condensed and may exclude detailed footnote disclosure to the
extent consistent with applicable SEC rules and regulations) and in accordance
with GAAP applied consistently throughout the periods reflected therein and with
prior periods (except as approved by such accountants or officer, as the case
may be, and disclosed therein). Each Borrower executing this Agreement
authorizes the Administrative Agent and, so long as a Default or Event of
Default shall have occurred and be continuing, each Lender, to communicate
directly with its independent certified public accountants including Arthur
Andersen LLP, and authorizes and shall instruct those accountants and advisors
to disclose and make available to the Administrative Agent and each Lender any
and all Financial Statements and other supporting financial documents, schedules
and information relating to any Borrower (including copies of any issued
management letters) with respect to the business, financial condition and other
affairs of any Borrower.
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6.2 Certificates; Other Information. Furnish to each Agent
and each Lender:
(a) concurrently with the delivery of the financial statements
referred to in Section 6.1(a), a certificate of the independent
certified public accountants reporting on such financial statements
(which certificate may be limited to accounting matters and disclaim
responsibility for legal interpretations) stating that in making the
examination necessary for such report no knowledge was obtained of any
Default or Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of any financial statements
pursuant to Section 6.1, (i) a certificate of a Responsible Officer
stating that, to the best of each such Responsible Officer's knowledge,
each Borrower during such period has observed or performed all of its
covenants and other agreements, and satisfied every condition,
contained in this Agreement and the other Loan 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 Default or Event
of Default except as specified in such certificate and (ii) in the case
of quarterly or annual financial statements, (x) a Compliance
Certificate containing all information and calculations necessary for
determining compliance by the Borrowers and their Subsidiaries with the
provisions of this Agreement referred to therein as of the last day of
the fiscal quarter or fiscal year of the Borrowers, as the case may be,
and (y) to the extent not previously disclosed to the Administrative
Agent, a listing of any county or state within the United States where
any Borrower keeps inventory or equipment and of any Intellectual
Property acquired by any Borrower since the date of the most recent
list delivered pursuant to this clause (y) (or, in the case of the
first such list so delivered, since the Closing Date) subject to the
reporting requirements contained in the Collateral Agreement;
(c) as soon as available, and in any event not later than 60
days after the end of each fiscal year of the Borrowers (except, with
respect to the fiscal year ending September 30, 1999, not later than 90
days), a detailed consolidated budget for the following fiscal year
(including a projected consolidated balance sheet of the Borrowers and
their Subsidiaries as of the end of the following fiscal year, and the
related consolidated statements of projected cash flow, projected
changes in financial position and projected income), and, as soon as
available, significant revisions, if any, of such budget and
projections with respect to such fiscal year (collectively, the
"Projections"), which Projections shall in each case be accompanied by
a certificate of a Responsible Officer stating that such Projections
are based on reasonable estimates, information and assumptions and that
such Responsible Officer has no reason to believe that such Projections
are incorrect or misleading in any material respect;
(d) within 45 days after the end of each fiscal quarter of the
Borrowers ending December 31, March 31 and June 30 and within 90 days
after the end of each fiscal quarter of the Borrowers ending September
30, a narrative discussion and analysis of the financial condition and
results of operations of the Borrowers and their Subsidiaries for such
fiscal quarter and for the period from the beginning of the then
current fiscal year to
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71
the end of such fiscal quarter, as compared to the portion of the
Projections covering such periods and to the comparable periods of the
previous year;
(e) within five days after the same are sent, copies of all
financial statements and reports which the Borrowers send to the
holders of any class of its debt securities or public equity securities
and, within five days after the same are filed, copies of all financial
statements and reports which the Borrowers may make to, or file with,
the SEC; and
(f) as soon as possible and in any event within 10 days of
obtaining knowledge thereof: (i) any development, event, or condition
that, individually or in the aggregate with other developments, events
or conditions, could reasonably be expected to result in the payment by
the Borrowers and their Subsidiaries, in the aggregate, of a Material
Environmental Amount; (ii) any notice that any governmental authority
may deny any application for an Environmental Permit sought by, or
revoke or refuse to renew any Environmental Permit held by, the
Borrowers; and (iii) any letter or report arising out of the scope of
the audit, by Arthur Andersen LLP or other independent certified public
accountants.
6.3 Collateral Reports. The Borrower Representative, at its
own expense, shall deliver or cause to be delivered the following:
(a) To the Administrative Agent, upon its request, and in no
event less frequently than fifteen (15) Business Days after the end of
each fiscal month (together with a copy of all or any part of such
delivery requested by any Lender in writing after the Closing Date),
each of the following:
(i) a Borrowing Base Certificate accompanied by such
supporting detail and documentation as shall be requested by
the Administrative Agent in its reasonable discretion;
(ii) a summary of Inventory by location and type, in
each case accompanied by such supporting detail and
documentation as shall be requested by the Administrative
Agent in its reasonable discretion;
(iii) a monthly trial balance showing Accounts
outstanding (other than Accounts for the industrial and
aftermarket group) aged from invoice date as follows: 1 to 30
days, 31 to 60 days, 61 to 90 days and 91 days or more,
accompanied by such supporting detail and documentation as
shall be requested by the Administrative Agent in its
reasonable discretion;
(iv) a monthly trial balance showing Accounts
outstanding for the industrial and aftermarket group aged from
invoice date as follows: 1 to 30 days, 31 to 60 days, 61 to 90
days, 91 to 120 days and 121 days or more, accompanied by such
supporting detail and documentation as shall be requested by
the Administrative Agent in its reasonable discretion; and
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(v) a monthly report of Reorganization Payments and
other fees and expenses incurred in connection with the
Reorganization and the financing thereof and other amounts
payable under the Plan of Reorganization until such time as
the Borrowers shall have certified that all such fees and
expenses shall have been paid.
(b) To the Administrative Agent, on a weekly basis or at such
more frequent intervals as the Administrative Agent may request from
time to time (together with a copy of all or any part of such delivery
requested by any Lender in writing after the Closing Date), Collateral
Reports with respect to the Borrowers, including all additions and
reductions (cash and non-cash) with respect to Accounts of the
Borrowers, in each case accompanied by such supporting detail and
documentation as shall be requested by the Administrative Agent in its
reasonable discretion;
(c) To the Administrative Agent, at the time of delivery of
each of the monthly financial statements delivered pursuant to Section
6.1, a reconciliation of the Accounts trial balance and month-end
Inventory reports of the Borrowers to each Borrower's general ledger
and monthly financial statements delivered pursuant to such Section
6.1, in each case accompanied by such supporting detail and
documentation as shall be requested by the Administrative Agent in its
reasonable discretion;
(d) To the Administrative Agent, at the time of delivery of
each of the quarterly financial statements delivered pursuant to
Section 6.1, (i) a listing of government contracts of each Borrower
subject to the Federal Assignment of Claims Act of 1940; and (ii) a
list of any applications for the registration of any Patent, Trademark
or Copyright with the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency which
any Borrower thereof has filed in the prior fiscal quarter;
(e) To the Administrative Agent, the results of each physical
verification, if any, which the Borrowers or any of their Subsidiaries
may in their discretion have made, or caused any other Person to have
made on their behalf, of all or any portion of their Inventory (and, if
a Default or an Event of Default shall have occurred and be continuing,
the Borrowers shall, upon the request of the Administrative Agent,
conduct, and deliver the results of, such physical verifications as the
Administrative Agent may require);
(f) To the Administrative Agent such appraisals of its assets
as the Administrative Agent may request at any time after the
occurrence and during the continuance of a Default or an Event of
Default, such appraisals to be conducted by an appraiser, and in form
and substance, satisfactory to the Administrative Agent; and
(g) To the Administrative Agent such other reports, statements
and reconciliations with respect to the Borrowing Base or Collateral of
any or all Borrowers as the Administrative Agent shall from time to
time request in its reasonable discretion.
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6.4 Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all its material 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 Borrowers or their Subsidiaries, as the case may
be.
6.5 Conduct of Business and Maintenance of Existence, etc. (a)
(i) Preserve, renew and keep in full force and effect its corporate existence
and (ii) take all reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of its business, except,
in each case, as otherwise permitted by Section 7.4 and except, in the case of
clause (ii) above, to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect; (b) comply with all Contractual
Obligations and Requirements of Law except to the extent that failure to comply
therewith could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect; and (c) transact business only in such corporate and trade names
as are set forth in Schedule 6.5.
6.6 Maintenance of Property; Insurance. (a) (i) Keep all
Property and systems useful and necessary in its business in good working order
and condition, ordinary wear and tear excepted and (ii) maintain with
financially sound and reputable insurance companies insurance on all its
Property in at least such amounts and against at least such risks (but including
in any event public liability, product liability and business interruption) as
are usually insured against in the same general area by companies engaged in the
same or a similar business.
(b) At their sole cost and expense, maintain the policies of
insurance described on Schedule 6.6 as in effect on the date hereof or otherwise
in form and amounts and with insurers acceptable to the Administrative Agent. If
any Borrower at any time or times hereafter shall fail to obtain or maintain any
of the policies of insurance required above or to pay all premiums relating
thereto, the Administrative Agent may at any time or times thereafter obtain and
maintain such policies of insurance and pay such premiums and take any other
action with respect thereto which the Administrative Agent deems advisable. The
Administrative Agent shall have no obligation to obtain insurance for any
Borrower or pay any premiums therefor. By doing so, the Administrative Agent
shall not be deemed to have waived any Default or Event of Default arising from
any Borrower's failure to maintain such insurance or pay any premiums therefor.
All sums so disbursed, including attorneys' fees, court costs and other charges
related thereto, shall be payable on demand by the Borrowers to the
Administrative Agent and shall be additional Obligations hereunder secured by
the Collateral.
(c) The Administrative Agent reserves the right at any time
upon any change in any Borrower's risk profile (including any change in the
product mix maintained by any Borrower or any laws affecting the potential
liability of such Borrower) to require additional forms and limits of insurance
to, in the Administrative Agent's reasonable opinion, adequately protect both
the Administrative Agent's and the Lenders' interests in all or any portion of
the Collateral and to ensure that each Borrower is protected by insurance in
amounts and with coverage customary for its industry. If reasonably requested by
the Administrative Agent, each
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Borrower shall deliver to the Administrative Agent from time to time a report of
a reputable insurance broker, reasonably satisfactory to the Administrative
Agent, with respect to its insurance policies.
(d) Each Borrower shall deliver to the Administrative Agent,
in form and substance reasonably satisfactory to the Administrative Agent,
endorsements to (i) all "All Risk" and business interruption insurance naming
Administrative Agent, on behalf of itself and the Lenders, as loss payee, and
(ii) all general liability and other liability policies naming the
Administrative Agent, on behalf of itself and the Lenders, as additional
insured. Each Borrower irrevocably makes, constitutes and appoints the
Administrative Agent (and all officers, employees or the Administrative Agents
designated by the Administrative Agent), so long as any Default or Event of
Default shall have occurred and be continuing or the anticipated insurance
proceeds exceed $250,000, as such Borrower's true and lawful agent and
attorney-in-fact for the purpose of making, settling and adjusting claims under
such "All Risk" policies of insurance, endorsing the name of such Borrower on
any check or other item of payment for the proceeds of such "All Risk" policies
of insurance and for making all determinations and decisions with respect to
such "All Risk" policies of insurance. The Administrative Agent shall have no
duty to exercise any rights or powers granted to it pursuant to the foregoing
power-of-attorney. The Borrower Representative shall promptly notify the
Administrative Agent of any loss, damage, or destruction to the Collateral in
the amount of $250,000 or more, whether or not covered by insurance. After
deducting from such proceeds the expenses, if any, incurred by the
Administrative Agent in the collection or handling thereof, the Administrative
Agent shall apply such proceeds to the reduction of the Obligations in
accordance with Section 2.12(c).
6.7 Inspection of Property; Books and Records; Discussions.
(a) 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 (b)
permit representatives of any Lender to visit and inspect any of its properties
and examine and make abstracts from any of its books and records (except to the
extent any such access is restricted by applicable law) at any reasonable time
during a Business Day and as often as may reasonably be desired and to discuss
the business, operations, properties and financial and other condition of the
Borrowers and their Subsidiaries with officers and employees of the Borrowers
and their Subsidiaries and with its independent certified public accountants. In
the absence of any Default or Event of Default, the Administrative Agent shall,
at the request of the Required Lenders, conduct not less than two (2) field
examination during each year this Agreement is in effect. Following the
occurrence and during the continuance of a Default or Event of Default, the
Administrative Agent shall conduct such field examinations as it, in its
reasonable credit judgment, deems appropriate.
6.8 Notices. Promptly give notice to the Administrative Agent
and each Lender of:
(a) the occurrence of any Default or Event of Default;
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(b) any (i) default or event of default under any Contractual
Obligation of any Borrower or any of their Subsidiaries or (ii)
litigation, investigation or proceeding which may exist at any time
between any Borrower or any of their Subsidiaries and any Governmental
Authority, which in either case, if not cured or if adversely
determined, as the case may be, could reasonably be expected to have a
Material Adverse Effect;
(c) any litigations or proceedings affecting the Borrowers or
any of their Subsidiaries in which the aggregate amount involved is
$1,000,000 or more and not covered by insurance or in which injunctive
or similar relief is sought;
(d) the following events, as soon as possible and in any event
within 30 days after any Borrower knows or has reason to know thereof:
(i) the occurrence of any Reportable Event with respect to any Plan, a
failure to make any required contribution to a Plan, the creation of
any Lien in favor of the PBGC or a Plan or any withdrawal from, or the
termination, Reorganization or Insolvency of, any Multiemployer Plan or
(ii) the institution of proceedings or the taking of any other action
by the PBGC or the Borrowers or any Commonly Controlled Entity or any
Multiemployer Plan with respect to the withdrawal from, or the
termination, Reorganization or Insolvency of, any Plan; and
(e) any development or event which has had or could reasonably
be expected to have a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action such Borrower or the relevant Subsidiary proposes to
take with respect thereto.
6.9 Environmental Laws. (a) Comply in all material respects
with, and ensure compliance in all material respects by all tenants and
subtenants, if any, with, all applicable Environmental Laws, and obtain and
comply in all material respects with and maintain, and ensure that all tenants
and subtenants obtain and comply in all material respects with and maintain, any
and all licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws.
(b) Conduct and complete all investigations, studies, sampling
and testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws.
6.10 Interest Rate Protection. In the case of the Borrower
Representative, within 90 days after the Closing Date, enter into Hedge
Agreements to the extent necessary to provide that at least $35,000,000 of the
Facilities is subject to interest rate protection, which Hedge Agreements shall
have terms and conditions reasonably satisfactory to the Administrative Agent.
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6.11 Additional Collateral, etc. (a) With respect to any
Property acquired after the Closing Date by any Borrower or any of their
Subsidiaries (other than (x) any fee or leasehold interest in any real property
or the Capital Stock of any new Subsidiary, (y) any Property subject to a Lien
expressly permitted by Section 7.3(g) to the extent Liens in favor of the
Lenders are not permitted thereby and (z) Property acquired by an Excluded
Foreign Subsidiary) as to which the Administrative Agent, for the benefit of the
Agents and the Lenders, does not have a perfected Lien, promptly (i) execute and
deliver to the Administrative Agent such amendments to the Collateral Agreement
or such other documents as the Administrative Agent deems necessary or advisable
to grant to the Administrative Agent, for the benefit of the Agents and the
Lenders, a security interest in such Property and (ii) take all actions
necessary or advisable to grant to the Administrative Agent, for the benefit of
the Agents and the Lenders, a perfected security interest in such Property,
including without limitation, the filing of Uniform Commercial Code financing
statements in such jurisdictions as may be required by the Collateral Agreement
or by law or as may be requested by the Administrative Agent.
(b) With respect to (i) any fee or leasehold interest in any
real property having a value (together with improvements thereof) of at least
$500,000 acquired after the Closing Date by the Borrowers or any of their
Subsidiaries (other than any such real property owned by an Excluded Foreign
Subsidiary or subject to a Lien expressly permitted by Section 7.3(g)) or (ii)
any Designated Facility not disposed of by the relevant Borrower within 180 days
of the Closing Date, promptly (A) execute and deliver a first priority Mortgage
in favor of the Administrative Agent, for the benefit of the Agents and the
Lenders, covering such real property, (B) if requested by the Administrative
Agent, provide the Lenders with (x) title and extended coverage insurance
covering such real property in an amount at least equal to the purchase price of
such real estate (or such other amount as shall be reasonably specified by the
Administrative Agent) as well as a current ALTA survey thereof, together with a
surveyor's certificate and (y) any consents or estoppels reasonably deemed
necessary or advisable by the Administrative Agent in connection with such
mortgage or deed of trust, each of the foregoing in form and substance
reasonably satisfactory to the Administrative Agent and (C) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
(c) With respect to any new Subsidiary (other than an Excluded
Foreign Subsidiary) created or acquired after the Closing Date (which, for the
purposes of this paragraph, shall include any existing Subsidiary that ceases to
be an Excluded Foreign Subsidiary), by the Borrowers or any of their
Subsidiaries, promptly (i) execute and deliver to the Administrative Agent such
amendments to the Collateral Agreement as the Administrative Agent deems
necessary or advisable to grant to the Administrative Agent, for the benefit of
the Lenders, a perfected first priority security interest in the Capital Stock
of such new Subsidiary which is owned by the Borrowers or any of their
Subsidiaries, (ii) deliver to the Administrative Agent the certificates
representing such Capital Stock, together with undated stock powers, in blank,
executed and delivered by a duly authorized officer of such Borrower or such
Subsidiary, as the case may be, (iii) cause such new Subsidiary (A) to become a
Borrower under this Agreement and a party to the Collateral Agreement and (B) to
take such actions necessary or advisable to
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grant to the Administrative Agent for the benefit of the Lenders a perfected
first priority security interest in the Collateral described in the Collateral
Agreement with respect to such new Subsidiary, including, without limitation,
the filing of Uniform Commercial Code financing statements in such jurisdictions
as may be required by the Collateral Agreement or by law or as may be requested
by the Administrative Agent, and (iv) if requested by the Administrative Agent,
deliver to the Administrative Agent legal opinions relating to the matters
described above, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent.
(d) With respect to any new Excluded Foreign Subsidiary
created or acquired after the Closing Date by the Borrowers or any of their
Subsidiaries, promptly (i) execute and deliver to the Administrative Agent such
amendments to the Collateral Agreement as the Administrative Agent deems
necessary or advisable in order to grant to the Administrative Agent, for the
benefit of the Lenders, a perfected first priority security interest in the
Capital Stock of such new Subsidiary which is owned by the Borrowers or any of
their Subsidiaries (provided that in no event shall more than 65% of the total
outstanding Capital Stock of any such new Subsidiary be required to be so
pledged), (ii) deliver to the Administrative Agent the certificates representing
such Capital Stock, together with undated stock powers, in blank, executed and
delivered by a duly authorized officer of such Borrower or such Subsidiary, as
the case may be, and take such other action as may be necessary or, in the
opinion of the Administrative Agent, desirable to perfect the Lien of the
Administrative Agent thereon, and (iii) if requested by the Administrative
Agent, deliver to the Administrative Agent legal opinions relating to the
matters described above, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent.
6.12 Further Assurances. In the case of the Borrowers, from
time to time execute and deliver, or cause to be executed and delivered, such
additional instruments, certificates or documents, and take all such actions, as
the Administrative Agent may reasonably request, for the purposes of
implementing or effectuating the provisions of this Agreement and the other Loan
Documents, or of more fully perfecting or renewing the rights of the
Administrative Agent and the Lenders with respect to the Collateral (or with
respect to any additions thereto or replacements or proceeds thereof or with
respect to any other property or assets hereafter acquired by the Borrowers
which may be deemed to be part of the Collateral) pursuant hereto or thereto.
Upon the exercise by the Administrative Agent or any Lender of any power, right,
privilege or remedy pursuant to this Agreement or the other Loan Documents which
requires any consent, approval, recording, qualification or authorization of any
Governmental Authority, the Borrowers will execute and deliver, or will cause
the execution and delivery of, all applications, certifications, instruments and
other documents and papers that the Administrative Agent or such Lender may be
required to obtain from the Borrowers or any of their Subsidiaries for such
governmental consent, approval, recording, qualification or authorization.
6.13 Cash Management Systems. (a) On or before the Closing
Date and until the Revolving Credit Termination Date, (i) establish lock boxes
("Lock Boxes") at one or more of the banks set forth on Schedule 6.13 (each, a
"Relationship Bank"), which banks shall be
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satisfactory to the Administrative Agent, and shall request in writing and
otherwise take such reasonable steps to ensure that all account debtors forward
payment directly to such Lock Boxes, and (ii) deposit and cause its domestic
Subsidiaries to deposit or cause to be deposited promptly, and in any event no
later than the first Business Day after the date of receipt thereof, all cash,
checks, drafts or other similar items of payment relating to or constituting
payments made in respect of any and all Collateral (whether or not otherwise
delivered to a Lock Box) into bank accounts in such Borrower's name or any such
Domestic Subsidiary's name (collectively, the "Borrower Accounts") at the
applicable Relationship Bank. On or before the Closing Date, the Borrower
Representative shall have established a concentration account in its name (the
"Concentration Account") at the bank which shall be designated as the
Concentration Account bank on Schedule 6.13 (the "Concentration Account Bank"),
which bank shall be satisfactory to the Administrative Agent.
(b) On or before the Closing Date (or such later date as
Administrative Agent shall consent to in writing), the Concentration Account
Bank and each Relationship Bank, shall have entered into a tri-party blocked
account agreement with the Administrative Agent, for the benefit of the
Administrative Agent and the Lenders, and the applicable Borrower and its
Domestic Subsidiaries, in form and substance acceptable to Administrative Agent,
which shall become operative on or prior to the Closing Date. Each such blocked
account agreement shall provide, among other things, that (i) all items of
payment deposited in such account and proceeds thereof deposited in the
Concentration Account are held by such bank as agent or bailee-in- possession
for the Administrative Agent, on behalf of Lenders, (ii) the bank executing such
agreement has no rights of setoff or recoupment or any other claim against such
account, as the case may be, other than for payment of its service fees and
other charges directly related to the administration of such account and for
returned checks or other items of payment, and (iii) from and after the Closing
Date, (A) with respect to banks at which a Borrower Account is located, such
Relationship Bank agrees to forward immediately all amounts in each Borrower
Account to the Concentration Account Bank and to commence the process of daily
sweeps from such Borrower Account into the Concentration Account, and (B) the
Concentration Account Bank agrees to immediately forward all amounts received in
the Concentration Account to the Collection Account through daily sweeps from
such Concentration Account into the Collection Account; provided, however, that
if any Relationship Bank has not entered into a tri-party blocked account
agreement on or prior to the Closing Date, the Borrowers shall (x) send a
direction letter to such Relationship Bank on the Closing Date irrevocably
instructing such Relationship Bank that all amounts in such Borrower Account are
to be forwarded immediately to the Concentration Account and (y) cause such
Relationship Bank to enter into a tri-party blocked account agreement by January
8, 1999. No Borrower shall, or shall cause or permit any Domestic Subsidiary
thereof to, accumulate or maintain cash in disbursement or payroll accounts as
of any date of determination in excess of checks outstanding against such
accounts as of that date and amounts necessary to meet minimum balance
requirements.
(c) So long as no Default or Event of Default has occurred and
is continuing, the Borrowers may amend Schedule 6.13 to add or replace a
Relationship Bank, any Lock Box, Borrower Account, or to replace any
Concentration Account or Disbursement Account; provided, however, (i) the
Administrative Agent shall have consented in writing in advance to
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any such replacement and (ii) prior to the time of the opening of a replacement
account or Lock Box, the applicable Borrower and the replacement Relationship
Bank shall have executed and delivered to the Administrative Agent a tri-party
blocked account agreement, in form and substance satisfactory to the
Administrative Agent. The Borrowers shall close any of their accounts (and
establish replacement accounts in accordance with the foregoing sentence)
promptly and in any event within thirty (30) days of notice from the
Administrative Agent that the creditworthiness of any bank holding an account is
no longer acceptable in the Administrative Agent's reasonable judgment, or as
promptly as practicable and in any event within sixty (60) days of notice from
the Administrative Agent that the operating performance, funds transfer and/or
availability procedures or performance with respect to accounts or lockboxes of
the bank holding such accounts or the Administrative Agent's liability under any
tri-party blocked account agreement with such bank is no longer acceptable in
the Administrative Agent's reasonable judgment.
(d) The Lock Boxes, Borrower Accounts, Disbursement Accounts
and the Concentration Accounts shall be cash collateral accounts, with all cash,
checks and other similar items of payment in such accounts securing payment of
the Loans and all other Obligations, and in which the Borrower and each
Subsidiary shall have granted a Lien to the Administrative Agent, on behalf of
the Agents and the Lenders, pursuant to the Collateral Agreement.
(e) All amounts deposited in the Collection Account shall be
deemed received by the Administrative Agent in accordance with Section 2.16(c)
and shall be applied (and allocated) by the Administrative Agent in accordance
with Section 2.18(d). In no event shall any amount be so applied unless and
until such amount shall have been credited in immediately available funds to the
Collection Account.
(f) The Borrower Representative may maintain an account (a
"Disbursement Account"; collectively, "Disbursement Accounts") at a bank
acceptable to the Administrative Agent into which the Administrative Agent
shall, from time to time, deposit proceeds of Revolving Credit Loans and Swing
Line Loans.
(g) Each Borrower shall and shall cause its Affiliates,
officers, employees, agents, directors or other Persons acting for or in concert
with the Borrower (each a "Related Person") to (i) hold in trust for the
Administrative Agent, for the benefit of the Agents and the Lenders, all checks,
cash and other items of payment in respect of Collateral received by such
Borrower or any such Related Person, and (ii) within one Business Day after
receipt by such Borrower or any such Related Person of any checks, cash or other
items or payment, deposit the same into a Borrower Account. Each Borrower
acknowledges and agrees that all cash, checks or items of payment constituting
proceeds of Collateral are the property of the Administrative Agent and the
Lenders. All proceeds of the sale or other disposition of any Collateral, shall
be deposited directly into the Borrower Accounts.
6.14 Supplemental Disclosure. From time to time as may be
requested by the Administrative Agent (which request will not be made more
frequently than once each year absent the occurrence and continuance of a
Default or an Event of Default), the Borrowers shall supplement each Schedule
hereto, or any representation herein or in any other Loan Document,
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80
with respect to any matter hereafter arising which, if existing or occurring at
the date of this Agreement, would have been required to be set forth or
described in such Schedule or as an exception to such representation or which is
necessary to correct any information in such Schedule or representation which
has been rendered inaccurate thereby (and, in the case of any supplements to any
Schedule, such Schedule shall be appropriately marked to show the changes made
therein); provided that (a) no such supplement to any such Schedule or
representation shall be or be deemed a waiver of any Default or Event of Default
resulting from the matters disclosed therein, except as consented to by the
Administrative Agent and the Required Lenders in writing; and (b) no supplement
shall be required as to representations and warranties that relate solely to the
Closing Date.
6.15 Intellectual Property. Each Borrower will conduct its
business and affairs without infringement of or interference with any
Intellectual Property of any other Person in any material respect.
6.16 Landlords' Agreements, Mortgagee Agreements and Bailee
Letters. Each Borrower shall use commercially reasonable efforts to obtain a
landlord's agreement, mortgagee agreement or bailee letter, as applicable, from
the lessor of each leased property or mortgagee of owned property or with
respect to any warehouse, processor or converter facility or other location
where Collateral is located, which agreement or letter shall contain a waiver or
subordination of all Liens or claims that the landlord, mortgagee or bailee may
assert against the Inventory or Collateral at that location, and shall otherwise
be satisfactory in form and substance to the Administrative Agent. With respect
to such locations or warehouse space leased or owned as of the Closing Date and
thereafter, if the Administrative Agent has not received a landlord or mortgagee
agreement or bailee letter as of the Closing Date (or, if later, as of the date
such location is acquired or leased), any Borrower's Eligible Inventory at that
location shall, in the Administrative Agent's discretion, be excluded from the
Borrowing Base or be subject to such Reserves as may be established by the
Administrative Agent in its reasonable credit judgment. After the Closing Date,
no real property or warehouse space shall be leased or acquired by any Borrower
and no Inventory shall be shipped to a processor or converter under arrangements
established after the Closing Date without the prior written consent of the
Administrative Agent (which consent, in the Administrative Agent's discretion,
may be conditioned upon the exclusion from the Borrowing Base of Eligible
Inventory at that location or the establishment of Reserves acceptable to the
Administrative Agent) or, unless and until a satisfactory landlord or mortgagee
agreement or bailee letter, as appropriate, shall first have been obtained with
respect to such location. Each Borrower shall timely and fully pay and perform
its obligations under all leases and other agreements with respect to each
leased location or public warehouse where any Collateral is or may be located.
6.17 Further Assurances. Each Borrower executing this
Agreement agrees that it shall, at such Borrower's expense and upon request of
the Administrative Agent, duly execute and deliver, or cause to be duly executed
and delivered, to the Administrative Agent such further instruments and do and
cause to be done such further acts as may be necessary or proper in the
reasonable opinion of the Administrative Agent to carry out more effectively the
provisions and purposes of this Agreement or any other Loan Document.
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81
6.18 Year 2000 Matters. The Borrowers shall complete any
reprogramming required to permit the proper functioning, in and following the
year 2000, of (i) the Borrowers' computer systems and (ii) equipment containing
embedded microchips (including systems and equipment supplied by others or with
which the Borrowers' systems interface) and the testing of all such systems and
equipment, as so reprogrammed, by September 30, 1999.
SECTION 7. NEGATIVE COVENANTS
The Borrowers and their respective Subsidiaries hereby agree
that, so long as the Commitments remain in effect, any Letter of Credit remains
outstanding or any Loan or other amount is owing to any Lender or any Agent
hereunder, the Borrowers shall not, and shall not permit any of their
Subsidiaries to, directly or indirectly:
7.1 Financial Condition Covenants.
(a) Consolidated Leverage Ratio. Permit the Consolidated
Leverage Ratio as at the last day of any period of four consecutive fiscal
quarters of the Borrowers (or, if less, the number of full fiscal quarters
subsequent to the Closing Date) ending with any fiscal quarter set forth below
to exceed the ratio set forth below opposite such fiscal quarter:
Consolidated
Fiscal Quarter Leverage Ratio
-------------- --------------
December 31, 1998 4.00
March 31, 1999 4.00
June 30, 1999 4.00
September 30, 1999 4.00
December 31, 1999 3.75
March 31, 2000 3.50
June 30, 2000 3.25
September 30, 2000 2.75
December 31, 2000 2.75
March 31, 2001 2.50
June 30, 2001 2.25
September 30, 2001 2.00
December 31, 2001 2.00
March 31, 2002 2.00
June 30, 2002 1.75
September 30, 2002 1.50
December 31, 2002 1.50
March 31, 2003 1.50
; provided, that for the purposes of determining the ratio described above for
the fiscal quarters of the Borrowers ending December 31, 1998, March 31, 1999
and June 30, 1999, Consolidated
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EBITDA for the relevant period shall be deemed to equal Consolidated EBITDA for
such fiscal quarter (and, in the case of the latter two such determinations,
each previous fiscal quarter commencing after the Closing Date) multiplied by 4,
2 and 4/3, respectively.
(b) Consolidated Interest Coverage Ratio. Permit the
Consolidated Interest Coverage Ratio for any period of four consecutive fiscal
quarters of the Borrowers (or, if less, the number of full fiscal quarters ended
subsequent to the Closing Date) ending with any fiscal quarter set forth below
to be less than the ratio set forth below opposite such fiscal quarter:
Consolidated Interest
Fiscal Quarter Coverage Ratio
-------------- ---------------------
December 31, 1998 2.25
March 31, 1999 2.25
June 30, 1999 2.25
September 30, 1999 2.25
December 31, 1999 2.50
March 31, 2000 2.75
June 30, 2000 3.00
September 30, 2000 3.50
December 31, 2000 3.50
March 31, 2001 3.50
June 30, 2001 3.75
September 30, 2001 4.00
December 31, 2001 4.00
March 31, 2002 4.00
June 30, 2002 4.00
September 30, 2002 4.00
December 31, 2002 4.00
March 31, 2003 4.00
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83
(c) Consolidated Fixed Charge Coverage Ratio. Permit the
Consolidated Fixed Charge Coverage Ratio for any period of four consecutive
fiscal quarters of the Borrowers ending with any fiscal quarter set forth below
to be less than the ratio set forth below opposite such fiscal quarter:
Consolidated Fixed
Fiscal Quarter Charge Coverage Ratio
-------------- ---------------------
September 30, 1999 1.10
December 31, 1999 1.25
March 31, 2000 1.25
June 30, 2000 1.25
September 30, 2000 1.25
December 31, 2000 1.50
March 31, 2001 1.75
June 30, 2001 2.00
September 30, 2001 2.75
December 31, 2001 1.00
March 31, 2002 1.00
June 30, 2002 1.00
September 30, 2002 1.00
December 31, 2002 1.00
March 31, 2003 1.00
7.2 Limitation on Indebtedness. Create, incur, assume or
suffer to exist any Indebtedness, except:
(a) Indebtedness of any Borrower pursuant to any Loan
Document;
(b) Indebtedness of any Borrower or any Subsidiary to any
other Borrower or any Subsidiary; provided, that each obligor of such
Indebtedness shall execute a demand note in form and substance
satisfactory to the Administrative Agent which shall be pledged and
delivered to the Administrative Agent pursuant to the Collateral
Agreement, and the obligations evidenced by such notes shall be
subordinated to the Obligations in a manner satisfactory to the
Administrative Agent;
(c) Indebtedness (including, without limitation, Capital Lease
Obligations) secured by Liens permitted by Section 7.3(g) in an
aggregate principal amount not to exceed $2,500,000 at any one time
outstanding;
(d) Indebtedness outstanding on the date hereof and listed on
Schedule 7.2(d) and any refinancings, refundings, renewals or
extensions thereof (without any increase in the principal amount
thereof or any shortening of the maturity of any principal amount
thereof);
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(e) Guarantee Obligations made in the ordinary course of
business by the Borrowers or any of their Subsidiaries of obligations
of the Borrowers;
(f) Indebtedness of a Person that becomes a Subsidiary after
the date hereof, provided that (i) such Indebtedness existed at the
time such Person became a Subsidiary and was not created in
anticipation thereof and (ii) immediately after giving effect to the
acquisition of such Person by a Borrower, no Default or Event of
Default shall have occurred and be continuing;
(g) Indebtedness (excluding Indebtedness described in clauses
(a) through (f) of this Section 7.2) not exceeding $500,000 in
aggregate principal amount at any one time outstanding;
(h) Indebtedness in connection with the Senior Secured Notes;
and
(i) Indebtedness of Trim Trends Canada Ltd. in an aggregate
amount not exceeding $2,000,000 at any time outstanding.
7.3 Limitation on Liens. Create, incur, assume or suffer to
exist any Lien upon any of its Property, whether now owned or hereafter
acquired, except for:
(a) Liens for taxes not yet billed, due or which are being
contested in good faith by appropriate proceedings, provided that
adequate reserves with respect thereto are maintained on the books of
the Borrowers or their Subsidiaries, as the case may be, in conformity
with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business which are not overdue for a period of more than 30 days or
which are being contested in good faith by appropriate proceedings;
(c) (i) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation and (ii) deposits securing liability to insurance carriers
under insurance or self-insurance arrangements and letters of credit
given in respect of the same;
(d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(e) easements, rights-of-way, restrictions, leases and
subleases and other similar encumbrances burdening the property which
in the aggregate do not in any case materially diminish the value of
the Property subject thereto or materially interfere with the ordinary
conduct of the business of the Borrowers or any of their Subsidiaries
conducted on the premises;
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85
(f) Liens in existence on the date hereof listed on Schedule
7.3(f), securing Indebtedness permitted by Section 7.2(d), provided
that no such Lien is spread to cover any additional Property (other
than after-acquired title in or on such property and the proceeds of
the existing collateral in accordance with the instrument creating such
Lien) after the Closing Date and that the amount of Indebtedness
secured thereby is not increased;
(g) Liens securing Indebtedness of the Borrowers or any of
their Subsidiaries incurred pursuant to Section 7.2(c) to finance the
acquisition of fixed or capital assets, provided that (i) such Liens
shall be created substantially simultaneously with the acquisition of
such fixed or capital assets, (ii) such Liens do not at any time
encumber any Property other than the Property financed by such
Indebtedness and (iii) the amount of Indebtedness secured thereby is
not increased in excess of the amount set forth in Section 7.2(c);
(h) Liens securing Indebtedness of the Borrowers or any of
their Subsidiaries incurred pursuant to Section 7.2(f), provided that
such Liens do not at any time encumber any Property other than the
Property financed by such Indebtedness;
(i) Liens created pursuant to the Security Documents;
(j) Liens in connection with the Senior Secured Notes;
provided, that such Liens do not encumber any asset not subject to a
Lien under the Security Documents;
(k) any interest or title of a lessor under any lease entered
into by the Borrowers or any of their Subsidiaries in the ordinary
course of its business and covering only the assets so leased;
. (l) Liens created to secure judgments or decrees entered
against any Borrower or involving the Borrowers and their Subsidiaries
taken as a whole liabilities which aggregate up to $1,000,000, which
judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 40 days from the entry thereof; and
. (m) Liens created on assets of Trim Trends Canada Ltd. to
secure Indebtedness of Trim Trends Canada Ltd. incurred pursuant to
Section 7.2(i).
7.4 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve themselves (or
suffer any liquidation or dissolution), or Dispose of all or substantially all
of its Property or business, except that:
(a) any Subsidiary of any Borrower may be merged or
consolidated with or into such Borrower (provided that such Borrower
shall be the continuing or surviving corporation);
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86
(b) any Subsidiary of any Borrower may Dispose of any or all
of its assets (upon voluntary liquidation or otherwise) to any
Borrower, and any Borrowers may dispose of a portion of its assets to
any other Borrower; and
(c) any Subsidiary of the Borrower may terminate its
existence, provided that such Subsidiary does not have any assets.
7.5 Limitation on Disposition of Property. Dispose of any of
its Property (including, without limitation, receivables and leasehold
interests), whether now owned or hereafter acquired, or, in the case of any
Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any
Person, except for the following (subject to the provisions of Section 2.12):
(a) the Disposition of obsolete or worn out property in the
ordinary course of business;
(b) the sale of inventory in the ordinary course of business;
(c) Dispositions permitted by Section 7.4(b);
(d) licenses, leases or subleases of tangible property in the
ordinary course of business;
(e) the sale or issuance of any Borrower's or Subsidiary's
Capital Stock to any Borrower or the sale or Issuance of Harvard's
Capital Stock to employees of a Borrower pursuant to employee benefit
plans;
(f) the sale or discount of overdue accounts receivable
arising in the ordinary course of business, but only in connection with
the compromise or collection thereof;
(g) the Disposition of the Designated Facilities; and
(h) the Disposition of other assets having a fair market value
not to exceed $15,000,000 in the aggregate for any fiscal year of the
Borrowers (but which sales price is not less than eighty percent (80%)
of the orderly liquidation value of any Equipment as set forth on the
Appraisal).
7.6 Limitation on Restricted Payments. Except with respect to
Trim Trends Canada Ltd., declare or pay any dividend (other than dividends
payable solely in common stock of the Person making such 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 Capital Stock of a Borrower or any of its Subsidiaries, 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 a
Borrower or any of its Subsidiaries (collectively, "Restricted Payments"),
except (a) any Borrower or any Subsidiary may make Restricted Payments to any
other Borrower, (b) issuances of shares of Capital Stock of Harvard
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87
upon the exercise of New Warrants (as defined in the Plan of Reorganization),
and (c) so long as no Default or Event of Default shall have occurred and be
continuing, Harvard may repurchase shares of Capital Stock of Harvard or options
to acquire shares of Capital Stock of Harvard issued to officers, directors,
employees or consultants of Harvard or any of its Subsidiaries (upon the death
or the cessation of employment of such officers, directors, employees or
consultants), but not in excess of $500,000 in the aggregate in any year.
7.7 Limitation on Capital Expenditures. Make or commit to make
any Capital Expenditure, except (a) Capital Expenditures of the Borrowers and
their Subsidiaries in the ordinary course of business not exceeding for any
fiscal period of the Borrowers set forth below the amount set forth below
opposite such fiscal period:
Period Amount
- ------ ------
6 months ended March 31, 1999 $20,000,000
Fiscal year ended September 30, 1999 26,500,000
Fiscal year ended September 30, 2000 27,500,000
Fiscal year ended September 30, 2001 22,500,000
Fiscal year ended September 30, 2002 22,500,000
; provided, that (i) up to an amount equal to ten percent of any such amount
referred to above, if not so expended in the fiscal year for which it is
permitted, may be carried over for expenditure in the next succeeding fiscal
year and (ii) Capital Expenditures made pursuant to this clause (a) during any
fiscal year shall be deemed made, first, in respect of amounts permitted for
such fiscal year as provided above and, second, in respect of amounts carried
over from the prior fiscal year pursuant to subclause (i) above, and (b) Capital
Expenditures made with the proceeds of any Reinvestment Deferred Amount.
7.8 Limitation on Investments. Make any advance, loan,
extension of credit (by way of guaranty or otherwise) or capital contribution
to, or purchase any Capital Stock, bonds, notes, debentures or other debt
securities of, or any assets constituting an ongoing business from, or make any
other investment in, any other Person (all of the foregoing, "Investments"),
except:
(a) extensions of trade credit in the ordinary course of
business;
(b) investments in Cash Equivalents;
(c) Investments arising in connection with the incurrence of
Indebtedness permitted by Section 7.2(b) and (e) ;
(d) loans and advances to employees of the Borrowers or any of
their Subsidiaries in the ordinary course of business (including,
without limitation, for travel,
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88
entertainment and relocation expenses) in an aggregate amount for the
Borrowers and their Subsidiaries not to exceed $500,000 at any one time
outstanding;
(e) Investments received in connection with the bankruptcy or
reorganization of suppliers and/or customers, or in settlement of
delinquent obligations of, or of other disputes with, customers and/or
suppliers;
(f) Investments in assets useful in the Borrowers' business
made by the Borrowers or any of their Subsidiaries with the proceeds of
any Reinvestment Deferred Amount or the proceeds of the sale of the
Designated Facilities;
(g) Investments (other than those relating to the incurrence
of Indebtedness permitted by Section 7.8(c)) by the Borrowers or any of
their Subsidiaries in any Borrower; and
. (h) Investments by any Borrower in Permitted Joint Ventures
that have an aggregate fair market value, taken together with all other
Investments made pursuant to this paragraph (h) that are at that time
outstanding, not to exceed $7.5 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, that (i) no more than $3.0 million of the aggregate amount of
Investments permitted by this paragraph (h) may be made in the form of
additional investments in the Permitted Joint Ventures and (ii) no more
than $4.5 million of the aggregate amount of Investments permitted by
this paragraph (h) may be made in the form of loans or advances made to
or on behalf of Hutchinson/Kingston-Warren LLC for the sole purpose of
funding the working capital needs, capital expenditures and other
general corporate or partnership needs of Hutchinson/Kingston-Warren
LLC in furtherance of its stated business purpose, provided, further,
the terms and conditions of such loans or advances require their
repayment to the Borrowers or that the Borrowers are repaid their
share of such expenditures.
7.9 Limitation on Modifications of Debt Instruments, etc. (a)
Make or offer to make any payment, prepayment, repurchase or redemption of, or
otherwise defease, the Senior Secured Notes, or segregate funds for any such
payment, prepayment, repurchase, redemption or defeasance (except as may be
permitted by Section 2.12(e)), and (b) amend, modify or otherwise change, or
consent or agree to any amendment, modification, waiver or other change to, any
of the terms of any Indebtedness (other than Indebtedness pursuant to this
Agreement) (other than any such amendment, modification, waiver or other change
which (i) would extend the maturity or reduce the amount of any payment of
principal thereof, reduce the rate or extend the date for payment of interest
thereon or relax any covenant or other restriction applicable to the Borrowers
or any of their Subsidiaries and (ii) does not involve the payment of a consent
fee), or amend its certificate of incorporation in any manner determined by the
Administrative Agent to be adverse to the Lenders.
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89
7.10 Limitation on Transactions with Affiliates. Enter into
any transaction, including, without limitation, any purchase, sale, lease or
exchange of Property, the rendering of any service or the payment of any
management, advisory or similar fees (other than usual and customary
compensation to officers and directors), with any Affiliate (other than another
Borrower or any Subsidiary or, subject to the limitations set forth in Section
7.8(h), any Permitted Joint Venture) unless such transaction is (a) set forth on
Schedule 7.10 or otherwise permitted under this Agreement, (b) in the ordinary
course of business of such Borrower or such Subsidiary, as the case may be, and
(c) upon fair and reasonable terms no less favorable to such Borrower or such
Subsidiary, as the case may be, than it would obtain in a comparable arm's
length transaction with a Person which is not an Affiliate.
7.11 Limitation on Sales and Leasebacks. Enter into any
arrangement with any Person providing for the leasing by any Borrower or any
Domestic Subsidiary of real or personal property which has been or is to be sold
or transferred by such Borrower or such Subsidiary to such Person or to any
other Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of such Borrower or such
Subsidiary.
7.12 Limitation on Changes in Fiscal Periods. Permit the
fiscal year of the Borrowers to end on a day other than September 30 or change
the Borrowers' method of determining fiscal quarters.
7.13 Limitation on Negative Pledge Clauses. Enter into or
suffer to exist or become effective any agreement which prohibits or limits the
ability of any Borrower or any Domestic Subsidiary to create, incur, assume or
suffer to exist any Lien upon any of its Property or revenues, whether now owned
or hereafter acquired, to secure the Obligations, other than (a) this Agreement
and the other Loan Documents, (b) any agreements governing any purchase money
Liens or Capital Lease Obligations otherwise permitted hereby (in which case,
any prohibition or limitation shall only be effective against the assets
financed thereby), (c) anti- assignment provisions in leases, licenses and other
ordinary course agreements, and (d) the collateral documents securing the Senior
Secured Notes.
7.14 Limitation on Restrictions on Subsidiary Distributions.
Enter into or suffer to exist or become effective any consensual encumbrance or
restriction on the ability of any Borrower or any Domestic Subsidiary to (a)
make Restricted Payments in respect of any Capital Stock of such Borrower or
such Subsidiary held by, or pay any Indebtedness owed to, any other Borrower or
any other Subsidiary, (b) make Investments in any other Borrower or any other
Subsidiary or (c) transfer any of its assets to any other Borrower or any other
Subsidiary, except for such encumbrances or restrictions existing under or by
reason of (i) any restrictions existing under the Loan Documents, (ii) any
restrictions with respect to a Borrower or a Subsidiary imposed pursuant to an
agreement which has been entered into in connection with the Disposition of all
or substantially all of the Capital Stock or assets of such Borrower or such
Subsidiary and (iii) anti-assignment provisions in leases, licenses and other
ordinary course agreements.
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7.15 Limitation on Lines of Business. Enter into any business,
either directly or through any Subsidiary, except for those businesses in which
the Borrowers and their Subsidiaries are engaged on the date of this Agreement
or which are reasonably related thereto or which are referred to in the
disclosure statement accompanying the Plan of Reorganization.
7.16 Materials of Environmental Concern. Cause or permit a
Release of any Materials of Environmental Concern on, at, in, under, above, to,
from or about any of the Mortgaged Properties where such Release would (a)
violate in any respect, or form the basis for any Environmental Liabilities
under, any Environmental Laws or Environmental Permits or (b) otherwise
adversely impact the value or marketability of any of the Mortgaged Properties
or any of the Collateral, other than such violations or Environmental
Liabilities which could not reasonably be expected to have a Material Adverse
Effect.
7.17 Change of Corporate Name or Location. (a) Change its
corporate name, or (b) change its chief executive office, principal place of
business, corporate offices or warehouses or locations at which Collateral is
held or stored, or the location of its records concerning the Collateral, in any
case without at least thirty (30) days prior written notice to the
Administrative Agent and after the Administrative Agent's written acknowledgment
that any reasonable action requested by the Administrative Agent in connection
therewith, including to continue the perfection of any Liens in favor of the
Administrative Agent, on behalf of the Lenders, in any Collateral, has been
completed or taken, and provided that any such new location shall be in the
United States. Without limiting the foregoing, no Borrower shall change its
name, identity or corporate structure in any manner which might make any
financing or continuation statement filed in connection herewith seriously
misleading within the meaning of Section 9-402(7) of the Code or any other then
applicable provision of the Code except upon prior written notice to the
Administrative Agent and the Lenders and after the Administrative Agent's
written acknowledgment that any reasonable action requested by the
Administrative Agent in connection therewith, including to continue the
perfection of any Liens in favor of the Administrative Agent, on behalf of the
Lenders, in any Collateral, has been completed or taken.
7.18 No Speculative Transactions. Engage in any transaction
involving commodity options, futures contracts or similar transactions, except
solely to hedge against fluctuations in the prices of commodities owned or
purchased by it and the values of foreign currencies receivable or payable by it
and interest swaps, caps or collars.
7.19 Reorganization Payments. Make any payment of
Reorganization Payments in an amount exceeding $21,500,000 in the aggregate.
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SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) Any Borrower shall fail to pay any principal of any Loan
or Reimbursement Obligation when due in accordance with the terms
hereof; or any Borrower shall fail to pay any interest on any Loan or
Reimbursement Obligation, or any other amount payable hereunder or
under any other Loan Document; or
(b) Any representation or warranty made or deemed made by any
Borrower herein or in any other Loan Document or which is contained in
any certificate, document or financial or other statement furnished by
it at any time under or in connection with this Agreement or any such
other Loan Document shall prove to have been inaccurate in any material
respect on or as of the date made or deemed made; or
(c) (i) Any Borrower shall default in the observance or
performance of any agreement contained in clause (i) or (ii) of Section
6.5(a) (with respect to the Borrowers only), Section 6.8(a), Section 7,
or Section 4 of the Collateral Agreement or (ii) an "Event of Default"
under and as defined in any Mortgage shall have occurred and be
continuing; or
(d) Any Borrower shall default in the observance or
performance of any other agreement contained in this Agreement or any
other Loan Document (other than as provided in paragraphs (a) through
(c) of this Section), and such default shall continue unremedied for a
period of 30 days; or
(e) Any Borrower or any of its Subsidiaries shall (i) default
in making any payment of any principal of any Indebtedness (including,
without limitation, any Guarantee Obligation, but excluding the Loans)
on the scheduled or original due date with respect thereto; or (ii)
default in making any payment of any interest on any such Indebtedness
beyond the period of grace, if any, provided in the instrument or
agreement under which such Indebtedness was created; or (iii) default
in the observance or performance of any other agreement or condition
relating to any such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or beneficiary
of such Indebtedness (or a trustee or agent on behalf of such holder or
beneficiary) to cause, with the giving of notice or the passage of time
if required, such Indebtedness to become due prior to its stated
maturity or (in the case of any such Indebtedness constituting a
Guarantee Obligation) to become payable; provided, that a default,
event or condition described in clause (i), (ii) or (iii) of this
paragraph (e) shall not at any time constitute an Event of Default
unless, at such time, one or more defaults, events or conditions of the
type described in clauses (i), (ii) and (iii) of this paragraph (e)
shall have occurred and be continuing with respect to Indebtedness the
outstanding principal amount of which exceeds in the aggregate
$1,000,000; or
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(f) (i) Any Borrower or any of its Subsidiaries shall commence
any case, proceeding or other action (A) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for
it or for all or any substantial part of its assets, or any Borrower or
any of its Subsidiaries shall make a general assignment for the benefit
of its creditors; or (ii) there shall be commenced against any Borrower
or any of its Subsidiaries any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the entry
of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of 60 days;
or (iii) there shall be commenced against any Borrower or any of its
Subsidiaries any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against
all or any substantial part of its assets which results in the entry of
an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 days from the
entry thereof; or (iv) any Borrower or any of its Subsidiaries shall
take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii), or (iii) above; or (v) any Borrower or any of its
Subsidiaries shall generally not, or shall be unable to, or shall admit
in writing its inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist
with respect to any Plan or any Lien in favor of the PBGC or a Plan
shall arise on the assets of any Borrower or any Commonly Controlled
Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the Required
Lenders, likely to result in the termination of such Plan for purposes
of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA, (v) an ERISA Event shall occur or (vi)
any other event or condition shall occur or exist with respect to a
Plan; and in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any,
could, in the sole judgment of the Required Lenders, reasonably be
expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against
Harvard or any of its Subsidiaries involving liabilities which taken as
a whole aggregate $1,000,000 or more, and all such judgments or decrees
shall not have been vacated, discharged, stayed or bonded pending
appeal within 40 days from the entry thereof; or
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93
(i) Any of the Security Documents shall cease, for any reason,
to be in full force and effect, or any Borrower or any Affiliate of any
Borrower shall so assert, or any Lien created by any of the Security
Documents shall cease to be enforceable and of the same effect and
priority purported to be created thereby; or
(j) (i) Any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), shall become, or obtain rights (whether
by means of warrants, options or otherwise) to become, the "beneficial
owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange
Act), directly or indirectly, of more than 50% of the outstanding
common stock of Harvard, (ii) the board of directors of Harvard shall
cease to consist of a majority of Continuing Directors, or (iii) the
occurrence of any "Change of Control" as defined in the indenture
relating to the Senior Secured Notes;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to any of the
Borrowers, automatically the Commitments shall immediately terminate and the
Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement and the other Loan Documents (including, without
limitation, all amounts of L/C Obligations, whether or not the beneficiaries of
the then outstanding Letters of Credit shall have presented the documents
required thereunder) shall immediately become due and payable, and (B) if such
event is any other Event of Default, either or both of the following actions may
be taken: (i) with the consent of the Majority Revolving Credit Facility
Lenders, the Administrative Agent may, or upon the request of the Majority
Revolving Credit Facility Lenders, the Administrative Agent shall, by notice to
the Borrower Representative declare the Revolving Credit Commitments to be
terminated forthwith, whereupon the Revolving Credit Commitments shall
immediately terminate; and (ii) with the consent of the Required Lenders, the
Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice to the Borrower Representative, declare
the Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement and the other Loan Documents (including, without
limitation, all amounts of L/C Obligations, whether or not the beneficiaries of
the then outstanding Letters of Credit shall have presented the documents
required thereunder) to be due and payable forthwith, whereupon the same shall
immediately become due and payable. With respect to all Letters of Credit with
respect to which presentment for honor shall not have occurred at the time of an
acceleration pursuant to this paragraph, the Borrowers shall at such time
deposit in a cash collateral account opened by the Administrative Agent an
amount equal to the aggregate then undrawn and unexpired amount of such Letters
of Credit. Amounts held in such cash collateral account shall be applied by the
Administrative Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay other
obligations of the Borrowers hereunder and under the other Loan Documents. After
all such Letters of Credit shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been satisfied and all other obligations of
the Borrowers hereunder and under the other Loan Documents shall have been paid
in full, the balance, if any, in such cash collateral account shall be returned
to the Borrowers (or such other Person as may be lawfully entitled thereto).
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94
SECTION 9. THE AGENTS
9.1 Appointment. Each Lender hereby irrevocably designates and
appoints the Agents as the agents of such Lender under this Agreement and the
other Loan Documents, and each such Lender irrevocably authorizes each Agent, in
such capacity, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the such Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement, no Agent shall have any duties or responsibilities,
except those expressly set forth herein, or any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against any Agent.
9.2 Delegation of Duties. Each Agent may execute any of its
duties under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. No Agent shall be responsible for the
negligence or misconduct of any agents or attorneys in-fact selected by it with
reasonable care.
9.3 Exculpatory Provisions. Neither any Agent nor any of their
respective 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 this Agreement or any
other Loan Document (except to the extent that any of the foregoing are found by
a final and nonappealable decision of a court of competent jurisdiction to have
resulted from its or such Person's own gross negligence or willful misconduct)
or (ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any Borrower or any officer
thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agents under or in connection with, this Agreement or any
other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
for any failure of any Borrower which is a party thereto to perform its
obligations hereunder or thereunder. The Agents shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of any Borrower.
9.4 Reliance by Agents. Each Agent shall be entitled to rely,
and shall be fully protected in relying, upon any instrument, writing,
resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or
teletype message, statement, order or other document 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 Borrowers), independent accountants and other
experts selected by such Agent. The Agents may deem and treat the payee of any
Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof
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95
shall have been filed with the Administrative Agent. Each Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or concurrence of
the Majority Facility Lenders with respect to the appropriate Facility (or, if
so specified by this Agreement, all Lenders) as it deems appropriate or it shall
first be indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Each Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
other Loan Documents in accordance with a request of the Required Lenders (or,
if so specified by this Agreement, all Lenders), and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Lenders
and all future holders of the Loans.
9.5 Notice of Default. No Agent shall be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless such Agent has received notice from a Lender or the Borrower
Representative referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event
that the Administrative Agent receives such a notice, the Administrative Agent
shall give notice thereof to the Lenders. The Administrative Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Majority Facility Lenders with respect to the
appropriate Facility (or, if so specified by this Agreement, all Lenders);
provided that unless and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the
Lenders.
9.6 Non-Reliance on Agents and Other Lenders. Each Lender
expressly acknowledges that neither the Agents nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or affiliates have
made any representations or warranties to it and that no act by any Agent
hereinafter taken, including any review of the affairs of a Borrower or any
affiliate of a Borrower, shall be deemed to constitute any representation or
warranty by any Agent to any Lender. Each Lender represents to the Agents that
it has, independently and without reliance upon any Agent or any other Lender,
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 Borrowers and their
affiliates and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon any Agent or any other Lender, 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 Agreement and the other Loan 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
Borrowers and their affiliates. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder, no Agent shall have any duty or responsibility to provide any Lender
with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness
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96
of any Borrower or any affiliate of a Borrower which may come into the
possession of such Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
9.7 Indemnification. The Lenders agree to indemnify each Agent
in its capacity as such (to the extent not reimbursed by the Borrowers and
without limiting the obligation of the Borrowers to do so), ratably according to
their respective Aggregate Exposure Percentages in effect on the date on which
indemnification is sought under this Section (or, if indemnification is sought
after the date upon which the Commitments shall have terminated and the Loans
shall have been paid in full, ratably in accordance with such Aggregate Exposure
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
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against such Agent in any way relating to
or arising out of, the Commitments, this Agreement, any of the other Loan
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 such Agent under or in connection with any of the foregoing; provided that no
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements which are found by a final and nonappealable decision
of a court of competent jurisdiction to have resulted from such Agent's gross
negligence or willful misconduct. The agreements in this Section 9.7 shall
survive the payment of the Loans and all other amounts payable hereunder.
9.8 Agent in Its Individual Capacity. Each Agent and its
affiliates may make loans to, accept deposits from and generally engage in any
kind of business with any Borrower as though such Agent was not an Agent. With
respect to its Loans made or renewed by it and with respect to any Letter of
Credit issued or participated in by it, each Agent shall have the same rights
and powers under this Agreement and the other Loan Documents as any Lender and
may exercise the same as though it were not an Agent, and the terms "Lender" and
"Lenders" shall include each Agent in its individual capacity.
9.9 Successor Agents. The Administrative Agent may resign as
Administrative Agent upon 10 days' notice to the Lenders and the Borrower
Representative. If the Administrative Agent shall resign as Administrative Agent
under this Agreement and the other Loan Documents, then the Required Lenders
shall appoint from among the Lenders a successor agent for the Lenders, which
successor agent (with an office or branch in New York City) shall (unless an
Event of Default under Section 8(a) or Section 8(f) with respect to the
Borrowers shall have occurred and be continuing) be subject to approval by the
Borrower Representative (which approval shall not be unreasonably withheld or
delayed), whereupon such successor agent shall succeed to the rights, powers and
duties of the Administrative Agent, and the term "Administrative Agent" shall
mean such successor agent effective upon such appointment and approval, and the
former Administrative Agent's rights, powers and duties as Administrative Agent
shall be terminated, without any other or further act or deed on the part of
such former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. If no successor agent has accepted appointment as
Administrative Agent by the date that is 10 days
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97
following a retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless thereupon become
effective, and the Lenders shall assume and perform all of the duties of the
Administrative Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above. The Syndication Agent may
resign as Syndication Agent hereunder, at any time, by notice to the Lenders and
the Administrative Agent, hereunder, whereupon the duties, rights, obligations
and responsibilities of the Syndication Agent hereunder shall automatically be
assumed by, and inure to the benefit of, the Administrative Agent, without any
further act by the Syndication Agent, the Administrative Agent or any Lender.
After any retiring Agent's resignation as Agent, the provisions of this Section
9 shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was an Agent under this Agreement and the other Loan Documents.
9.10 Authorization to Release Liens. The Administrative Agent
is hereby irrevocably authorized by each of the Lenders to release any Lien
covering any Property of the Borrowers or any of their Subsidiaries that is the
subject of a Disposition which is permitted by this Agreement or which has been
consented to in accordance with Section 10.1.
9.11 The Arranger. The Arranger, in its capacity as such,
shall have no duties or responsibilities, and shall incur no liability, under
this Agreement and the other Loan Documents.
9.12 Dissemination of Information. The Administrative Agent
will use reasonable efforts to provide the Lenders with any notice of Default or
Event of Default received by the Administrative Agent from, or delivered by the
Administrative Agent to, any Borrower, with notice of any Event of Default of
which the Administrative Agent has actually become aware and with notice of any
action taken by the Administrative Agent following any Event of Default;
provided, however, that the Administrative Agent shall not be liable to any
Lender for any failure to do so, except to the extent that such failure is
attributable to the Administrative Agent's gross negligence or willful
misconduct. The Lenders acknowledge that the Borrowers are required to provide
Financial Statements to the Lenders in accordance with Sections 6.1 and 6.2
hereto and agree that the Administrative Agent shall have no duty to provide the
same to the Lenders, nor shall the Administrative Agent have any duty to provide
any Collateral Reports to the Lenders.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreement or any
other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
Section 10.1. The Required Lenders and each Borrower party to the relevant Loan
Document may, or (with the written consent of the Required Lenders) the Agents
and each Borrower party to the relevant Loan Document may, from time to time,
(a) enter into written amendments, supplements or modifications hereto and to
the other Loan Documents (including amendments and restatements hereof or
thereof) for the purpose of adding any provisions to this Agreement or the other
Loan Documents or changing in any manner the rights of the Lenders or of the
Borrowers hereunder or thereunder or (b) waive, on
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such terms and conditions as may be specified in the instrument of waiver, any
of the requirements of this Agreement or the other Loan Documents or any Default
or Event of Default and its consequences; provided, however, that no such waiver
and no such amendment, supplement or modification shall (i) forgive the
principal amount or extend the final scheduled date of maturity of any Loan or
Reimbursement Obligation, extend the scheduled date of any amortization payment
in respect of any Term Loan, reduce the stated rate of any interest or fee
payable hereunder or extend the scheduled date of any payment thereof, or
increase the amount or extend the expiration date of any Commitment of any
Lender, or subordinate any of the Obligations owing to any Lender, or release
Collateral under the Collateral Agreement (in a single transaction or series of
related transactions) having an aggregate orderly liquidation value of more than
$5,000,000 whereby the Net Cash Proceeds thereof shall not be applied toward
prepayment of the Terms Loans and the reduction of the Revolving Credit
Commitments as required pursuant to Section 2.12(c), in each case without the
consent of each Lender directly affected thereby; (ii) amend, modify or waive
any provision of this Section or reduce any percentage specified in the
definition of Required Lenders, Majority Facility Lenders or Required Prepayment
Lenders, consent to the assignment or transfer by the Borrowers of any of their
rights and obligations under this Agreement and the other Loan Documents or
release all or substantially all of the Collateral under the Collateral
Agreement, in each case without the consent of all Lenders or as contemplated in
Section 9.10; (iii) amend, modify or waive any condition precedent to any
extension of credit under the Revolving Credit Facility set forth in Section 5.2
(including, without limitation, the waiver of an existing Default or Event of
Default required to be waived in order for such extension of credit to be made)
without the consent of any Majority Revolving Credit Facility Lenders; (iv)
reduce the percentage specified in the definition of Majority Facility Lenders
with respect to any Facility without the written consent of all Lenders under
such Facility; (v) amend, modify or waive any provision of Section 9 without the
consent of any Agent directly affected thereby; (vi) amend, modify or waive any
provision of Section 2.6 or 2.7 without the written consent of the Swing Line
Lender; (vii) amend, modify or waive any provision of Section 2.18 without the
consent of each Lender directly affected thereby; (viii) amend, modify or waive
any provision of Section 3 without the consent of the Issuing Lender; (ix)
increase any Advance Rate beyond the percentage(s) in effect on the Closing Date
or make any eligibility criteria less restrictive without the consent of each
Lender affected thereby; (x) release any Borrower of its obligations hereunder
and the other Loan Documents (other than in connection with the Disposition of
such Borrower as permitted hereunder) without the consent of all Lenders; or
(xi) subordinate or otherwise change the priority of the security interests or
liens of the Administrative Agent to secure the Obligations without the consent
of all Lenders. Any such waiver and any such amendment, supplement or
modification shall apply equally to each of the Lenders and shall be binding
upon the Borrowers, the Lenders, the Administrative Agent and all future holders
of the Loans. In the case of any waiver, the Borrowers, the Lenders and the
Administrative Agent shall be restored to their former position and rights
hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon. Any such waiver, amendment, supplement or
modification shall be effected by a written instrument signed by the parties
required to sign pursuant to the foregoing provisions of this Section; provided,
that delivery of an executed signature page of any such
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instrument by facsimile transmission shall be effective as delivery of a
manually executed counterpart thereof. For the avoidance of doubt, this
Agreement may be amended (or amended and restated) with the written consent of
each Lender, the Agents and each Borrower to each relevant Loan Document (x) to
add one or more additional credit facilities to this Agreement and to permit the
extensions of credit from time to time outstanding thereunder and the accrued
interest and fees in respect thereof (collectively, the "Additional Extensions
of Credit") to share ratably in the benefits of this Agreement and the other
Loan Documents with the Term Loans and Revolving Extensions of Credit and the
accrued interest and fees in respect thereof and (y) to include appropriately
the Lenders holding such credit facilities in any determination of the Required
Lenders, Required Prepayment Lenders and Majority Revolving Facility Lenders;
provided, however, that no such amendment shall permit the Additional Extensions
of Credit to share ratably with or with preference to the Term Loans in the
application of mandatory prepayments without the consent of the Required
Prepayment Lenders or otherwise to share ratably with or with preference to the
Revolving Extensions of Credit without the consent of the Majority Revolving
Facility Lenders.
10.2 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, or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed (a) in the case of the Borrowers and the Agents, as follows
and (b) in the case of the Lenders, as set forth on Schedule I to the Lender
Addendum to which such Lender is a party or, in the case of a Lender which
becomes a party to this Agreement pursuant to an Assignment and Acceptance, in
such Assignment and Acceptance or (c) in the case of any party, to such other
address as such party may hereafter notify to the other parties hereto:
The Borrowers: Harvard Industries, Inc.
3 Werner Way, Suite 210
Lebanon, New Jersey 08833
Attention: Chief Financial Officer
Telecopy: (908) 236-0071
Telephone: (973) 437-4100
with a copy to: Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Attention: Myron Trepper, Esq.
Telecopy: (212) 728-8111
Telephone: (212) 728-8000
The Syndication Agent: Lehman Commercial Paper Inc.
3 World Financial Center
New York, New York 10285
Attention: Michael O'Brien
Telecopy: (212) 528-0819
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Telephone: (212) 526-0437
The Administrative Agent: General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927
Attention: Sue Santos
Telecopy: (203) 316-7823
Telephone: (203) 316-7575
with a copy to: Hahn & Hessen LLP
350 Fifth Avenue
New York, New York 10118
Attention: Steven Seif, Esq.
Telecopy: (212) 946-0294
Telephone: (212) 594-7167
provided that any notice, request or demand to or upon the Agents or any Lender
shall not be effective until received.
10.3 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the either Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
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 exclusive of any rights, remedies, powers and privileges provided by law.
10.4 Survival of Representations and Warranties. All
representations and warranties made hereunder, in the other Loan Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the Loans and other extensions of credit hereunder.
10.5 Payment of Expenses. The Borrowers agree (a) to pay or
reimburse the Agents for all their reasonable out-of-pocket costs and expenses
incurred in connection with the syndication of the Facilities (other than fees
payable to syndicate members) and the development, preparation and execution of,
and any amendment, supplement or modification to, this Agreement and the other
Loan Documents and any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements and other charges of counsel to the Agents, (b) to pay or
reimburse each Lender and the Agents for all its costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the other Loan Documents and any such other documents, including,
without limitation, the fees and disbursements of counsel (including the
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allocated fees and disbursements and other charges of in-house counsel) to each
Lender and of counsel to the Agents, (c) to pay, indemnify, and hold each Lender
and the Agents harmless from, any and all recording and filing fees and any and
all liabilities with respect to, or resulting from any delay in paying, stamp,
excise and other taxes, if any, which may be payable or determined to be payable
in connection with the execution and delivery of, or consummation or
administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the other Loan Documents and any such other documents, and (d)
to pay, indemnify, and hold each Lender and the Agents and their respective
affiliates and their respective officers, directors, trustees, employees,
agents, controlling persons and advisors (each, an "Indemnitee") 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 with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Loan Documents and
any such other documents, including, without limitation, any of the foregoing
relating to the use of proceeds of the Loans or the violation of, noncompliance
with or liability under, any Environmental Law applicable to the operations of
the Borrowers or any of their Subsidiaries or any of the Properties and the fees
and disbursements and other charges of legal counsel in connection with claims,
actions or proceedings by any indemnitee against the Borrowers hereunder (all
the foregoing in this clause (d), collectively, the "Indemnified Liabilities"),
provided, that the Borrowers shall have no obligation hereunder to any
Indemnitee with respect to Indemnified Liabilities to the extent such
Indemnified Liabilities are found by a final and nonappealable decision of a
court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of such Indemnitee or any such other Person which is an
officer, director, trustee, employee, agent, controlling person or advisor of
such Indemnitee. Without limiting the foregoing, and to the extent permitted by
applicable law, the Borrowers agree not to assert and to cause their
Subsidiaries not to assert, and hereby waives and agrees to cause their
Subsidiaries so to waive, all rights for contribution or any other rights of
recovery with respect to all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature, under or
related to Environmental Laws, that any of them might have by statute or
otherwise against any Indemnitee. The agreements in this Section shall survive
repayment of the Loans and all other amounts payable hereunder.
10.6 Successors and Assigns; Participations and Assignments.
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrowers, the Lenders, the Agents, all future holders of the Loans and their
respective successors and assigns, except that the Borrowers may not assign or
transfer any of their rights or obligations under this Agreement without the
prior written consent of the Agents and each Lender.
(b) Any Lender may, without the consent of the Borrowers, in
accordance with applicable law, at any time sell to one or more banks, financial
institutions or other entities (each, a "Participant") participating interests
in any Loan owing to such Lender, any Commitment of such Lender or any other
interest of such Lender hereunder and under the other Loan Documents. In the
event of any such sale by a Lender of a participating interest to a Participant,
such Lender's obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Lender shall remain solely responsible
for the
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102
performance thereof, such Lender shall remain the holder of any such
Loan for all purposes under this Agreement and the other Loan Documents, and the
Borrowers and the Agents shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement and the other Loan Documents. In no event shall any Participant under
any such participation have any right to approve any amendment or waiver of any
provision of any Loan Document, or any consent to any departure by any Borrower
therefrom, except to the extent that such amendment, waiver or consent would
reduce the principal of, or interest on, the Loans or any fees payable
hereunder, or postpone the date of the final maturity of the Loans, in each case
to the extent subject to such participation. The Borrowers agree that if amounts
outstanding under this Agreement and the Loans are due or unpaid, or shall have
been declared or shall have become due and payable upon the occurrence of an
Event of Default, each Participant shall, to the maximum extent permitted by
applicable law, be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement, provided that, in purchasing such participating
interest, such Participant shall be deemed to have agreed to share with the
Lenders the proceeds thereof as provided in Section 10.7(a) as fully as if it
were a Lender hereunder. The Borrowers also agree that each Participant shall be
entitled to the benefits of Sections 2.19, 2.20 and 2.21 with respect to its
participation in the Commitments and the Loans outstanding from time to time as
if it was a Lender; provided that, in the case of Section 2.20, such Participant
shall have complied with the requirements of said Section and provided, further,
that no Participant shall be entitled to receive any greater amount pursuant to
any such Section than the transferor Lender would have been entitled to receive
in respect of the amount of the participation transferred by such transferor
Lender to such Participant had no such transfer occurred.
(c) Any Lender (an "Assignor") may, in accordance with
applicable law and upon written notice to the Syndication Agent, at any time and
from time to time assign to any Lender or any affiliate thereof or, with the
consent of the Borrowers and the Agents (which, in each case, shall not be
unreasonably withheld or delayed) (provided (x) that no such consent need be
obtained by Lehman Commercial Paper Inc. for a period of 180 days following the
Closing Date and (y) the consent of the Borrowers need not be obtained with
respect to any assignment of Term Loans), to an additional bank, financial
institution or other entity (an "Assignee") all or any part of its rights and
obligations under this Agreement pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit E, executed by such Assignee and such
Assignor (and, where the consent of the Borrowers or the Agents is required
pursuant to the foregoing provisions, by the Borrowers and such other Persons)
and delivered to the Administrative Agent for its acceptance and recording in
the Register; provided that no such assignment to an Assignee (other than any
Lender or any affiliate thereof) shall be in an aggregate principal amount of
less than $5,000,000 with respect to Revolving Credit Commitments and Term Loans
(other than in the case of an assignment of all of a Lender's interests under
this Agreement), unless otherwise agreed by the Borrowers, the Syndication Agent
and the Administrative Agent; and provided, further, that the consent of the
Issuing Lender and the Swing Line Lender (which, in each case, shall not be
unreasonably withheld or delayed) shall be required for any assignment of
Revolving Credit Commitments. Any such
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103
assignment need not be ratable as among the Facilities. Upon such execution,
delivery, acceptance and recording, from and after the effective date determined
pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be
a party hereto and, to the extent provided in such Assignment and Acceptance,
have the rights and obligations of a Lender hereunder with a Commitment and/or
Loans as set forth therein, and (y) the Assignor thereunder shall, to the extent
provided in such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering
all of an Assignor's rights and obligations under this Agreement, such Assignor
shall cease to be a party hereto). Notwithstanding any provision of this
Section, the consent of the Borrowers shall not be required for any assignment
which occurs at any time when any Event of Default shall have occurred and be
continuing.
(d) The Administrative Agent shall, on behalf of the
Borrowers, maintain at its address referred to in Section 10.2 a copy of each
Assignment and Acceptance delivered to it and a register (the "Register") for
the recordation of the names and addresses of the Lenders and the Commitment of,
and principal amount of the Loans owing to, each Lender from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrowers, the Administrative Agent and the Lenders shall treat each
Person whose name is recorded in the Register as the owner of the Loans and any
Notes evidencing such Loans recorded therein for all purposes of this Agreement.
Any assignment of any Loan, whether or not evidenced by a Note, shall be
effective only upon appropriate entries with respect thereto being made in the
Register (and each Note shall expressly so provide). Any assignment or transfer
of all or part of a Loan evidenced by a Note shall be registered on the Register
only upon surrender for registration of assignment or transfer of the Note
evidencing such Loan, accompanied by a duly executed Assignment and Acceptance;
thereupon one or more new Notes in the same aggregate principal amount shall be
issued to the designated Assignee, and the old Notes shall be returned by the
Administrative Agent to the Borrower Representative marked "canceled". The
Register shall be available for inspection by the Borrower Representative, the
Syndication Agent or any Lender at any reasonable time and from time to time
upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed
by an Assignor and an Assignee (and, in any case where the consent of any other
Person is required by Section 10.6(c), by each such other Person) together with
payment to the Administrative Agent of a registration and processing fee of
$3,500 (except that no such registration and processing fee shall be payable (x)
in connection with an assignment involving Lehman Commercial Paper Inc. or (y)
in the case of an Assignee which is already a Lender or is an affiliate of a
Lender or a Person under common management with a Lender), the Administrative
Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the
effective date determined pursuant thereto record the information contained
therein in the Register and give notice of such acceptance and recordation to
the Lenders, the Syndication Agent and the Borrower Representative. On or prior
to such effective date, the Borrowers, at their own expense, upon request, shall
execute and deliver to the Administrative Agent (in exchange for the Revolving
Credit Note and/or applicable Term Notes, as the case may be, of the assigning
Lender) a new Revolving Credit Note and/or applicable Term Notes, as the case
may be, to the order of such
<PAGE>
104
Assignee in an amount equal to the Revolving Credit Commitment and/or applicable
Term Loans, as the case may be, assumed or acquired by it pursuant to such
Assignment and Acceptance and, if the Assignor has retained a Revolving Credit
Commitment and/or Term Loans, as the case may be, upon request, a new Revolving
Credit Note and/or Term Notes, as the case may be, to the order of the Assignor
in an amount equal to the Revolving Credit Commitment and/or applicable Term
Loans, as the case may be, retained by it hereunder. Such new Note or Notes
shall be dated the Closing Date and shall otherwise be in the form of the Note
or Notes replaced thereby.
(f) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this Section concerning assignments of Loans
and Notes relate only to absolute assignments and that such provisions do not
prohibit assignments creating security interests, including, without limitation,
any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve
Bank in accordance with applicable law.
10.7 Adjustments; Set-off. (a) Except to the extent that this
Agreement provides for payments to be allocated to a particular Lender or to the
Lenders under a particular Facility, if any Lender (a "Benefitted Lender") shall
at any time receive any payment of all or part of the Obligations owing to it,
or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 8(f), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender's Obligations, such Benefitted Lender shall purchase for
cash from the other Lenders a participating interest in such portion of each
such other Lender's Obligations, or shall provide such other Lenders with the
benefits of any such collateral, as shall be necessary to cause such Benefitted
Lender to share the excess payment or benefits of such collateral ratably with
each of the Lenders; provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such Benefitted Lender,
such purchase shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to the
Borrowers, any such notice being expressly waived by the Borrowers to the extent
permitted by applicable law, upon any amount becoming due and payable by the
Borrowers hereunder (whether at the stated maturity, by acceleration or
otherwise), to set off and appropriate and apply against such amount 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 Lender or any branch or agency
thereof to or for the credit or the account of the Borrowers, as the case may
be. Each Lender agrees promptly to notify the Borrower Representative and the
Administrative Agent after any such setoff and application made by such Lender,
provided that the failure to give such notice shall not affect the validity of
such setoff and application. Anything in this Agreement to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no Lender
shall take any action to protect or enforce its rights arising out of this
Agreement or the Notes (including exercising any rights of set-off) without
first obtaining the prior written
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105
consent of the Administrative Agent and the Required Lenders, it being the
intent of Lenders that any such action to protect or enforce rights under this
Agreement and the Notes shall be taken in concert and at the direction or with
the consent of the Administrative Agent.
10.8 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts,
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument. Delivery of an executed signature page of this
Agreement by facsimile transmission shall be effective as delivery of a manually
executed counterpart hereof. A set of the copies of this Agreement signed by all
the parties shall be lodged with the Borrower Representative and the
Administrative Agent.
10.9 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.
10.10 Integration. This Agreement and the other Loan Documents
represent the agreement of the Borrowers, the Agents and the Lenders with
respect to the subject matter hereof, and there are no promises, undertakings,
representations or warranties by the Agents or any Lender relative to subject
matter hereof not expressly set forth or referred to herein or in the other Loan
Documents.
10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.12 Submission To Jurisdiction; Waivers. Each Borrower
hereby irrevocably and unconditionally:
(a) submits for itself and its Property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the
courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially
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106
similar form of mail), postage prepaid, to the Borrower at its address
set forth in Section 10.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this Section any special, exemplary, punitive or
consequential damages.
10.13 Acknowledgments. Each Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) neither the Agents nor any Lender has any fiduciary
relationship with or duty to the Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and
the relationship between Agents and Lenders, on one hand, and the
Borrower, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Borrower and the
Lenders.
10.14 Confidentiality. Each of the Agents and the Lenders
agrees to keep confidential all non-public information provided to it by any
Borrower or on behalf of any Borrower by any agent, consultant, accountant or
other representative thereof, pursuant to this Agreement that is designated by
such Borrower as confidential; provided that nothing herein shall prevent any
Agent or any Lender from disclosing any such information (a) to any Agent, any
Lender or any affiliate of any Lender, (b) to any Participant or Assignee (each,
a "Transferee") or prospective Transferee which agrees to comply with the
provisions of this Section, (c) any of its employees, directors, agents,
attorneys, accountants and other professional advisors, (d) upon the request or
demand of any Governmental Authority having jurisdiction over it, (e) in
response to any order of any court or other Governmental Authority or as may
otherwise be required pursuant to any Requirement of Law, (f) if required to do
so in connection with any litigation or similar proceeding, (g) which has been
publicly disclosed other than in breach of this Section, (h) to the National
Association of Insurance Commissioners or any similar organization or any
nationally recognized rating agency that requires access to information about a
Lender's investment portfolio in connection with ratings issued with respect to
such Lender or (i) in connection with the exercise of any remedy hereunder or
under any other Loan Document.
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107
10.15 Release of Collateral Security. Notwithstanding anything
to the contrary contained herein or in the Collateral Agreement, upon request of
the Borrower Representative, the Administrative Agent shall (without notice to
or vote or consent of any Lender) take action having the effect of releasing any
Collateral provided for in the Collateral Agreement to the extent necessary to
permit consummation, by the relevant Person in accordance with the terms of this
Agreement and the other Loan Documents, of any transaction not prohibited
hereunder.
10.16 Accounting Changes. In the event that any "Accounting
Change" (as defined below) shall occur and such change results in a change in
the method of calculation of financial covenants, standards or terms in this
Agreement, then the Borrowers and the Administrative Agent agree to enter into
negotiations in order to amend such provisions of this Agreement so as to
equitably reflect such Accounting Changes with the desired result that the
criteria for evaluating the Borrowers' financial condition shall be the same
after such Accounting Changes as if such Accounting Changes had not been made.
Until such time as such an amendment shall have been executed and delivered by
the Borrowers, the Administrative Agent and the Required Lenders, all financial
covenants, standards and terms in this Agreement shall continue to be calculated
or construed as if such Accounting Changes had not occurred. "Accounting
Changes" refers to changes in accounting principles required by the promulgation
of any rule, regulation, pronouncement or opinion by the Financial Accounting
Standards Board of the American Institute of Certified Public Accountants or, if
applicable, the SEC.
10.17 Delivery of Lender Addenda. Each initial Lender shall
become a party to this Agreement by delivering to the Administrative Agent and
the Syndication Agent a Lender Addendum duly executed by such Lender, the
Borrowers and each Agent.
10.18 Reinstatement. This Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against any Borrower for liquidation or reorganization, should any Borrower
become insolvent or make an assignment for the benefit of any creditor or
creditors or should a receiver or trustee be appointed for all or any
significant part of any Borrower's assets, and shall continue to be effective or
to be reinstated, as the case may be, if at any time payment and performance of
the Obligations, or any part thereof, is, pursuant to applicable law, rescinded
or reduced in amount, or must otherwise be restored or returned by any obligee
of the Obligations, whether as a "voidable preference," "fraudulent conveyance,"
or otherwise, all as though such payment or performance had not been made. In
the event that any payment, or any part thereof, is rescinded, reduced, restored
or returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.
10.19 No Strict Construction. The parties hereto have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.
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108
10.20 WAIVERS OF JURY TRIAL. EACH OF THE BORROWERS, THE
AGENTS AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
10.21 Maximum Liability. (a) Anything herein or in any other
Loan Document to the contrary notwithstanding, the maximum liability of each
Borrower (other than Harvard) jointly and severally liable hereunder and the
maximum recourse against the Collateral of each Borrower (other than Harvard)
hereunder and under the other Loan Documents shall in no event exceed the amount
which such Borrower (other than Harvard) can be jointly and severally liable for
the Obligations under applicable federal and state laws relating to the
insolvency of debtors (after giving effect to the right of contribution
established in Section 10.22).
(b) Each Borrower agrees that the Obligations may at any time
and from time to time exceed the amount of the liability of such Borrower
hereunder without impairing the joint and several liability of such Borrower
under this Agreement or affecting the rights and remedies of any Agent or any
Lender hereunder.
(c) The joint and several liability of each Borrower hereunder
shall remain in full force and effect until all Obligations and the joint and
several liability of each Borrower with respect thereto shall have been
satisfied by payment in full, no Letter of Credit shall be outstanding and the
Commitments shall be terminated, notwithstanding that from time to time during
the term of this Agreement the Borrowers may be free from any Obligations.
(d) No payment made by Harvard, any other Borrower, any
guarantor or any other Person or received or collected by the Administrative
Agent or any Lender from Harvard, any other Borrower, any guarantor or any other
Person by virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment of
the Obligations shall be deemed to modify, reduce, release or otherwise affect
the joint and several liability of any Borrower hereunder which shall,
notwithstanding any such payment (other than any payment made by such Borrower
in respect of the Obligations or any payment received or collected from such
Borrower in respect of the Obligations), remain liable for the Obligations up to
the maximum liability of such Borrower hereunder until the Obligations are paid
in full, no Letter of Credit shall be outstanding and the Commitments are
terminated.
10.22 Right of Contribution. Each Borrower hereby agrees that
to the extent that a Borrower shall have paid more than its proportionate share
of any payment made hereunder whether by cash or by realization upon its
Collateral, such Borrower shall be entitled to seek and receive contribution
from and against any other Borrower hereunder which has not paid its
proportionate share of such payment. Each Borrower's right of contribution shall
be subject to the terms and conditions of Section 2.24(d). The provisions of
this Section 10.22 shall in no respect limit the obligations and liabilities of
any Borrower to any Agent and the Lenders, and each Borrower shall remain liable
to the Agents and the Lenders for the full amount such Borrower is jointly and
severally liable for hereunder.
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109
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
HARVARD INDUSTRIES, INC.
DOEHLER-JARVIS, INC.
HARVARD TRANSPORTATION
CORPORATION
DOEHLER-JARVIS GREENEVILLE, INC.
POTTSTOWN PRECISION CASTING, INC.
DOEHLER-JARVIS TECHNOLOGIES, INC.
DOEHLER-JARVIS TOLEDO, INC.
HARMAN AUTOMOTIVE, INC.
HAYES-ALBION CORPORATION
THE KINGSTON-WARREN CORPORATION
By: /s/ D. Craig Bowman
----------------------------------------
Name: D. Craig Bowman
Title: Vice President
LEHMAN BROTHERS INC.,
as Arranger
By: /s/ William J. Gallagher
----------------------------------------
Name: William J. Gallagher
Title: Authorized Signatory
LEHMAN COMMERCIAL PAPER INC., as
Syndication Agent and as a Lender
By: /s/ William J. Gallagher
----------------------------------------
Name: William J. Gallagher
Title: Authorized Signatory
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110
GENERAL ELECTRIC CAPITAL
CORPORATION, as Administrative Agent and as a
Lender
By: /s/ Martin Greenberg
----------------------------------------
Name: Martin Greenberg
Title: Duly Authorized Signatory
<PAGE>
================================================================================
COLLATERAL AGREEMENT
made by
HARVARD INDUSTRIES, INC.
DOEHLER-JARVIS, INC.,
HARVARD TRANSPORTATION CORPORATION,
DOEHLER-JARVIS GREENEVILLE, INC.,
POTTSTOWN PRECISION CASTING, INC.,
DOEHLER-JARVIS TECHNOLOGIES, INC.,
DOEHLER-JARVIS TOLEDO, INC.,
HARMAN AUTOMOTIVE, INC.,
HAYES-ALBION CORPORATION, and
THE KINGSTON-WARREN CORPORATION
in favor of
GENERAL ELECTRIC CAPITAL CORPORATION,
as Administrative Agent
Dated as of November 24, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINED TERMS .................................................. 2
1.1 Definitions ........................................................ 2
1.2 Other Definitional Provisions ...................................... 5
SECTION 2. GRANT OF SECURITY INTEREST ..................................... 6
2.1 Collateral ......................................................... 6
2.2 Grant of First Priority Security Interest .......................... 6
SECTION 3. REPRESENTATIONS AND WARRANTIES ................................. 7
3.1 Title; No Other Liens .............................................. 7
3.2 Perfected Liens .................................................... 7
3.3 Chief Executive Office ............................................. 7
3.4 Inventory and Equipment ............................................ 7
3.5 Farm Products ...................................................... 8
3.6 Pledged Securities ................................................. 8
3.7 Receivables ........................................................ 8
3.8 Contracts .......................................................... 8
3.9 Intellectual Property9
SECTION 4. COVENANTS ...................................................... 10
4.1 Delivery of Instruments and Chattel Paper .......................... 10
4.2 Maintenance of Insurance ........................................... 10
4.3 Payment of Obligations ............................................. 10
4.4 Maintenance of Perfected Security Interest; Further Documentation .. 11
4.5 Changes in Locations, Name, etc .................................... 11
4.6 Notices ............................................................ 12
4.7 Pledged Securities ................................................. 12
4.8 Receivables ........................................................ 13
4.9 Contracts .......................................................... 13
4.10Intellectual Property .............................................. 14
SECTION 5. REMEDIAL PROVISIONS ............................................ 15
5.1 Certain Matters Relating to Receivables ............................ 15
5.2 Communications with Obligors; Grantors Remain Liable ............... 16
5.3 Pledged Stock ...................................................... 16
5.4 Proceeds to be Turned Over To Administrative Agent ................. 17
5.5 Application of Proceeds ............................................ 18
5.6 Code and Other Remedies ............................................ 18
5.7 Registration Rights ................................................ 19
5.8 Waiver; Deficiency ................................................. 20
i
<PAGE>
SECTION 6. THE ADMINISTRATIVE AGENT ..................................... 20
6.1 Administrative Agent's Appointment as Attorney-in-Fact, etc .... 20
6.2 Duty of Administrative Agent ................................... 22
6.3 Execution of Financing Statements .............................. 22
6.4 Authority of Administrative Agent .............................. 23
SECTION 7. MISCELLANEOUS ................................................ 23
7.1 Amendments in Writing .......................................... 23
7.2 Notices ........................................................ 23
7.3 No Waiver by Course of Conduct; Cumulative Remedies ............ 23
7.4 Enforcement Expenses; Indemnification .......................... 23
7.5 Successors and Assigns ......................................... 24
7.6 Set-Off ........................................................ 24
7.7 Counterparts ................................................... 24
7.8 Severability ................................................... 25
7.9 Section Headings ............................................... 25
7.10 Integration .................................................... 25
7.11 GOVERNING LAW .................................................. 25
7.12 Submission To Jurisdiction; Waivers ............................ 25
7.13 Acknowledgements ............................................... 26
7.14 Additional Grantors ............................................ 26
7.15 Releases ....................................................... 26
7.16 WAIVER OF JURY TRIAL ........................................... 28
ii
<PAGE>
COLLATERAL AGREEMENT
COLLATERAL AGREEMENT, dated as of November 24, 1998, made by each of the
signatories hereto (together with any other entity that may become a party
hereto as provided herein, the "Grantors"), in favor of GENERAL ELECTRIC CAPITAL
CORPORATION, as Administrative Agent (in such capacity, the "Administrative
Agent") for the banks and other financial institutions (the "Lenders") from time
to time parties to the Credit Agreement, dated as of the date hereof (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among HARVARD INDUSTRIES, INC., a Delaware corporation,
DOEHLER-JARVIS, INC., a Delaware corporation, HARVARD TRANSPORTATION
CORPORATION, a Michigan corporation, DOEHLER-JARVIS GREENEVILLE, INC., a
Delaware corporation, POTTSTOWN PRECISION CASTING, INC., a Delaware corporation,
DOEHLER-JARVIS TECHNOLOGIES, INC., a Delaware corporation, DOEHLER-JARVIS TOLEDO
INC., a Delaware corporation, HARMAN AUTOMOTIVE, INC., a Michigan corporation,
HAYES-ALBION CORPORATION, a Michigan corporation, THE KINGSTON-WARREN
CORPORATION, a New Hampshire corporation (collectively, the "Borrowers"), the
Lenders, LEHMAN BROTHERS INC., as advisor and arranger (in such capacity, the
"Arranger"), LEHMAN COMMERCIAL PAPER INC., as syndication agent (in such
capacity, the "Syndication Agent") and GENERAL ELECTRIC CAPITAL CORPORATION, as
Administrative Agent.
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make extensions of credit to the Borrowers upon the terms and subject
to the conditions set forth therein;
WHEREAS, the Grantors are members of an affiliated group of companies;
WHEREAS, the Grantors are engaged in related businesses, and each Grantor
will derive substantial direct and indirect benefit from the making of the
extensions of credit under the Credit Agreement; and
WHEREAS, it is a condition precedent to the obligation of the Lenders to
make their respective extensions of credit to the Borrowers under the Credit
Agreement that the Grantors shall have executed and delivered this Agreement to
the Administrative Agent for the benefit of the Agents and the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Arranger, the Agents and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit to the
Borrowers thereunder, each Grantor hereby agrees with the Administrative Agent,
for the benefit of the Agents and the Lenders, as follows:
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2
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement, and the following terms which are defined in the Uniform
Commercial Code in effect in the State of New York on the date hereof are used
herein as so defined: Chattel Paper, Documents, Farm Products, Instruments and
Investment Property.
(b) The following terms shall have the following meanings:
"Agreement": this Collateral Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"Collateral": as defined in Section 2.
"Collateral Account": any collateral account established by the
Administrative Agent as provided in Section 5.1 or 5.4.
"Contracts": the contracts and agreements listed in Schedule 7, as the same
may be amended, supplemented or otherwise modified from time to time, including,
without limitation, (i) all rights of any Grantor to receive moneys due and to
become due to it thereunder or in connection therewith, (ii) all rights of any
Grantor to damages arising thereunder and (iii) all rights of any Grantor to
perform and to exercise all remedies thereunder.
"Copyrights": (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished (including,
without limitation, those listed in Schedule 6), all registrations and
recordings thereof, and all applications in connection therewith, including,
without limitation, all registrations, recordings and applications in the United
States Copyright Office, and (ii) the right to obtain all renewals thereof.
"Copyright Licenses": any written agreement naming any Grantor as licensor
(including, without limitation, those listed in Schedule 6) granting any right
under any Copyright, including, without limitation, the grant of rights to
manufacture, distribute, exploit and sell materials derived from any Copyright.
"General Intangibles": all "general intangibles" as such term is defined in
Section 9-106 of the Uniform Commercial Code in effect in the State of New York
on the date hereof and, in any event, including, without limitation, with
respect to any Grantor, all contracts, agreements, instruments and indentures in
any form, and portions thereof, to which such Grantor is a party or under which
such Grantor has any right, title or interest or to which such Grantor or any
property of such Grantor is subject, as the same may from time to time be
amended, supplemented or otherwise modified, including, without limitation, (i)
all rights of such Grantor to receive moneys due and to become due to it
thereunder or in connection therewith, (ii) all rights of such Grantor to
damages
<PAGE>
3
arising thereunder and (iii) all rights of such Grantor to perform and to
exercise all remedies thereunder, in each case to the extent the grant by such
Grantor of a security interest pursuant to this Agreement in its right, title
and interest in such contract, agreement, instrument or indenture is not
prohibited by such contract, agreement, instrument or indenture without the
consent of any other party thereto, would not give any other party to such
contract, agreement, instrument or indenture the right to terminate its
obligations thereunder, or is permitted with consent if all necessary consents
to such grant of a security interest have been obtained from the other parties
thereto (it being understood that the foregoing shall not be deemed to obligate
such Grantor to obtain such consents); provided, that the foregoing limitation
shall not affect, limit, restrict or impair the grant by such Grantor of a
security interest pursuant to this Agreement in any Receivable or any money or
other amounts due or to become due under any such contract, agreement,
instrument or indenture.
"Intellectual Property": the collective reference to all rights, priorities
and privileges relating to intellectual property, whether arising under United
States, multinational or foreign laws or otherwise, including, without
limitation, the Copyrights, the Copyright Licenses, the Patents, the Patent
Licenses, the Trademarks and the Trademark Licenses that are owned, held or used
in the business of any Grantor or any of its Subsidiaries, and all rights to sue
at law or in equity for any infringement or other impairment thereof, including
the right to receive all proceeds and damages therefrom.
"Intercompany Note": any promissory note evidencing loans made by any
Grantor to any of its Subsidiaries (that is not a Grantor).
"Intercreditor Agreement": the Intercreditor Agreement among (i) Norwest
Bank Minnesota, N.A., as Trustee, (ii) the Administrative Agent and (iii) the
Borrower Representative, dated as of November 24, 1998.
"Issuers": the collective reference to each issuer of a Pledged Security.
"New York UCC": the Uniform Commercial Code as from time to time in effect
in the State of New York.
"Obligations": the collective reference to the unpaid principal of and
interest on the Loans and Reimbursement Obligations and all other obligations
and liabilities of the Borrowers (including, without limitation, interest
accruing at the then applicable rate provided in the Credit Agreement after the
maturity of the Loans and Reimbursement Obligations and interest accruing at the
then applicable rate provided in the Credit Agreement after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to any Borrower, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding) to the
Agents or any Lender (or, in the case of any Hedge Agreement referred to below,
any Affiliate of any
<PAGE>
4
Lender), whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under, out of, or in
connection with, the Credit Agreement, this Agreement, the other Loan Documents,
any Letter of Credit or any Hedge Agreement entered into by the Borrowers with
any Lender (or any Affiliate of any Lender) or any other document made,
delivered or given in connection therewith, in each case whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and disbursements
of counsel to the Agents or to the Lenders that are required to be paid by the
Borrowers pursuant to the terms of any of the foregoing agreements).
"Patents": (i) all letters patent of the United States, any other country
or any political subdivision thereof, all reissues and extensions thereof and
all goodwill associated therewith, including, without limitation, any of the
foregoing referred to in Schedule 6, (ii) all applications for letters patent of
the United States or any other country and all divisions, continuations and
continuations-in-part thereof, including, without limitation, any of the
foregoing referred to in Schedule 6, and (iii) all rights to obtain any reissues
or extensions of the foregoing.
"Patent License": all agreements, whether written or oral, providing for
the grant by Grantor of any right to manufacture, use or sell any invention
covered in whole or in part by a Patent, including, without limitation, any of
the foregoing referred to in Schedule 6.
"Pledged Notes": all promissory notes listed on Schedule 2, all
Intercompany Notes at any time issued to any Grantor and all other promissory
notes issued to or held by any Grantor (other than promissory notes issued in
connection with extensions of trade credit by any Grantor in the ordinary course
of business).
"Pledged Securities": the collective reference to the Pledged Notes and the
Pledged Stock.
"Pledged Stock": the shares of Capital Stock listed on Schedule 2, together
with any other shares, stock certificates, options or rights of any nature
whatsoever in respect of the Capital Stock of any Person that may be issued or
granted to, or held by, any Grantor while this Agreement is in effect.
"Proceeds": all "proceeds" as such term is defined in Section 9-306(1) of
the Uniform Commercial Code in effect in the State of New York on the date
hereof and, in any event, shall include, without limitation, all dividends or
other income from the Pledged Securities, collections thereon or distributions
or payments with respect thereto.
"Receivable": any right to payment for goods sold or leased or for services
rendered, whether or not such right is evidenced by an Instrument or
<PAGE>
5
Chattel Paper and whether or not it has been earned by performance (including,
without limitation, any Account).
"Securities Act": the Securities Act of 1933, as amended.
"Trademarks": (i) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, service marks,
logos and other source or business identifiers, and all goodwill associated
therewith, now existing or hereafter adopted or acquired, all registrations and
recordings thereof, and all applications in connection therewith, whether in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, and all common-law rights related thereto,
including, without limitation, any of the foregoing referred to in Schedule 6,
and (ii) the right to obtain all renewals thereof.
"Trademark License": any agreement, whether written or oral, providing for
the grant by or to any Grantor of any right to use any Trademark, including,
without limitation, any of the foregoing referred to in Schedule 6.
"Unperfected Collateral": as defined in Section 3.2.
"Vehicles": all cars, trucks, trailers, construction and earth moving
equipment and other vehicles covered by a certificate of title law of any state
and all tires and other appurtenances to any of the foregoing.
1.2 Other Definitional Provisions. (a) The words "hereof," "herein",
"hereto" 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 and Schedule references are to this Agreement unless
otherwise specified.
(b) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral or any
part thereof, when used in relation to a Grantor, shall refer to such Grantor's
Collateral or the relevant part thereof.
SECTION 2. GRANT OF SECURITY INTEREST
2.1 Collateral. For the purposes of this Agreement, all of the following
property now owned or at any time hereafter acquired by a Grantor or in which a
Grantor now has or at any time in the future may acquire any right, title or
interest is collectively referred to as the "Collateral":
<PAGE>
6
(a) all Accounts;
(b) all Chattel Paper;
(c) all Contracts;
(d) all Documents;
(e) all Equipment;
(f) all General Intangibles;
(g) all Instruments;
(h) all Intellectual Property;
(i) all Inventory;
(j) all Pledged Securities;
(k) all Vehicles;
(l) all Investment Property;
(m) all deposit accounts and other bank accounts;
(n) all books and records pertaining to the Collateral; and
(o) to the extent not otherwise included, all Proceeds and products of any
and all of the foregoing and all collateral security and guarantees
given by any Person with respect to any of the foregoing.
2.2 Grant of First Priority Security Interest. As collateral security for
the prompt and complete payment and performance when due (whether at stated
maturity, acceleration or otherwise) of the Obligations, each Grantor hereby
grants, assigns and transfers to the Administrative Agent for the benefit of the
Agents and the Lenders, a first priority security interest in all of its
Collateral (except for Liens which by their terms do not permit other Liens to
attach to the subject collateral), subject to Liens permitted by Section 7.3 of
the Credit Agreement.
<PAGE>
7
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrowers thereunder, each Grantor hereby represents and warrants
to the Administrative Agent and each Lender that:
3.1 Title; No Other Liens. Except for the security interest granted to the
Administrative Agent for the benefit of the Agents and the Lenders pursuant to
this Agreement and the other Liens permitted to exist on the Collateral by
Section 7.3 of the Credit Agreement, such Grantor owns each item of the
Collateral free and clear of any and all Liens or claims of others. No financing
statement, other than with respect to the DIP Facilities, or other public notice
with respect to all or any part of the Collateral is on file or of record in any
public office, except such as have been filed in favor of the Administrative
Agent, for the benefit of the Lenders, pursuant to this Agreement or as are
permitted by the Credit Agreement or except as shall be terminated on the date
hereof.
3.2 Perfected Liens. The security interests granted pursuant to this
Agreement upon completion of the filings and other actions specified on Schedule
3 (which, in the case of all filings and other documents referred to on said
Schedule, have been delivered to the Administrative Agent in completed and duly
executed form) will constitute valid perfected security interests in all of the
Collateral (except for Vehicles and except for Intellectual Property not listed
on Schedule 6 (the "Unperfected Collateral")) in favor of the Administrative
Agent, for the benefit of the Agents and the Lenders, as collateral security for
such Grantor's Obligations, enforceable in accordance with the terms hereof and
applicable law against all creditors of such Grantor and are prior to all other
Liens on the Collateral in existence on the date hereof except for (i) Liens
permitted by Section 7.3 of the Credit Agreement, (ii) Liens which have priority
over the Liens on the Collateral by operation of law and (iii) Liens described
on Schedule 8.
3.3 Chief Executive Office. On the date hereof, such Grantor's
jurisdiction of organization and the location of such Grantor's chief executive
office or sole place of business are specified on Schedule 4.
3.4 Inventory and Equipment. On the date hereof, the Inventory and the
Equipment (other than mobile goods) are kept at the locations listed on Schedule
5.
3.5 Farm Products. None of the Collateral constitutes, or is the Proceeds
of, Farm Products.
3.6 Pledged Securities. (a) The shares of Pledged Stock pledged by such
Grantor hereunder constitute all the issued and outstanding shares of all
classes of the Capital Stock of each domestic Issuer owned by such Grantor.
<PAGE>
8
(b) All the shares of the Pledged Stock have been duly and validly issued
and are fully paid and nonassessable.
(c) Each of the Pledged Notes constitutes the legal, valid and binding
obligation of the obligor with respect thereto, enforceable in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
(d) Such Grantor is the record and beneficial owner of, and has good and
marketable title to, the Pledged Securities pledged by it hereunder, free of any
and all Liens or options in favor of, or claims of, any other Person, except the
security interest created by this Agreement.
3.7 Receivables. (a) No amount payable to such Grantor under or in
connection with any Receivable is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Administrative Agent.
(b) Substantially all of the obligors on Receivables are not Governmental
Authorities.
(c) The amounts represented by such Grantor to the Lenders from time to
time as owing to such Grantor in respect of the Receivables will at such times
be accurate.
3.8 Contracts. (a) No consent of any party (other than such Grantor) to any
Contract is required, or purports to be required, in connection with the
execution, delivery and performance of this Agreement.
(b) Each Contract is in full force and effect and constitutes a valid and
legally enforceable obligation of the parties thereto, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
(c) No consent or authorization of, filing with or other act by or in
respect of any Governmental Authority is required in connection with the
execution, delivery, performance, validity or enforceability of any of the
Contracts by any party thereto other than those which have been duly obtained,
made or performed, are in full force and effect and do not subject the scope of
any such Contract to any material adverse limitation, either specific or general
in nature.
(d) Neither such Grantor nor (to the best of such Grantor's knowledge) any
of the other parties to the Contracts is in default in the performance or
observance of any of the terms thereof in any manner that, in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
<PAGE>
9
(e) The right, title and interest of such Grantor in, to and under the
Contracts are not subject to any defenses, offsets, counterclaims or claims
that, in the aggregate, could reasonably be expected to have a Material Adverse
Effect.
(f) Such Grantor has delivered to the Administrative Agent a complete and
correct copy of each Contract, including all amendments, supplements and other
modifications thereto.
(g) No amount payable to such Grantor under or in connection with any
Contract is evidenced by any Instrument or Chattel Paper which has not been
delivered to the Administrative Agent.
(h) None of the parties to any Contract is a Governmental Authority.
3.9 Intellectual Property. (a) Schedule 6 lists all registrations,
applications for, and all material unregistered Intellectual Property owned by
such Grantor in its own name on the date hereof.
(b) On the date hereof, all material Intellectual Property is valid,
subsisting, unexpired and enforceable, has not been abandoned and, to the best
knowledge of such Grantor, does not infringe the intellectual property rights of
any other Person.
(c) Except as set forth in Schedule 6, on the date hereof, none of the
Intellectual Property is the subject of any licensing or franchise agreement
pursuant to which such Grantor is the licensor or franchisor.
(d) No holding, decision or judgment has been rendered by any Governmental
Authority which would limit, cancel or question the validity of, or such
Grantor's rights in, any Intellectual Property in any respect that could
reasonably be expected to have a Material Adverse Effect.
(e) No action or proceeding is pending, or, to the knowledge of such
Grantor, threatened, on the date hereof (i) seeking to limit, cancel or question
the validity of any Intellectual Property or such Grantor's ownership interest
therein, or (ii) which, if adversely determined, would have a material adverse
effect on the value of any Intellectual Property.
SECTION 4. COVENANTS
Each Grantor covenants and agrees with the Administrative Agent and the
Lenders that, from and after the date of this Agreement until the Obligations
shall have been paid in full, no Letter of Credit shall be outstanding and the
Commitments shall have terminated:
<PAGE>
10
4.1 Delivery of Instruments and Chattel Paper. If any amount payable under
or in connection with any of the Collateral shall be or become evidenced by any
Instrument or Chattel Paper, such Instrument or Chattel Paper shall be
immediately delivered to the Administrative Agent, duly indorsed in a manner
satisfactory to the Administrative Agent, to be held as Collateral pursuant to
this Agreement.
4.2 Maintenance of Insurance. (a) Such Grantor will maintain, with
financially sound and reputable companies, insurance policies (i) insuring the
Inventory, Equipment and Vehicles against loss by fire, explosion, theft and
such other casualties as may be reasonably satisfactory to the Administrative
Agent and (ii) to the extent requested by the Administrative Agent, insuring
such Grantor, the Administrative Agent and the Lenders against liability for
personal injury and property damage relating to such Inventory, Equipment and
Vehicles, such policies to be in such form and amounts and having such coverage
as may be reasonably satisfactory to the Administrative Agent and the Lenders.
(b) All such insurance shall (i) provide that no cancellation, material
reduction in amount or material change in coverage thereof shall be effective
until at least 30 days after receipt by the Administrative Agent of written
notice thereof, (ii) name the Administrative Agent as insured party or loss
payee, (iii) if reasonably requested by the Administrative Agent, include a
breach of warranty clause and (iv) be reasonably satisfactory in all other
respects to the Administrative Agent.
(c) Upon the reasonable request of the Administrative Agent, the Borrowers
shall deliver to the Administrative Agent and the Lenders a report of a
reputable insurance broker with respect to such insurance substantially
concurrently with the delivery by the Borrowers to the Administrative Agent of
their audited financial statements for each fiscal year and such supplemental
reports with respect thereto as the Administrative Agent may from time to time
reasonably request.
4.3 Payment of Obligations. Such Grantor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes (except as may be treated under the Plan of
Reorganization), assessments and governmental charges or levies imposed upon the
Collateral or in respect of income or profits therefrom, as well as all claims
of any kind (including, without limitation, claims for labor, materials and
supplies) against or with respect to the Collateral, except that no such charge
need be paid if the amount or validity thereof is currently being contested in
good faith by appropriate proceedings, reserves in conformity with GAAP with
respect thereto have been provided on the books of such Grantor and such
proceedings could not reasonably be expected to result in the sale, forfeiture
or loss of any material portion of the Collateral or any interest therein.
4.4 Maintenance of Perfected Security Interest; Further Documentation. (a)
Such Grantor shall maintain the security interest created by this Agreement as a
perfected security interest (except with respect to Unperfected Collateral, to
the extent that filing of UCC financing statements is insufficient to perfect a
security interest in such Unperfected Collateral) having at least the priorities
described in Section 2 and shall defend such security interest against the
claims and demands of all Persons whomsoever.
<PAGE>
11
(b) Such Grantor will furnish to the Administrative Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Administrative Agent
may reasonably request, all in reasonable detail.
(c) At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of such Grantor, such Grantor will
promptly and duly execute and deliver, and have recorded, such further
instruments and documents and take such further actions as the Administrative
Agent may reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code (or other similar laws) in effect
in any jurisdiction with respect to the security interests created hereby.
4.5 Changes in Locations, Name, etc. Such Grantor will not, except upon 15
days' prior written notice to the Administrative Agent and delivery to the
Administrative Agent of (a) all additional executed financing statements and
other documents reasonably requested by the Administrative Agent to maintain the
validity, perfection and priority of the security interests provided for herein
and (b) if applicable, a written supplement to Schedule 5 showing any additional
location at which Inventory or Equipment shall be kept:
(i) permit any of the Inventory or Equipment to be kept at a location
other than those listed on Schedule 5, except with respect to Equipment
under repair and held by bailees;
(ii) change the location of its chief executive office or sole place
of business from that referred to in Section 3.3; or
(iii) change its name, identity or corporate structure to such an
extent that any financing statement filed by the Administrative Agent in
connection with this Agreement would become misleading.
4.6 Notices. Such Grantor will advise the Administrative Agent and the
Lenders promptly, in reasonable detail, of:
(a) any Lien (other than security interests created hereby or Liens
permitted under the Credit Agreement) on any of the Collateral which would
adversely affect the ability of the Administrative Agent to exercise any of its
remedies hereunder; and
(b) of the occurrence of any other event which could reasonably be expected
to have a material adverse effect on the aggregate value of the Collateral or on
the security interests created hereby (the materiality of the adverse nature of
any such occurrence or other event will not be presumed by the sending of any
such notice).
4.7 Pledged Securities. If such Grantor shall become entitled to receive or
shall receive any stock certificate (including, without limitation, any
certificate
<PAGE>
12
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate issued in
connection with any reorganization), option or rights in respect of the Capital
Stock of any Issuer, whether in addition to, in substitution of, as a conversion
of, or in exchange for, any shares of the Pledged Stock, or otherwise in respect
thereof, such Grantor shall accept the same as the agent of the Administrative
Agent and the Lenders, hold the same in trust for the Administrative Agent and
the Lenders and deliver the same forthwith to the Administrative Agent in the
exact form received, duly indorsed by such Grantor to the Administrative Agent,
if required, together with an undated stock power covering such certificate duly
executed in blank by such Grantor and with, if the Administrative Agent so
requests, signature guaranteed, to be held by the Administrative Agent, subject
to the terms hereof, as additional collateral security for the Obligations.
Subject to the provisions of the Credit Agreement any sums paid upon or in
respect of the Pledged Securities upon the liquidation or dissolution of any
Issuer shall be paid over to the Administrative Agent to be held by it hereunder
as additional collateral security for the Obligations, and in case any
distribution of capital shall be made on or in respect of the Pledged Securities
or any property shall be distributed upon or with respect to the Pledged
Securities pursuant to the recapitalization or reclassification of the capital
of any Issuer or pursuant to the reorganization thereof, the property so
distributed shall, unless otherwise subject to a perfected security interest in
favor of the Administrative Agent, be delivered to the Administrative Agent to
be held by it hereunder as additional collateral security for the Obligations.
If any sums of money or property so paid or distributed in respect of the
Pledged Securities shall be received by such Grantor, such Grantor shall, until
such money or property is paid or delivered to the Administrative Agent, hold
such money or property in trust for the Lenders, segregated from other funds of
such Grantor, as additional collateral security for the Obligations.
(b) Without the prior written consent of the Administrative Agent, such
Grantor will not (i) vote to enable, or take any other action to permit, any
Issuer to issue any stock or other equity securities of any nature or to issue
any other securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of any Issuer,
(ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Pledged Securities or Proceeds thereof (except
pursuant to a transaction expressly permitted by the Credit Agreement), (iii)
create, incur or permit to exist any Lien or option in favor of, or any claim of
any Person with respect to, any of the Pledged Securities or Proceeds thereof,
or any interest therein, except for the security interests created by this
Agreement or (iv) enter into any agreement or undertaking restricting the right
or ability of such Grantor or the Administrative Agent to sell, assign or
transfer any of the Pledged Securities or Proceeds thereof.
(c) In the case of each Grantor which is an Issuer, such Issuer agrees that
(i) it will be bound by the terms of this Agreement relating to the Pledged
Securities issued by it and will comply with such terms insofar as such terms
are applicable to it, (ii) it will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in Section 4.7(a) with
respect to the Pledged Securities issued by it and (iii) the terms of Sections
5.3(c) and 5.7 shall apply to it, mutatis mutandis, with respect to all actions
that may be required of it pursuant to Section 5.3(c) or 5.7 with respect to the
Pledged Securities issued by it.
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13
4.8 Receivables. (a) Other than in the ordinary course of business
consistent with its past practice, such Grantor will not (i) grant any extension
of the time of payment of any Receivable, (ii) compromise or settle any
Receivable for less than the full amount thereof, (iii) release, wholly or
partially, any Person liable for the payment of any Receivable, (iv) allow any
credit or discount whatsoever on any Receivable or (v) amend, supplement or
modify any Receivable in any manner that could adversely affect the value
thereof.
(b) Such Grantor will deliver to the Administrative Agent a copy of each
material demand, notice or document received by it that questions or calls into
doubt the validity or enforceability of more than 5% of the aggregate amount of
the then outstanding Receivables.
4.9 Contracts. (a) Such Grantor will perform and comply in all material
respects with all its obligations under the Contracts.
(b) Such Grantor will not amend, modify, terminate or waive any provision
of any Contract in any manner which could reasonably be expected to materially
adversely affect the value of such Contract as Collateral.
(c) Such Grantor will exercise promptly and diligently each and every
material right which it may have under each Contract (other than any right of
termination).
(d) Such Grantor will deliver to the Administrative Agent a copy of each
material demand, notice or document received by it relating in any way to any
Contract that questions the validity or enforceability of such Contract.
4.10 Intellectual Property. (a) Such Grantor (either itself or through
licensees) will (i) continue to use each material Trademark on each and every
trademark class of goods applicable to its current line as reflected in its
current catalogs, brochures and price lists in order to maintain such Trademark
in full force free from any claim of abandonment for non-use, (ii) maintain as
in the past the quality of products and services offered under each material
Trademark, (iii) use such Trademark with the appropriate notice of registration
and all other notices and legends required by applicable Requirements of Law,
(iv) not adopt or use any mark which is confusingly similar or a colorable
imitation of each material Trademark unless the Administrative Agent, for the
benefit of the Lenders, shall obtain a perfected security interest in such mark
pursuant to this Agreement, and (v) not (and not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby each
material Trademark may become invalidated or impaired in any way. (b)ab Such
Grantor (either itself or through licensees) will not do any act, or omit to do
any act, whereby any material Patent may become forfeited, abandoned or
dedicated to the public.
(c) Such Grantor (either itself or through licensees) (i) will not (and
will not permit any licensee or sublicensee thereof to) do any act or knowingly
omit to do any act
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14
whereby any material Copyright may become invalidated or otherwise impaired or
fall into the public domain.
(d) Such Grantor (either itself or through licensees) will not do any act
that knowingly uses any material Intellectual Property to infringe the
intellectual property rights of any other Person.
(e) Such Grantor will notify the Administrative Agent and the Lenders
immediately if it knows, or has reason to know, that any application or
registration relating to any material Intellectual Property may become
forfeited, abandoned or dedicated to the public, or of any adverse determination
or development (including, without limitation, the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office or any court or tribunal in
any country) regarding such Grantor's ownership of, or the validity of, any
material Intellectual Property or such Grantor's right to register the same or
to own and maintain the same.
(f) Whenever such Grantor, either by itself or through any agent, employee,
licensee or designee, shall file an application for the registration of any
Intellectual Property with the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, such Grantor shall report such
filing to the Administrative Agent within five Business Days after the last day
of the fiscal quarter in which such filing occurs. Upon request of the
Administrative Agent, such Grantor shall execute and deliver, and have recorded,
any and all agreements, instruments, documents, and papers as the Administrative
Agent may request to evidence the Administrative Agent's and the Lenders'
security interest in any Copyright, Patent or Trademark and the goodwill and
general intangibles of such Grantor relating thereto or represented thereby.
(g) Such Grantor will take all reasonable and necessary steps, including,
without limitation, in any proceeding before the United States Patent and
Trademark Office, the United States Copyright Office or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the material Intellectual Property, including,
without limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
(h) In the event that any material Intellectual Property is infringed,
misappropriated or diluted by a third party, such Grantor shall (i) take such
actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and promptly notify the
Administrative Agent after it learns thereof and take all appropriate remedial
action, including, when appropriate, sue for infringement, misappropriation or
dilution, to seek injunctive relief where appropriate and to recover any and all
damages for such infringement, misappropriation or dilution.
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15
SECTION 5. REMEDIAL PROVISIONS
5.1 Certain Matters Relating to Receivables. (a) The Administrative Agent
shall have the right to make test verifications of the Receivables in any manner
and through any medium that it reasonably considers advisable, and each Grantor
shall furnish all such assistance and information as the Administrative Agent
may require in connection with such test verifications. At any time and from
time to time, upon the Administrative Agent's request and at the expense of the
relevant Grantor, such Grantor shall cause independent public accountants or
others satisfactory to the Administrative Agent to furnish to the Administrative
Agent reports showing reconciliations, aging and test verifications of, and
trial balances for, the Receivables; provided, however that unless a Default or
Event Default shall have occurred and be continuing, the Administrative Agent
shall request no more than two (2) such reports during any calendar year.
(b) The Administrative Agent hereby authorizes each Grantor to collect such
Grantor's Receivables and the Administrative Agent may curtail or terminate said
authority at any time after the occurrence and during the continuance of an
Event of Default. If required by the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default, any payments of
Receivables, when collected by any Grantor, (i) shall be forthwith (and, in any
event, within two Business Days) deposited by such Grantor in the exact form
received, duly indorsed by such Grantor to the Administrative Agent if required,
in a Collateral Account maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent for the
account of the Lenders only as provided in Section 5.5, and (ii) until so turned
over, shall be held by such Grantor in trust for the Administrative Agent and
the Lenders, segregated from other funds of such Grantor. Each such deposit of
Proceeds of Receivables shall be accompanied by a report identifying in
reasonable detail the nature and source of the payments included in the deposit.
(c) At the Administrative Agent's request, each Grantor shall deliver to
the Administrative Agent all original and other documents evidencing, and
relating to, the agreements and transactions which gave rise to the Receivables,
including, without limitation, all original orders, invoices and shipping
receipts.
5.2 Communications with Obligors; Grantors Remain Liable. (a) The
Administrative Agent in its own name or in the name of others may at any time
after the occurrence and during the continuance of an Event of Default
communicate with obligors under the Receivables and parties to the Contracts to
verify with them to the Administrative Agent's satisfaction the existence,
amount and terms of any Receivables or Contracts.
(b) Upon the request of the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default, each Grantor shall
notify obligors on the Receivables and parties to the Contracts that the
Receivables and the Contracts have been assigned to the Administrative Agent for
the benefit of the Agents and the Lenders and that payments in respect thereof
shall be made directly to the Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor shall
remain liable under each of the Receivables and Contracts to observe and perform
all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with
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16
the terms of any agreement giving rise thereto. Neither the Administrative Agent
nor any Lender shall have any obligation or liability under any Receivable (or
any agreement giving rise thereto) or Contract by reason of or arising out of
this Agreement or the receipt by the Administrative Agent or any Lender of any
payment relating thereto, nor shall the Administrative Agent or any Lender be
obligated in any manner to perform any of the obligations of any Grantor under
or pursuant to any Receivable (or any agreement giving rise thereto) or
Contract, to make any payment, to make any inquiry as to the nature or the
sufficiency of any payment received by it or as to the sufficiency of any
performance by any party thereunder, to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.
5.3 Pledged Stock. (a) Unless an Event of Default shall have occurred and
be continuing and the Administrative Agent shall have given notice to the
relevant Grantor of the Administrative Agent's intent to exercise its
corresponding rights pursuant to Section 5.3(b), each Grantor shall be permitted
to receive all cash dividends paid in respect of the Pledged Stock and all
payments made in respect of the Pledged Notes, in each case paid in the normal
course of business of the relevant Issuer and consistent with past practice, to
the extent permitted in the Credit Agreement, and to exercise all voting and
corporate rights with respect to the Pledged Securities; provided, however, that
no vote shall be cast or corporate right exercised or other action taken which,
in the Administrative Agent's reasonable judgment, would impair the Collateral
or which would be inconsistent with or result in any violation of any provision
of the Credit Agreement, this Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice of its intent to exercise such rights to
the relevant Grantor or Grantors, (i) the Administrative Agent shall have the
right to receive any and all cash dividends, payments or other Proceeds paid in
respect of the Pledged Securities and make application thereof to the
Obligations in the order set forth in Section 5.5, and (ii) any or all of the
Pledged Securities shall be registered in the name of the Administrative Agent
or its nominee, and the Administrative Agent or its nominee may thereafter
exercise (x) all voting, corporate and other rights pertaining to such Pledged
Securities at any meeting of shareholders of the relevant Issuer or Issuers or
otherwise and (y) any and all rights of conversion, exchange and subscription
and any other rights, privileges or options pertaining to such Pledged
Securities as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged
Securities upon the merger, consolidation, reorganization, recapitalization or
other fundamental change in the corporate structure of any Issuer, or upon the
exercise by any Grantor or the Administrative Agent of any right, privilege or
option pertaining to such Pledged Securities, and in connection therewith, the
right to deposit and deliver any and all of the Pledged Securities with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as the Administrative Agent may determine), all
without liability except to account for property actually received by it, but
the Administrative Agent shall have no duty to any Grantor to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.
(c) Each Grantor hereby authorizes and instructs each Issuer of any Pledged
Securities pledged by such Grantor hereunder to (i) comply with any instruction
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17
received by it from the Administrative Agent in writing that (x) states that an
Event of Default has occurred and is continuing and (y) is otherwise in
accordance with the terms of this Agreement, without any other or further
instructions from such Grantor, and each Grantor agrees that each Issuer shall
be fully protected in so complying, and (ii) unless otherwise expressly
permitted hereby, pay any dividends or other payments with respect to the
Pledged Securities directly to the Administrative Agent.
5.4 Proceeds to be Turned Over To Administrative Agent. In addition to the
rights of the Administrative Agent and the Lenders specified in Section 5.1 with
respect to payments of Receivables, all Proceeds received by any Grantor
consisting of cash, checks and other near-cash items shall be held by such
Grantor in trust for the Administrative Agent and the Lenders, segregated from
other funds of such Grantor, and shall, forthwith upon receipt by such Grantor,
be turned over to the Administrative Agent in the exact form received by such
Grantor (duly indorsed by such Grantor to the Administrative Agent, if
required). All Proceeds received by the Administrative Agent hereunder shall be
held by the Administrative Agent in a Collateral Account maintained under its
sole dominion and control. All Proceeds while held by the Administrative Agent
in a Collateral Account (or by such Grantor in trust for the Administrative
Agent and the Lenders) shall continue to be held as collateral security for all
the Obligations and shall not constitute payment thereof until applied as
provided in Section 5.5.
5.5 Application of Proceeds. If an Event of Default shall have occurred
and be continuing, at any time at the Administrative Agent's election, the
Administrative Agent may apply all or any part of Proceeds constituting
Collateral, whether or not held in any Collateral Account in payment of the
Obligations in the order specified in the Intercreditor Agreement.
5.6 Code and Other Remedies. If an Event of Default shall occur and be
continuing, the Administrative Agent, on behalf of the Agents and the Lenders,
may exercise, in addition to all other rights and remedies granted to them in
this Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the New York UCC or any other applicable law. Without limiting the generality of
the foregoing, the Administrative Agent, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon any Grantor or any other
Person (all and each of which demands, defenses, advertisements and notices are
hereby waived) may in such circumstances forthwith collect, receive, appropriate
and realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Administrative Agent or any Lender or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Administrative Agent or any Lender shall have
the right upon any such public sale or sales, and, to the extent permitted by
law, upon any such private sale or sales, to purchase the whole or any part of
the Collateral so sold, free of any right or equity of redemption in any
Grantor, which right or equity is hereby waived and released. Each Grantor
further agrees, at the Administrative Agent's request, to assemble the
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18
Collateral and make it available to the Administrative Agent at places which the
Administrative Agent shall reasonably select, whether at such Grantor's premises
or elsewhere. The Administrative Agent shall apply the net proceeds of any
action taken by it pursuant to this Section 5.6, after deducting all reasonable
costs and expenses of every kind incurred in connection therewith or incidental
to the care or safekeeping of any of the Collateral or in any way relating to
the Collateral or the rights of the Administrative Agent and the Lenders
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Obligations, in such
order as the Administrative Agent may elect, and only after such application and
after the payment by the Administrative Agent of any other amount required by
any provision of law, including, without limitation, Section 9-504(1)(c) of the
New York UCC, need the Administrative Agent account for the surplus, if any, to
any Grantor. To the extent permitted by applicable law, each Grantor waives all
claims, damages and demands it may acquire against the Administrative Agent or
any Lender arising out of the exercise by them of any rights hereunder. If any
notice of a proposed sale or other disposition of Collateral shall be required
by law, such notice shall be deemed reasonable and proper if given at least 10
days before such sale or other disposition.
5.7 Registration Rights. (a) If the Administrative Agent shall determine to
exercise its right to sell any or all of the Pledged Stock pursuant to Section
5.6, and if in the opinion of the Administrative Agent it is necessary or
advisable to have the Pledged Stock, or that portion thereof to be sold,
registered under the provisions of the Securities Act, the relevant Grantor will
cause the Issuer thereof to (i) execute and deliver, and cause the directors and
officers of such Issuer to execute and deliver, all such instruments and
documents, and do or cause to be done all such other acts as may be, in the
opinion of the Administrative Agent, necessary or advisable to register the
Pledged Stock, or that portion thereof to be sold, under the provisions of the
Securities Act, (ii) use its best efforts to cause the registration statement
relating thereto to become effective and to remain effective for a period of one
year from the date of the first public offering of the Pledged Stock, or that
portion thereof to be sold, and (iii) make all amendments thereto and/or to the
related prospectus which, in the opinion of the Administrative Agent, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto. Each Grantor agrees to cause such Issuer to
comply with the provisions of the securities or "Blue Sky" laws of any and all
jurisdictions which the Administrative Agent shall designate and to make
available to its security holders, as soon as practicable, an earnings statement
(which need not be audited) which will satisfy the provisions of Section 11(a)
of the Securities Act.
(b) Each Grantor recognizes that the Administrative Agent may be unable to
effect a public sale of any or all the Pledged Stock, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Administrative
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for
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19
the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.
(c) Each Grantor agrees to use its best efforts to do or cause to be done
all such other acts as may be necessary to make such sale or sales of all or any
portion of the Pledged Stock pursuant to this Section 5.7 valid and binding and
in compliance with any and all other applicable Requirements of Law. Each
Grantor further agrees that a breach of any of the covenants contained in this
Section 5.7 will cause irreparable injury to the Administrative Agent and the
Lenders, that the Administrative Agent and the Lenders have no adequate remedy
at law in respect of such breach and, as a consequence, that each and every
covenant contained in this Section 5.7 shall be specifically enforceable against
such Grantor, and such Grantor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants except for
a defense that no Event of Default has occurred under the Credit Agreement.
5.8 Waiver; Deficiency. Each Grantor waives and agrees not to assert any
rights or privileges which it may acquire under Section 9-112 of the New York
UCC. Each Grantor shall remain liable for any deficiency if the proceeds of any
sale or other disposition of the Collateral are insufficient to pay its
Obligations and the fees and disbursements of any attorneys employed by the
Administrative Agent or any Lender to collect such deficiency.
SECTION 6. THE ADMINISTRATIVE AGENT
6.1 Administrative Agent's Appointment as Attorney-in-Fact, etc. (a) Each
Grantor hereby irrevocably constitutes and appoints the Administrative Agent and
any officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of such Grantor and in the name of such Grantor or in its own name,
for the purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, each Grantor hereby gives the
Administrative Agent the power and right, on behalf of such Grantor, without
notice to or assent by such Grantor, to do any or all of the following:
(i) in the name of such Grantor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Receivable or Contract or with respect to any other Collateral and file any
claim or take any other action or proceeding in any court of law or equity
or otherwise deemed appropriate by the Administrative Agent for the purpose
of collecting any and all such moneys due under any Receivable or Contract
or with respect to any other Collateral whenever payable;
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20
(ii) in the case of any Intellectual Property, execute and deliver,
and have recorded, any and all agreements, instruments, documents and
papers as the Administrative Agent may request to evidence the
Administrative Agent's and the Lenders' security interest in such
Intellectual Property and the goodwill and general intangibles of such
Grantor relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of the
premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in Section 5.6
or 5.7, any indorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
(v) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the Administrative
Agent shall direct; ask or demand for, collect, and receive payment of and
receipt for, any and all moneys, claims and other amounts due or to become
due at any time in respect of or arising out of any Collateral; sign and
indorse any invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments, verifications,
notices and other documents in connection with any of the Collateral;
commence and prosecute any suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect the Collateral or
any portion thereof and to enforce any other right in respect of any
Collateral; defend any suit, action or proceeding brought against such
Grantor with respect to any Collateral; settle, compromise or adjust any
such suit, action or proceeding and, in connection therewith, give such
discharges or releases as the Administrative Agent may deem appropriate;
assign any Copyright, Patent or Trademark (along with the goodwill of the
business to which any such Copyright, Patent or Trademark pertains),
throughout the world for such term or terms, on such conditions, and in
such manner, as the Administrative Agent shall in its sole discretion
determine; and generally, sell, transfer, pledge and make any agreement
with respect to or otherwise deal with any of the Collateral as fully and
completely as though the Administrative Agent were the absolute owner
thereof for all purposes, and do, at the Administrative Agent's option and
such Grantor's expense, at any time, or from time to time, all acts and
things which the Administrative Agent deems necessary to protect, preserve
or realize upon the Collateral and the Administrative Agent's and the
Lenders' security interests therein and to effect the intent of this
Agreement, all as fully and effectively as such Grantor might do.
Anything in this Section 6.1(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney
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21
provided for in this Section 6.1(a) (except for the rights provided in Section
6.1(a)(iii)) unless an Event of Default shall have occurred and be continuing.
(b) If any Grantor fails to perform or comply with any of its agreements
contained herein, the Administrative Agent, at its option, but without any
obligation so to do, may perform or comply, or otherwise cause performance or
compliance, with such agreement.
(c) The expenses of the Administrative Agent incurred in connection with
actions undertaken as provided in this Section 6.1, together with interest
thereon at a rate per annum equal to the rate per annum at which interest would
then be payable on past due Revolving Credit Loans that are Base Rate Loans
under the Credit Agreement, from the date of payment by the Administrative Agent
to the date reimbursed by the relevant Grantor, shall be payable by such Grantor
to the Administrative Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. All powers, authorizations and agencies
contained in this Agreement are coupled with an interest and are irrevocable
until this Agreement is terminated and the security interests created hereby are
released.
6.2 Duty of Administrative Agent. The Administrative Agent's sole duty with
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section 9-207 of the New York UCC or otherwise, shall
be to deal with it in the same manner as the Administrative Agent deals with
similar property for its own account. Neither the Administrative Agent, any
Lender nor any of their respective officers, directors, employees or agents
shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of any Grantor or any
other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof. The powers conferred on the Administrative Agent
and the Lenders hereunder are solely to protect the Administrative Agent's and
the Lenders' interests in the Collateral and shall not impose any duty upon the
Administrative Agent or any Lender to exercise any such powers. The
Administrative Agent and the Lenders shall be accountable only for amounts that
they actually receive as a result of the exercise of such powers, and neither
they nor any of their officers, directors, employees or agents shall be
responsible to any Grantor for any act or failure to act hereunder, except for
their own gross negligence or willful misconduct.
6.3 Execution of Financing Statements. Pursuant to Section 9-402 of the New
York UCC and any other applicable law, each Grantor authorizes the
Administrative Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the
signature of such Grantor in such form and in such offices as the Administrative
Agent reasonably determines appropriate to perfect the security interests of the
Administrative Agent under this Agreement. A photographic or other reproduction
of this Agreement shall be sufficient as a financing statement or other filing
or recording document or instrument for filing or recording in any jurisdiction.
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22
6.4 Authority of Administrative Agent. Each Grantor acknowledges that the
rights and responsibilities of the Administrative Agent under this Agreement
with respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Administrative Agent and the
Lenders, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Administrative Agent and the Grantors, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and no Grantor shall be under any
obligation, or entitlement, to make any inquiry respecting such authority.
SECTION 7. MISCELLANEOUS
7.1 Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with Section 10.1 of the Credit Agreement.
7.2 Notices. All notices, requests and demands to or upon the
Administrative Agent or any Grantor hereunder shall be effected in the manner
provided for in Section 10.2 of the Credit Agreement.
7.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the
Administrative Agent nor any Lender shall by any act (except by a written
instrument pursuant to Section 7.1), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Administrative Agent or any Lender of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Administrative Agent or such Lender would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
7.4 Enforcement Expenses; Indemnification. (a) Each Grantor agrees to pay
or reimburse each Lender and the Administrative Agent for all its costs and
expenses incurred in enforcing or preserving any rights under this Agreement and
the other Loan Documents to which such Grantor is a party, including, without
limitation, the fees and disbursements of counsel (including the allocated fees
and expenses of in-house counsel) to each Lender and of counsel to the
Administrative Agent.
(b) Each Grantor agrees to pay, and to save the Administrative Agent and
the Lenders harmless from, any and all liabilities with respect to, or resulting
from any delay in
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paying, any and all stamp, excise, sales or other taxes which may be payable or
determined to be payable with respect to any of the Collateral or in connection
with any of the transactions contemplated by this Agreement.
(c) The agreements in this Section shall survive repayment of the
Obligations and all other amounts payable under the Credit Agreement and the
other Loan Documents.
7.5 Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of each Grantor and shall inure to the benefit of the
Administrative Agent and the Lenders and their successors and assigns; provided
that no Grantor may assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of the
Administrative Agent.
7.6 Set-Off. Each Grantor hereby irrevocably authorizes the Administrative
Agent and each Lender at any time and from time to time while an Event of
Default shall have occurred and be continuing, without notice to such Grantor or
any other Grantor, any such notice being expressly waived by each Grantor, to
set-off and appropriate and apply 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 the Administrative Agent or such Lender to or for the credit or the
account of such Grantor (other than for the account of any Grantor acting in a
fiduciary or other special capacity), or any part thereof in such amounts as the
Administrative Agent or such Lender may elect, against and on account of the
obligations and liabilities of such Grantor to the Administrative Agent or such
Lender hereunder and claims of every nature and description of the
Administrative Agent or such Lender against such Grantor, in any currency,
whether arising hereunder, under the Credit Agreement, any other Loan Document
or otherwise, as the Administrative Agent or such Lender may elect, whether or
not the Administrative Agent or any Lender has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured. The Administrative Agent and each Lender shall notify such Grantor
promptly of any such set-off and the application made by the Administrative
Agent or such Lender of the proceeds thereof, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Administrative Agent and each Lender under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Administrative Agent or such Lender may have.
7.7 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.
7.8 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.
<PAGE>
24
7.9 Section Headings. The Section headings used in this Agreement are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
7.10 Integration. This Agreement and the other Loan Documents represent the
agreement of the Grantors, the Administrative Agent and the Lenders with respect
to the subject matter hereof and thereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or any
Lender relative to subject matter hereof and thereof not expressly set forth or
referred to herein or in the other Loan Documents.
7.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
7.12 Submission To Jurisdiction; Waivers . Each Grantor hereby irrevocably
and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Grantor at its address referred to in Section 7.2 or at such other address
of which the Administrative Agent shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent permitted by law, any right it may
have to claim or recover in any legal action or proceeding referred to in
this Section any special, exemplary, punitive or consequential damages.
<PAGE>
25
7.13 Acknowledgements. Each Grantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents to which it is a
party;
(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to any Grantor arising out of or in connection
with this Agreement or any of the other Loan Documents, and the
relationship between the Grantors, on the one hand, and the Administrative
Agent and Lenders, on the other hand, in connection herewith or therewith
is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or among the Grantors and the Lenders.
7.14 Additional Grantors. Each Subsidiary of a Borrower that is required
to become a party to this Agreement pursuant to Section 6.11 of the Credit
Agreement shall become a Grantor for all purposes of this Agreement upon
execution and delivery by such Subsidiary of an Assumption Agreement in the form
of Annex 1 hereto.
7.15 Releases. (a) At such time as the Loans, the Reimbursement Obligations
and the other Obligations shall have been paid in full, the Commitments have
been terminated and no Letters of Credit shall be outstanding, the Collateral
shall be released from the Liens created hereby, and this Agreement and all
obligations (other than those expressly stated to survive such termination) of
the Administrative Agent and each Grantor hereunder shall terminate, all without
delivery of any instrument or performance of any act by any party, and all
rights to the Collateral shall revert to the Grantors. At the request and sole
expense of any Grantor following any such termination, the Administrative Agent
shall deliver to such Grantor any Collateral held by the Administrative Agent
hereunder, and execute and deliver to such Grantor such documents as such
Grantor shall reasonably request to evidence such termination.
(b) If any of the Collateral shall be sold, transferred or otherwise
disposed of by any Grantor in a transaction permitted by the Credit Agreement,
then the Administrative Agent, at the request and sole expense of such Grantor,
shall execute and deliver to such Grantor all releases or other documents
reasonably necessary or desirable for the release of the Liens created hereby on
such Collateral.
<PAGE>
26
7.16 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
IN WITNESS WHEREOF, each of the undersigned has caused this Collateral
Agreement to be duly executed and delivered as of the date first above written.
HARVARD INDUSTRIES, INC.
DOEHLER-JARVIS, INC.
HARVARD TRANSPORTATION CORPORATION
DOEHLER-JARVIS GREENEVILLE, INC.
POTTSTOWN PRECISION CASTING, INC.
DOEHLER-JARVIS TECHNOLOGIES, INC.
DOEHLER-JARVIS TOLEDO, INC.
HARMAN AUTOMOTIVE, INC.
HAYES-ALBION CORPORATION
THE KINGSTON-WARREN CORPORATION
By: /s/ D. Craig Bowman
-------------------------------
Title:
<PAGE>
Schedule 1
Intentionally Left Blank
<PAGE>
Schedule 2
DESCRIPTION OF PLEDGED SECURITIES
Pledged Stock:
Issuer Class of Stock Stock Certificate No. No. of Shares
------ -------------- --------------------- -------------
Pledged Notes:
Issuer Payee Principal Amount
------ ----- ----------------
<PAGE>
Schedule 3
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
Uniform Commercial Code Filings
[List each office where a financing statement is to be filed]
Patent and Trademark Filings
[List all filings]
Actions with respect to Pledged Stock
Other Actions
[Describe other actions to be taken]
<PAGE>
Schedule 4
LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE
Grantor Location
------- --------
Harvard Industries, Inc.
Doehler-Jarvis, Inc.
Harvard Transportation Corporation
Doehler-Jarvis Greeneville, Inc.
Pottstown Precision Casting, Inc.
Doehler-Jarvis Technologies, Inc.
Doehler-Jarvis Toledo, Inc.
Harman Automotive, Inc.
Hayes-Albion Corporation
The Kingston-Warren Corporation
<PAGE>
Schedule 5
LOCATION OF INVENTORY AND EQUIPMENT
Grantor Locations
------- ---------
Harvard Industries, Inc.
Doehler-Jarvis, Inc.
Harvard Transportation Corporation
Doehler-Jarvis Greeneville, Inc.
Pottstown Precision Casting, Inc.
Doehler-Jarvis Technologies, Inc.
Doehler-Jarvis Toledo, Inc.
Harman Automotive, Inc.
Hayes-Albion Corporation
The Kingston-Warren Corporation
<PAGE>
Schedule 6
COPYRIGHTS AND COPYRIGHT LICENSES
Harvard Industries, Inc.
Doehler-Jarvis, Inc.
Harvard Transportation Corporation
Doehler-Jarvis Greeneville, Inc.
Pottstown Precision Casting, Inc.
Doehler-Jarvis Technologies, Inc.
Doehler-Jarvis Toledo, Inc.
Harman Automotive, Inc.
Hayes-Albion Corporation
The Kingston-Warren Corporation
<PAGE>
PATENTS AND PATENT LICENSES
Harvard Industries, Inc.
Doehler-Jarvis, Inc.
Harvard Transportation Corporation
Doehler-Jarvis Greeneville, Inc.
Pottstown Precision Casting, Inc.
Doehler-Jarvis Technologies, Inc.
Doehler-Jarvis Toledo, Inc.
Harman Automotive, Inc.
Hayes-Albion Corporation
The Kingston-Warren Corporation
<PAGE>
TRADEMARKS AND TRADEMARK LICENSES
Harvard Industries, Inc.
Doehler-Jarvis, Inc.
Harvard Transportation Corporation
Doehler-Jarvis Greeneville, Inc.
Pottstown Precision Casting, Inc.
Doehler-Jarvis Technologies, Inc.
Doehler-Jarvis Toledo, Inc.
Harman Automotive, Inc.
Hayes-Albion Corporation
The Kingston-Warren Corporation
<PAGE>
Schedule 7
CONTRACTS
<PAGE>
Schedule 8
EXISTING PRIOR LIENS
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the Collateral
Agreement dated as of November 24, 1998 (the "Agreement"), made by the Grantors
party thereto in favor of General Electric Capital Corporation, as
Administrative Agent. The undersigned agrees for the benefit of the
Administrative Agent and the Lenders as follows:
1. The undersigned will be bound by the terms of the Agreement and will
comply with such terms insofar as such terms are applicable to the undersigned.
2. The undersigned will notify the Administrative Agent promptly in writing
of the occurrence of any of the events described in Section 4.7(a) of the
Agreement.
3. The terms of Sections 5.3(a) and 5.7 of the Agreement shall apply to it,
mutatis mutandis, with respect to all actions that may be required of it
pursuant to Section 5.3(a) or 5.7 of the Agreement.
[NAME OF ISSUER]
By
--------------------------------
Title
-----------------------------
Address for Notices:
----------------------------------
----------------------------------
Fax:
------------------------------
<PAGE>
Annex 1 to
Collateral Agreement
ASSUMPTION AGREEMENT, dated as of ________________, ____, made by
_________________________, a ______________ corporation (the "Additional
Grantor"), in favor of GENERAL ELECTRIC CAPITAL CORPORATION, as Administrative
Agent for the Lenders from time to time party to the Credit Agreement, dated as
of November ___, 1998 (as amended, supplemented or otherwise modified from time
to time, the "Credit Agreement"). All capitalized terms not defined herein shall
have the meaning ascribed to them in such Credit Agreement.
W I T N E S S E T H :
WHEREAS, in connection with the Credit Agreement, the Borrowers (other than
the Additional Grantor) have entered into the Collateral Agreement, dated as of
November 24, 1998 (as amended, supplemented or otherwise modified from time to
time, the "Collateral Agreement") in favor of the Administrative Agent for the
benefit of the Agents and the Lenders;
WHEREAS, the Credit Agreement requires the Additional Grantor to become a
party to the Collateral Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Collateral Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Collateral Agreement. By executing and delivering this Assumption
Agreement, the Additional Grantor, as provided in Section 7.14 of the Collateral
Agreement, hereby becomes a party to the Collateral Agreement as a Grantor
thereunder with the same force and effect as if originally named therein as a
Grantor and, without limiting the generality of the foregoing, hereby expressly
assumes all obligations and liabilities of a Grantor thereunder. The information
set forth in Annex 1-A hereto is hereby added to the information set forth in
Schedules ____________ to the Collateral Agreement. The Additional Grantor
hereby represents and warrants that each of the representations and warranties
contained in Section 3 of the Collateral Agreement is true and correct on and as
the date hereof (after giving effect to this Assumption Agreement) as if made on
and as of such date.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
<PAGE>
2
IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to
be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTOR]
By:
-------------------------------
Name:
Title:
<PAGE>
EXHIBIT B
FORM OF COMPLIANCE CERTIFICATE
This Compliance Certificate is delivered to you pursuant to Section 6.2 of
the Credit Agreement, dated as of November 24, 1998, as amended, supplemented or
modified from time to time (the "Credit Agreement"), among HARVARD INDUSTRIES,
INC., (the "Borrower Representative"), DOEHLER-JARVIS, INC., HARVARD
TRANSPORTATION CORPORATION, DOEHLER-JARVIS GREENEVILLE, INC., POTTSTOWN
PRECISION CASTING, INC., DOEHLER-JARVIS TECHNOLOGIES, INC., DOEHLER-JARVIS
TOLEDO INC., HARMAN AUTOMOTIVE, INC., HAYES-ALBION CORPORATION, THE
KINGSTON-WARREN CORPORATION (together with the Borrower Representative, jointly
and severally, the "Borrowers"), the Lenders, LEHMAN BROTHERS INC., as Arranger,
LEHMAN COMMERCIAL PAPER INC., as Syndication Agent and GENERAL ELECTRIC CAPITAL
CORPORATION, as Administrative Agent. Terms defined in the Credit Agreement and
not otherwise defined herein are used herein with the meanings so defined.
1. I am the duly elected, qualified and acting [Chief Financial Officer]
[Vice President - Finance] of ____________.
2. I have reviewed and am familiar with the contents of this Compliance
Certificate.
3. I have reviewed the terms of the Credit Agreement and the Loan Documents
and have made or caused to be made under my supervision, a review in reasonable
detail of the transactions and condition of _____________ during the accounting
period covered by the financial statements attached hereto as Attachment 1 (the
"Financial Statements"). Such review did not disclose the existence during or at
the end of the accounting period covered by the Financial Statements, and I have
no knowledge of the existence, as of the date of this Compliance Certificate, of
any condition or event which constitutes a Default or Event of Default [, except
as set forth below].
4. Attached hereto as Attachment 2 are the computations showing compliance
with the covenants set forth in Section 7.1 and 7.7 of the Credit Agreement.
IN WITNESS WHEREOF, I execute this Compliance Certificate this _____ day of
_____, 199__.
HARVARD INDUSTRIES, INC.
By:
-------------------------------
Title:
<PAGE>
Attachment 2
to Exhibit B
The information described herein is as of , 199_, and pertains to the
period from ______________ ____ , 19_ to ________________ __, 19__.
[Set forth Covenant Calculations]
<PAGE>
EXHIBIT C
FORM OF CLOSING CERTIFICATE
Pursuant to Section 5.1(m) of the Credit Agreement dated as of November 24,
1998 (the "Credit Agreement"; terms defined therein being used herein as therein
defined), among HARVARD INDUSTRIES, INC. (the "Borrower Representative"),
DOEHLER-JARVIS, INC., HARVARD TRANSPORTATION CORPORATION, DOEHLER-JARVIS
GREENEVILLE, INC., POTTSTOWN PRECISION CASTING, INC., DOEHLER-JARVIS
TECHNOLOGIES, INC., DOEHLER-JARVIS TOLEDO INC., HARMAN AUTOMOTIVE, INC.,
HAYES-ALBION CORPORATION, THE KINGSTON-WARREN CORPORATION (together with the
Borrower Representative, jointly and severally, the "Borrowers"), the Lenders,
LEHMAN BROTHERS INC., as Arranger, LEHMAN COMMERCIAL PAPER INC., as Syndication
Agent and GENERAL ELECTRIC CAPITAL CORPORATION, as Administrative Agent, the
undersigned [INSERT TITLE OF OFFICER] of [INSERT NAME OF COMPANY] (the
"Company") hereby certifies as follows:
1. The representations and warranties of the Company set forth in each of
the Loan Documents to which it is a party or which are contained in any
certificate furnished by or on behalf of the Company pursuant to any of the Loan
Documents to which it is a party are true and correct in all material respects
on and as of the date hereof with the same effect as if made on the date hereof,
except for representations and warranties expressly stated to relate to a
specific earlier date, in which case such representations and warranties were
true and correct in all material respects as of such earlier date.
2. ___________________ is the duly elected and qualified Corporate
Secretary of the Company and the signature set forth for such officer below is
such officer's true and genuine signature.
3. No Default or Event of Default has occurred and is continuing as of the
date hereof or after giving effect to the Loans to be made on the date hereof.
4. The conditions precedent set forth in Section 5.1 of the Credit
Agreement were satisfied as of the Closing Date except as set forth on Schedule
I hereto.
The undersigned Corporate Secretary of the Company certifies as follows:
5. There are no liquidation or dissolution proceedings pending or to my
knowledge threatened against the Company, nor has any other event occurred
adversely affecting or threatening the continued corporate existence of the
Company.
6. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its organization.
7. Attached hereto as Annex 1 is a true and complete copy of resolutions
duly adopted by the Board of Directors of the Company on _____________, 1998;
such
<PAGE>
2
resolutions have not in any way been amended, modified, revoked or rescinded,
have been in full force and effect since their adoption to and including the
date hereof and are now in full force and effect and are the only corporate
proceedings of the Company now in force relating to or affecting the matters
referred to therein.
8. Attached hereto as Annex 2 is a true and complete copy of the By-Laws of
the Company as in effect on the date hereof.
9. Attached hereto as Annex 3 is a true and complete copy of the
Certificate of Incorporation of the Company as in effect on the date hereof, and
such certificate has not been amended, repealed, modified or restated.
10. The following persons are now duly elected and qualified officers of
the Company holding the offices indicated next to their respective names below,
and such officers have held such offices with the Company at all times since the
date indicated next to their respective titles to and including the date hereof,
and the signatures appearing opposite their respective names below are the true
and genuine signatures of such officers, and each of such officers is duly
authorized to execute and deliver on behalf of the Company each of the Loan
Documents to which it is a party and any certificate or other document to be
delivered by the Company pursuant to the Loan Documents to which it is a party:
Name Office Date Signature
---- ------ ---- ---------
IN WITNESS WHEREOF, the undersigned have hereunto set our names as of the
date set forth below.
- ------------------------------- ----------------------------------
Name: Name:
Title: Title:
Date: _______________, 1998
<PAGE>
EXHIBIT E
FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of November 24, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among HARVARD INDUSTRIES, INC. (the "Borrower Representative"),
DOEHLER-JARVIS, INC., HARVARD TRANSPORTATION CORPORATION, DOEHLER-JARVIS
GREENEVILLE, INC., POTTSTOWN PRECISION CASTING, INC., DOEHLER-JARVIS
TECHNOLOGIES, INC., DOEHLER-JARVIS TOLEDO INC., HARMAN AUTOMOTIVE, INC.,
HAYES-ALBION CORPORATION, THE KINGSTON-WARREN CORPORATION (together with the
Borrower Representative, jointly and severally, the "Borrowers"), the Lenders,
LEHMAN BROTHERS INC., as Arranger, LEHMAN COMMERCIAL PAPER INC., as Syndication
Agent and GENERAL ELECTRIC CAPITAL CORPORATION, as Administrative Agent. Unless
otherwise defined herein, terms defined in the Credit Agreement and used herein
shall have the meanings given to them in the Credit Agreement.
The Assignor identified on Schedule l hereto (the "Assignor") and the
Assignee identified on Schedule l hereto (the "Assignee") agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date (as defined below), the interest described in Schedule 1 hereto
(the "Assigned Interest") in and to the Assignor's rights and obligations under
the Credit Agreement with respect to those credit facilities contained in the
Credit Agreement as are set forth on Schedule 1 hereto (individually, an
"Assigned Facility"; collectively, the "Assigned Facilities"), in a principal
amount for each Assigned Facility as set forth on Schedule 1 hereto.
2. The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or with respect to the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement, any other Loan Document or any other instrument or
document furnished pursuant thereto, other than that the Assignor has not
created any adverse claim upon the interest being assigned by it hereunder and
that such interest is free and clear of any such adverse claim; (b) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrowers, any of their Subsidiaries or any other
obligor or the performance or observance by the Borrowers, any of their
Subsidiaries or any other obligor of any of their respective obligations under
the Credit Agreement or any other Loan Document or any other instrument or
document furnished pursuant hereto or thereto; and (c) attaches any Notes held
by it evidencing the Assigned Facilities and (i) requests that the
Administrative Agent, upon request by the Assignee, exchange the attached Notes
for a new Note or Notes payable to the Assignee and (ii) if the Assignor has
retained any interest in the Assigned Facility, requests that the Administrative
Agent exchange the attached Notes for a new Note or Notes payable to the
Assignor, in each case in amounts which reflect the assignment being made hereby
(and after giving effect to any other assignments which have become effective on
the Effective Date).
<PAGE>
2
3. The Assignee (a) represents and warrants that it is legally authorized
to enter into this Assignment and Acceptance; (b) confirms that it has received
a copy of the Credit Agreement, together with copies of the financial statements
delivered pursuant to Section 4.1 thereof and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (c) agrees that it will,
independently and without reliance upon the Assignor, the Agents or any other
Lender 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 Credit Agreement, the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto; (d) appoints and
authorizes the Agents to take such action as agent on its behalf and to exercise
such powers and discretion under the Credit Agreement, the other Loan Documents
or any other instrument or document furnished pursuant hereto or thereto as are
delegated to the Agents by the terms thereof, together with such powers as are
incidental thereto; and (e) agrees that it will be bound by the provisions of
the Credit Agreement and will perform in accordance with its terms all the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender including, if it is organized under the laws of a
jurisdiction outside the United States, its obligation pursuant to Section
2.20(d) of the Credit Agreement.
4. The effective date of this Assignment and Acceptance shall be the
Effective Date of Assignment described in Schedule 1 hereto (the "Effective
Date"). Following the execution of this Assignment and Acceptance, it will be
delivered to the Administrative Agent for acceptance by it and recording by the
Administrative Agent pursuant to the Credit Agreement, effective as of the
Effective Date (which shall not, unless otherwise agreed to by the
Administrative Agent, be earlier than five Business Days after the date of such
acceptance and recording by the Administrative Agent).
5. Upon such acceptance and recording, from and after the Effective Date,
the Administrative Agent shall make all payments in respect of the Assigned
Interest (including payments of principal, interest, fees and other amounts) to
the Assignor for amounts which have accrued to the Effective Date and to the
Assignee for amounts which have accrued subsequent to the Effective Date.
6. From and after the Effective Date, (a) the Assignee shall be a party to
the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Loan Documents and shall be bound by the provisions thereof and (b) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.
7. This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
<PAGE>
Schedule 1
to Assignment and Acceptance
Name of Assignor:
------------------------------
Name of Assignee:
------------------------------
Effective Date of Assignment:
----------------------
Credit Principal Commitment Percentage Assigned
Facility Assigned Amount Assigned ------------------------------
----------------- ---------------
$___________ __.________%
[Name of Assignee] [Name of Assignor]
By: By:
----------------------------- --------------------------
Title: Title:
Accepted: Consented To:
GENERAL ELECTRIC CAPITAL HARVARD INDUSTRIES, INC., as
CORPORATION, as Administrative Borrower Representative
Agent
By: By:
----------------------------- --------------------------
Title: Title:
LEHMAN COMMERCIAL PAPER INC.,
as Syndication Agent
By:
--------------------------
Title:
<PAGE>
EXHIBIT G-1
FORM OF TERM NOTE
THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE TRANSFERRED EXCEPT
IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT REFERRED TO
BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MUST BE
RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE
TERMS OF SUCH CREDIT AGREEMENT.
$____________
New York, New York
November 24, 1998
FOR VALUE RECEIVED, the undersigned, HARVARD INDUSTRIES, INC., a Delaware
corporation, DOEHLER-JARVIS, INC., a Delaware corporation, HARVARD
TRANSPORTATION CORPORATION, a Michigan corporation, DOEHLER-JARVIS GREENEVILLE,
INC., a Delaware corporation, POTTSTOWN PRECISION CASTING, INC., a Delaware
corporation, DOEHLER-JARVIS TECHNOLOGIES, INC., a Delaware corporation,
DOEHLER-JARVIS TOLEDO INC., a Delaware corporation, HARMAN AUTOMOTIVE, INC., a
Michigan corporation, HAYES-ALBION CORPORATION, a Michigan corporation, THE
KINGSTON-WARREN CORPORATION, a New Hampshire corporation (collectively, the
"Borrowers"), hereby unconditionally and jointly and severally promise to pay
to__________ (the "Lender") or its registered assigns at the Payment Office
specified in the Credit Agreement (as hereinafter defined) in lawful money of
the United States and in immediately available funds, the principal amount of
(a) _______ DOLLARS ($_____), or, if less, (b) the unpaid principal amount of
the Term Loan made by the Lender pursuant to Section 2.1 of the Credit
Agreement. The principal amount shall be paid in the amounts and on the dates
specified in Section 2.3 of the Credit Agreement. The Borrowers further jointly
and severally agree to pay interest in like money at such office on the unpaid
principal amount hereof from time to time outstanding at the rates and on the
dates specified in Section 2.15 of the Credit Agreement.
The holder of this Note is authorized to endorse on the schedules annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof the date, Type and amount of the Term
Loan and the date and amount of each payment or prepayment of principal with
respect thereto, each conversion of all or a portion thereof to another Type,
each continuation of all or a portion thereof as the same Type and, in the case
of Eurodollar Loans, the length of each Interest Period with respect thereto.
Each such endorsement shall constitute prima facie evidence of the accuracy of
the information endorsed. The failure to make any such endorsement or any error
in any such endorsement shall not affect the obligations of the Borrowers in
respect of the Term Loan.
This Note (a) is one of the Term Notes referred to in the Credit Agreement
dated as of November 24, 1998 (as amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), among the Borrowers, the Lender, the
other banks and financial institutions or entities from time to time parties
thereto, Lehman Commercial Paper Inc., as Syndication Agent, Lehman Brothers
Inc., as Arranger and General Electric Capital Corporation, as Administrative
Agent, (b) is subject to the provisions of the Credit Agreement and (c) is
<PAGE>
2
subject to optional and mandatory prepayment in whole or in part as provided in
the Credit Agreement. This Note is secured as provided in the Loan Documents.
Reference is hereby made to the Loan Documents for a description of the
properties and assets in which a security interest has been granted, the nature
and extent of the security, the terms and conditions upon which the security
interests were granted and the rights of the holder of this Note in respect
thereof.
Upon the occurrence of any one or more of the Events of Default, all
principal and all accrued interest then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable, all as provided
in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN THE CREDIT
AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AND IN ACCORDANCE
WITH THE REGISTRATION AND OTHER PROVISIONS OF SECTION 10.6 OF THE CREDIT
AGREEMENT.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK.
HARVARD INDUSTRIES, INC.
DOEHLER-JARVIS, INC.,
HARVARD TRANSPORTATION CORPORATION,
DOEHLER-JARVIS GREENEVILLE, INC.,
POTTSTOWN PRECISION CASTING, INC.,
DOEHLER-JARVIS TECHNOLOGIES, INC.,
DOEHLER-JARVIS TOLEDO INC.,
HARMAN AUTOMOTIVE, INC.,
HAYES-ALBION CORPORATION,
THE KINGSTON-WARREN CORPORATION
By:
` --------------------------------
Name:
Title:
<PAGE>
Schedule A
to Term Note
LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount Amount of Base Rate
Amount of Base Rate Converted to Amount of Principal of Loans Converted to Unpaid Principal Balance
Date Loans Base Rate Loans Base Rate Loans Repaid Eurodollar Loans of Base Rate Loans Notation Made By
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
<PAGE>
Schedule B
to Term Note
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Interest Period and Amount of Principal Amount of Eurodollar
Amount of Amount Converted Eurodollar Rate with of Eurodollar Loans Loans Converted to
Date Eurodollar Loans to Eurodollar Loans Respect Thereto Repaid Base Rate Loans
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
==============================================================================================================================
<CAPTION>
- -----------------------------------------------------
Unpaid Principal
Balance of Notation
Date Eurodollar Loans Made By
- -----------------------------------------------------
<S> <C> <C>
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
=====================================================
</TABLE>
<PAGE>
EXHIBIT G-2
FORM OF REVOLVING CREDIT NOTE
THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE TRANSFERRED EXCEPT
IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT REFERRED TO
BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MUST BE
RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE
TERMS OF SUCH CREDIT AGREEMENT.
$____________
New York, New York
November 24, 1998
FOR VALUE RECEIVED, the undersigned, HARVARD INDUSTRIES, INC., a Delaware
corporation, DOEHLER-JARVIS, INC., a Delaware corporation, HARVARD
TRANSPORTATION CORPORATION, a Michigan corporation, DOEHLER-JARVIS GREENEVILLE,
INC., a Delaware corporation, POTTSTOWN PRECISION CASTING, INC., a Delaware
corporation, DOEHLER-JARVIS TECHNOLOGIES, INC., a Delaware corporation,
DOEHLER-JARVIS TOLEDO INC., a Delaware corporation, HARMAN AUTOMOTIVE, INC., a
Michigan corporation, HAYES-ALBION CORPORATION, a Michigan corporation, THE
KINGSTON-WARREN CORPORATION, a New Hampshire corporation (collectively, the
"Borrowers") hereby unconditionally and jointly and severally promise to pay to
_______________ (the "Lender") or its registered assigns at the Payment Office
specified in the Credit Agreement (as hereinafter defined) in lawful money of
the United States and in immediately available funds, on the Revolving Credit
Termination Date the principal amount of (a) _______ DOLLARS ($______), or, if
less, (b) the aggregate unpaid principal amount of all Revolving Credit Loans
made by the Lender to the Borrowers pursuant to Section 2.4 of the Credit
Agreement. The Borrowers further jointly and severally agree to pay interest in
like money at such Payment Office on the unpaid principal amount hereof from
time to time outstanding at the rates and on the dates specified in Section 2.15
of the Credit Agreement.
The holder of this Note is authorized to endorse on the schedules annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof the date, Type and amount of each
Revolving Credit Loan made pursuant to the Credit Agreement and the date and
amount of each payment or prepayment of principal thereof, each continuation
thereof, each conversion of all or a portion thereof to another Type and, in the
case of Eurodollar Loans, the length of each Interest Period with respect
thereto. Each such endorsement shall constitute prima facie evidence of the
accuracy of the information endorsed. The failure to make any such endorsement
or any error in any such endorsement shall not affect the obligations of the
Borrower in respect of any Revolving Credit Loan.
This Note (a) is one of the Revolving Credit Notes referred to in the
Credit Agreement dated as of November 24, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among the
Borrowers, the Lender, the other banks and financial institutions or entities
from time to time parties thereto, Lehman Commercial Paper Inc., as Syndication
Agent, Lehman Brothers Inc., as Arranger, and General Electric Capital
Corporation, as Administrative Agent, (b) is subject to the provisions of the
Credit Agreement
<PAGE>
2
and (c) is subject to optional and mandatory prepayment in whole or in part as
provided in the Credit Agreement. This Note is secured as provided in the Loan
Documents. Reference is hereby made to the Loan Documents for a description of
the properties and assets in which a security interest has been granted, the
nature and extent of the security, the terms and conditions upon which the
security interests were granted and the rights of the holder of this Note in
respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
principal and all accrued interest then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable, all as provided
in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN THE CREDIT
AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AND IN ACCORDANCE
WITH THE REGISTRATION AND OTHER PROVISIONS OF SECTION 10.6 OF THE CREDIT
AGREEMENT.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK.
HARVARD INDUSTRIES, INC.
DOEHLER-JARVIS, INC.,
HARVARD TRANSPORTATION CORPORATION,
DOEHLER-JARVIS GREENEVILLE, INC.,
POTTSTOWN PRECISION CASTING, INC.,
DOEHLER-JARVIS TECHNOLOGIES, INC.,
DOEHLER-JARVIS TOLEDO INC.,
HARMAN AUTOMOTIVE, INC.,
HAYES-ALBION CORPORATION,
THE KINGSTON-WARREN CORPORATION
By:
--------------------------------
Name:
Title:
<PAGE>
Schedule A
to Revolving Credit Note
LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount Amount of Base Rate
Amount of Base Rate Converted to Amount of Principal of Loans Converted to Unpaid Principal Balance
Date Loans Base Rate Loans Base Rate Loans Repaid Eurodollar Loans of Base Rate Loans Notation Made By
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
<PAGE>
Schedule B
to Revolving Credit Note
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Interest Period and Amount of Principal Amount of Eurodollar
Amount of Amount Converted Eurodollar Rate with of Eurodollar Loans Loans Converted to
Date Eurodollar Loans to Eurodollar Loans Respect Thereto Repaid Base Rate Loans
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
==============================================================================================================================
<CAPTION>
- -----------------------------------------------------
Unpaid Principal
Balance of Notation
Date Eurodollar Loans Made By
- -----------------------------------------------------
<S> <C> <C>
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
=====================================================
</TABLE>
<PAGE>
EXHIBIT G-3
FORM OF SWING LINE NOTE
THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE TRANSFERRED EXCEPT
IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT REFERRED TO
BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MUST BE
RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE
TERMS OF SUCH CREDIT AGREEMENT.
$10,000,000 New York, New York
November 24, 1998
FOR VALUE RECEIVED, the undersigned, HARVARD INDUSTRIES, INC., a Delaware
corporation, DOEHLER-JARVIS, INC., a Delaware corporation, HARVARD
TRANSPORTATION CORPORATION, a Michigan corporation, DOEHLER-JARVIS GREENEVILLE,
INC., a Delaware corporation, POTTSTOWN PRECISION CASTING, INC., a Delaware
corporation, DOEHLER-JARVIS TECHNOLOGIES, INC., a Delaware corporation,
DOEHLER-JARVIS TOLEDO INC., a Delaware corporation, HARMAN AUTOMOTIVE, INC., a
Michigan corporation, HAYES-ALBION CORPORATION, a Michigan corporation, THE
KINGSTON-WARREN CORPORATION, a New Hampshire corporation (collectively, the
"Borrowers"), hereby unconditionally and jointly and severally promise to pay to
GENERAL ELECTRIC CAPITAL CORPORATION (the "Swing Line Lender") or its registered
assigns at the Payment Office specified in the Credit Agreement (as hereinafter
defined) in lawful money of the United States and in immediately available
funds, on the Revolving Credit Termination Date the principal amount of (a) TEN
MILLION DOLLARS ($10,000,000), or, if less, (b) the aggregate unpaid principal
amount of all Swing Line Loans made by the Swing Line Lender to the Borrowers
pursuant to Section 2.6 of the Credit Agreement, as hereinafter defined. The
Borrowers further jointly and severally agree to pay interest in like money at
such office on the unpaid principal amount hereof from time to time outstanding
at the rates and on the dates specified in Section 2.15 of such Credit
Agreement.
The holder of this Note is authorized to endorse on the schedules annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof the date and amount of each Swing Line
Loan made pursuant to the Credit Agreement and the date and amount of each
payment or prepayment of principal thereof. Each such endorsement shall
constitute prima facie evidence of the accuracy of the information endorsed. The
failure to make any such endorsement or any error in any such endorsement shall
not affect the obligations of the Borrowers in respect of any Swing Line Loan.
This Note (a) is the Swing Line Note referred to in the Credit Agreement
dated as of November 24, 1998 (as amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), among the Borrowers, the Swing Line
Lender, the other banks and financial institutions or entities from time to time
parties thereto, Lehman Commercial Paper Inc., as Syndication Agent, Lehman
Brothers Inc., as Arranger, and General Electric Capital Corporation, as
Administrative Agent, (b) is subject to the provisions of the Credit Agreement
and (c) is subject to optional and mandatory prepayment in whole or in part as
provided in the Credit Agreement. This Note is secured as provided in the Loan
Documents. Reference is hereby made to the Loan Documents for a description of
the properties and assets in which a security interest has been granted, the
nature and extent of the security,
<PAGE>
2
the terms and conditions upon which the security interests were granted and the
rights of the holder of this Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
principal and all accrued interest then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable, all as provided
in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN THE CREDIT
AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AND IN ACCORDANCE
WITH THE REGISTRATION AND OTHER PROVISIONS OF SECTION 10.6 OF THE CREDIT
AGREEMENT.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK.
HARVARD INDUSTRIES, INC.
DOEHLER-JARVIS, INC.,
HARVARD TRANSPORTATION CORPORATION,
DOEHLER-JARVIS GREENEVILLE, INC.,
POTTSTOWN PRECISION CASTING, INC.,
DOEHLER-JARVIS TECHNOLOGIES, INC.,
DOEHLER-JARVIS TOLEDO INC.,
HARMAN AUTOMOTIVE, INC.,
HAYES-ALBION CORPORATION,
THE KINGSTON-WARREN CORPORATION
By:
--------------------------------
Name:
Title:
<PAGE>
Schedule A
to Swing Line Note
LOANS AND REPAYMENTS OF SWING LINE LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount of Amount of Principal of Swing Unpaid Principal Balance of
Date Swing Line Loans Line Loans Repaid Swing Line Loans Notation Made By
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
<PAGE>
EXHIBIT H
FORM OF EXEMPTION CERTIFICATE
Reference is made to the Credit Agreement, dated as of November 24, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement") among HARVARD INDUSTRIES, INC., DOEHLER-JARVIS, INC., HARVARD
TRANSPORTATION CORPORATION, DOEHLER-JARVIS GREENEVILLE, INC., POTTSTOWN
PRECISION CASTING, INC., DOEHLER-JARVIS TECHNOLOGIES, INC., DOEHLER-JARVIS
TOLEDO INC., HARMAN AUTOMOTIVE, INC., HAYES-ALBION CORPORATION, THE
KINGSTON-WARREN CORPORATION (collectively, the "Borrowers"), the several banks
and other financial institutions or entities from time to time parties thereto
(the "Lenders"), LEHMAN BROTHERS INC., as Arranger, LEHMAN COMMERCIAL PAPER
INC., as Syndication Agent and GENERAL ELECTRIC CAPITAL CORPORATION, as
Administrative Agent. Capitalized terms used herein that are not defined herein
shall have the meanings ascribed to them in the Credit Agreement.
______________________ (the "Non-U.S. Lender") is providing this certificate
pursuant to Section 2.20(d) of the Credit Agreement. The Non-U.S. Lender hereby
represents and warrants that:
1. The Non-U.S. Lender is the sole record and beneficial owner of the Loans
or the obligations evidenced by Note(s) in respect of which it is providing this
certificate.
2. The Non-U.S. Lender is not a "bank" for purposes of Section 881(c)(3)(A)
of the Internal Revenue Code of 1986, as amended (the "Code"). In this regard,
the Non-U.S. Lender further represents and warrants that:
(a) the Non-U.S. Lender is not subject to regulatory or other legal
requirements as a bank in any jurisdiction; and
(b) the Non-U.S. Lender has not been treated as a bank for purposes of any
tax, securities law or other filing or submission made to any Governmental
Authority, any application made to a rating agency or qualification for any
exemption from tax, securities law or other legal requirements;
3. The Non-U.S. Lender is not a 10-percent shareholder of the Borrower
within the meaning of Section 881(c)(3)(B) of the Code; and
4. The Non-U.S. Lender is not a controlled foreign corporation receiving
interest from a related person within the meaning of Section 881(c)(3)(C) of the
Code.
<PAGE>
2
IN WITNESS WHEREOF, the undersigned has duly executed this certificate.
[NAME OF NON-U.S. LENDER]
By:
--------------------------------
Name:
Title:
Date:
---------------
<PAGE>
SCHEDULE I
[Waived Conditions Precedent]
[Describe any conditions precedent waived on
Closing Date and terms of any waiver]
<PAGE>
ANNEX 1
[Board Resolutions]
<PAGE>
ANNEX 3
[Certificate of Incorporation]
<PAGE>
EXHIBIT I
FORM OF LENDER ADDENDUM
Reference is made to the Credit Agreement, dated as of November 24, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among HARVARD INDUSTRIES, INC., DOEHLER-JARVIS, INC., HARVARD
TRANSPORTATION CORPORATION, DOEHLER-JARVIS GREENEVILLE, INC., POTTSTOWN
PRECISION CASTING, INC., DOEHLER-JARVIS TECHNOLOGIES, INC., DOEHLER-JARVIS
TOLEDO INC., HARMAN AUTOMOTIVE, INC., HAYES-ALBION CORPORATION, THE
KINGSTON-WARREN CORPORATION (collectively, the "Borrowers"), the several banks
and other financial institutions or entities from time to time parties thereto
(the "Lenders"), LEHMAN BROTHERS INC., as Arranger, LEHMAN COMMERCIAL PAPER
INC., as Syndication Agent and GENERAL ELECTRIC CAPITAL CORPORATION, as
Administrative Agent. Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement.
Upon execution and delivery of this Lender Addendum by the parties hereto
as provided in Section 10.17 of the Credit Agreement, the undersigned hereby
becomes a Lender thereunder having the Commitments set forth in Schedule 1
hereto, effective as of the Closing Date.
THIS LENDER ADDENDUM SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
This Lender Addendum may be executed by one or more of the parties hereto
on any number of separate counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. Delivery of
an executed signature page hereof by facsimile transmission shall be effective
as delivery of a manually executed counterpart hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Lender Addendum to
be duly executed and delivered by their proper and duly authorized officers as
of this ____ day of ____, 199_
[NAME OF LENDER]
By:
--------------------------------
Name:
Title:
Accepted and agreed:
HARVARD INDUSTRIES, INC., as
Borrower Representative
<PAGE>
2
By:
-----------------------
Name:
Title:
LEHMAN COMMERCIAL PAPER INC., as
Syndication Agent
By:
-----------------------
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION, as
Administrative Agent
By:
-----------------------
Name:
Title:
<PAGE>
Schedule 1
COMMITMENTS AND NOTICE ADDRESS
Name and Notice Revolving Term Loan
Address of Lender Credit Commitment Commitment
- ----------------- ----------------- ----------
<PAGE>
================================================================================
COLLATERAL AGREEMENT
made by
HARVARD INDUSTRIES, INC.,
DOEHLER-JARVIS, INC.,
HARVARD TRANSPORTATION CORPORATION,
DOEHLER-JARVIS GREENEVILLE, INC.,
POTTSTOWN PRECISION CASTING, INC.,
DOEHLER-JARVIS TECHNOLOGIES, INC.,
DOEHLER-JARVIS TOLEDO, INC.,
HARMAN AUTOMOTIVE, INC.,
HAYES-ALBION CORPORATION, and
THE KINGSTON-WARREN CORPORATION as Grantors
in favor of
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Collateral Agent
Dated as of November 24, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINED TERMS .................................................. 1
1.1 Definitions ....................................................... 1
1.2 Other Definitional Provisions ..................................... 5
SECTION 2. GRANT OF SECURITY INTEREST ..................................... 6
2.1 Collateral ........................................................ 6
2.2 Grant of Second Priority Security Interest ........................ 6
2.3 Acknowledgment Regarding Intercreditor Agreement .................. 7
SECTION 3. REPRESENTATIONS AND WARRANTIES ................................. 7
3.1 Title; No Other Liens ............................................. 7
3.2 Perfected Liens ................................................... 7
3.3 Chief Executive Office ............................................ 7
3.4 Inventory and Equipment ........................................... 8
3.5 Farm Products ..................................................... 8
3.6 Pledged Securities ................................................ 8
3.7 Receivables ....................................................... 8
3.8 Contracts ......................................................... 9
3.9 Intellectual Property ............................................. 9
SECTION 4. COVENANTS ...................................................... 10
4.1 Delivery of Instruments and Chattel Paper ......................... 10
4.2 Maintenance of Insurance .......................................... 10
4.3 Payment of Obligations ............................................ 11
4.4 Maintenance of Perfected Security Interest; Further Documentation . 11
4.5 Changes in Locations, Name, etc ................................... 12
4.6 Notices ........................................................... 12
4.7 Pledged Securities ................................................ 12
4.8 Receivables ....................................................... 14
4.9 Contracts ......................................................... 14
4.10 Intellectual Property ............................................. 14
SECTION 5. REMEDIAL PROVISIONS ............................................ 16
5.1 Certain Matters Relating to Receivables ........................... 16
5.2 Communications with Obligors; Grantors Remain Liable .............. 17
5.3 Pledged Stock ..................................................... 17
5.4 Proceeds to be Turned Over To Collateral Agent .................... 18
5.5 Application of Proceeds ........................................... 19
5.6 Code and Other Remedies ........................................... 19
5.7 Registration Rights ............................................... 20
5.8 Waiver; Deficiency ................................................ 21
i
<PAGE>
SECTION 6. THE COLLATERAL AGENT ......................................... 21
6.1 Collateral Agent's Appointment as Attorney-in-Fact, etc ........ 21
6.2 Duty of Collateral Agent ....................................... 23
6.3 Execution of Financing Statements .............................. 23
6.4 Authority of Collateral Agent .................................. 23
SECTION 7. MISCELLANEOUS ................................................ 24
7.1 Amendments in Writing .......................................... 24
7.2 Notices ........................................................ 24
7.3 No Waiver by Course of Conduct; Cumulative Remedies ............ 24
7.4 Enforcement Expenses; Indemnification .......................... 24
7.5 Successors and Assigns ......................................... 24
7.6 Set-Off ........................................................ 25
7.7 Counterparts ................................................... 25
7.8 Severability ................................................... 25
7.9 Section Headings ............................................... 25
7.10 Integration .................................................... 25
7.11 GOVERNING LAW .................................................. 26
7.12 Submission To Jurisdiction; Waivers ............................ 26
7.13 Acknowledgements ............................................... 26
7.14 Additional Grantors ............................................ 27
7.15 Releases ....................................................... 27
7.16 WAIVER OF JURY TRIAL ........................................... 27
ii
<PAGE>
COLLATERAL AGREEMENT
COLLATERAL AGREEMENT, dated as of November 24, 1998, made by each of the
signatories hereto (together with any other entity that may become a party
hereto as provided herein, the "Grantors"), in favor of NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee under the Indenture described below (the
Trustee, as secured party hereunder, the "Collateral Agent") is entered by and
among HARVARD INDUSTRIES, INC., a Delaware corporation (the "Company"),
DOEHLER-JARVIS, INC., a Delaware corporation, HARVARD TRANSPORTATION,
CORPORATION, a Michigan corporation, DOEHLER-JARVIS GREENEVILLE, INC., a
Delaware corporation, POTTSTOWN PRECISION CASTING, INC., a Delaware corporation,
DOEHLER-JARVIS TECHNOLOGIES, INC., a Delaware corporation, DOEHLER-JARVIS TOLEDO
INC., a Delaware corporation, and HARMAN AUTOMOTIVE, INC., a Michigan
corporation, HAYES-ALBION CORPORATION, a Michigan corporation and THE
KINGSTON-WARREN CORPORATION, a New Hampshire corporation (collectively, the
"Subsidiary Guarantors").
W I T N E S S E T H :
WHEREAS, pursuant to the Amended and Restated Purchase Agreement (as
defined in the Indenture) and the Indenture (as defined herein), the Company
proposes to issue the Securities (as defined in the Indenture) upon the terms
and subject to the conditions set forth therein;
WHEREAS, the Grantors are members of an affiliated group of companies;
WHEREAS, the Grantors are engaged in related businesses, and each Grantor
will derive substantial direct and indirect benefit from the issuance of the
Securities; and
WHEREAS, it is a condition to the closing of the offering of the Securities
that the Grantors shall have executed and delivered this Agreement to the
Collateral Agent;
NOW, THEREFORE, in consideration of the premises and to induce the Initial
Purchaser (as defined in the Indenture) to enter into the Amended and Restated
Purchase Agreement and to induce the prospective purchasers of the Securities to
purchase said Securities, each Grantor hereby agrees with the Collateral Agent
as follows:
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms defined in the
Indenture and used herein shall have the meanings given to them in the
Indenture, and the following terms which are defined in the Uniform Commercial
Code in effect in the State of New York on the date hereof are used herein as so
defined: Accounts, Chattel Paper, Documents, Equipment, Farm Products,
Instruments, Inventory and Investment Property.
(b) The following terms shall have the following meanings:
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2
"Agreement": this Collateral Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"Collateral": as defined in Section 2.
"Collateral Account": any collateral account established by the Collateral
Agent as provided in Section 5.1 or 5.4.
"Contracts": the contracts and agreements listed in Schedule 7, as the same
may be amended, supplemented or otherwise modified from time to time, including,
without limitation, (i) all rights of any Grantor to receive moneys due and to
become due to it thereunder or in connection therewith, (ii) all rights of any
Grantor to damages arising thereunder and (iii) all rights of any Grantor to
perform and to exercise all remedies thereunder.
"Copyright Licenses": any written agreement naming any Grantor as licensor
(including, without limitation, those listed in Schedule 6) granting any right
under any Copyright, including, without limitation, the grant of rights to
manufacture, distribute, exploit and sell materials derived from any Copyright.
"Copyrights": (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished (including,
without limitation, those listed in Schedule 6), all registrations and
recordings thereof, and all applications in connection therewith, including,
without limitation, all registrations, recordings and applications in the United
States Copyright Office, and (ii) the right to obtain all renewals thereof.
"DIP Credit Facilities": as defined in the Senior Credit Facility.
"General Intangibles": all "general intangibles" as such term is defined in
Section 9-106 of the Uniform Commercial Code in effect in the State of New York
on the date hereof and, in any event, including, without limitation, with
respect to any Grantor, all contracts, agreements, instruments and indentures in
any form, and portions thereof, to which such Grantor is a party or under which
such Grantor has any right, title or interest or to which such Grantor or any
property of such Grantor is subject, as the same may from time to time be
amended, supplemented or otherwise modified, including, without limitation, (i)
all rights of such Grantor to receive moneys due and to become due to it
thereunder or in connection therewith, (ii) all rights of such Grantor to
damages arising thereunder and (iii) all rights of such Grantor to perform and
to exercise all remedies thereunder, in each case to the extent the grant by
such Grantor of a security interest pursuant to this Agreement in its right,
title and interest in such contract, agreement, instrument or indenture is not
prohibited by such contract, agreement, instrument or indenture without the
consent of any other party thereto, would not give any other party to such
contract, agreement, instrument or indenture the right to terminate its
obligations thereunder, or is permitted with consent if all necessary consents
to such grant of a security interest have been obtained from the other parties
thereto (it being
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3
understood that the foregoing shall not be deemed to obligate such Grantor to
obtain such consents); provided, that the foregoing limitation shall not affect,
limit, restrict or impair the grant by such Grantor of a security interest
pursuant to this Agreement in any Receivable or any money or other amounts due
or to become due under any such contract, agreement, instrument or indenture.
"Indenture": the Indenture dated as of November 24, 1998 by and among the
Company, the Subsidiary Guarantors named therein and the Trustee.
"Intellectual Property": the collective reference to all rights, priorities
and privileges relating to intellectual property, whether arising under United
States, multinational or foreign laws or otherwise, including, without
limitation, the Copyrights, the Copyright Licenses, the Patents, the Patent
Licenses, the Trademarks and the Trademark Licenses that are owned, held or used
in the business of any Grantor or any of its Subsidiaries, and all rights to sue
at law or in equity for any infringement or other impairment thereof, including
the right to receive all proceeds and damages therefrom.
"Intercompany Note": any promissory note evidencing loans made by any
Grantor to any of its Subsidiaries (that is not a Grantor).
"Intercreditor Agreement": the Intercreditor Agreement among (i) the
Company, (ii) the Collateral Agent and (iii) the Administrative Agent, dated as
of November 24, 1998.
"Issuers": the collective reference to each issuer of a Pledged Security.
"Letter of Credit": as defined as the Senior Credit Facility.
"Loan Security Documents": the "Security Documents" as defined in the
Senior Credit Facility.
"Material Adverse Effect": as defined in the Senior Credit Facility.
"New York UCC": the Uniform Commercial Code as from time to time in effect
in the State of New York.
"Obligations": the collective reference to any amounts owing to the
Securityholders in respect of principal and premium of and Interest, Liquidated
Damage, if any, and Defaulted Interest, if any, of the Securities under the
Indenture and all other obligations and liabilities of the Company and the
Subsidiary Guarantors (including, without limitation, amounts owing to
Securityholders under the Indenture after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Company or any Subsidiary Guarantor).
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4
"Patent License": all agreements, whether written or oral, providing for
the grant by Grantor of any right to manufacture, use or sell any invention
covered in whole or in part by a Patent, including, without limitation, any of
the foregoing referred to in Schedule 6.
"Patents": (i) all letters patent of the United States, any other country
or any political subdivision thereof, all reissues and extensions thereof and
all goodwill associated therewith, including, without limitation, any of the
foregoing referred to in Schedule 6, (ii) all applications for letters patent of
the United States or any other country and all divisions, continuations and
continuations-in-part thereof, including, without limitation, any of the
foregoing referred to in Schedule 6, and (iii) all rights to obtain any reissues
or extensions of the foregoing.
"Plan of Reorganization": the Grantors' First Amended and Modified
Consolidated Plan of Reorganization under Chapter 11 of the Bankruptcy Code
dated August 19, 1998 as confirmed by the Bankruptcy Court on October 15, 1998.
"Pledged Notes": all promissory notes listed on Schedule 2, all
Intercompany Notes at any time issued to any Grantor and all other promissory
notes issued to or held by any Grantor (other than promissory notes issued in
connection with extensions of trade credit by any Grantor in the ordinary course
of business).
"Pledged Securities": the collective reference to the Pledged Notes and the
Pledged Stock. "Pledged Stock": the shares of Capital Stock listed on Schedule
2, together with any other shares, stock certificates, options or rights of any
nature whatsoever in respect of the Capital Stock of any Person that may be
issued or granted to, or held by, any Grantor while this Agreement is in effect.
"Proceeds": all "proceeds" as such term is defined in Section 9-306(1) of
the Uniform Commercial Code in effect in the State of New York on the date
hereof and, in any event, shall include, without limitation, all dividends or
other income from the Pledged Securities, collections thereon or distributions
or payments with respect thereto.
"Property": any right or interest in or to property of any kind whatsoever,
whether real, personal or mixed and whether tangible or intangible, including,
without limitation, Capital Stock.
"Receivable": any right to payment for goods sold or leased or for services
rendered, whether or not such right is evidenced by an Instrument or Chattel
Paper and whether or not it has been earned by performance (including, without
limitation, any Account).
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5
"Requirements of Laws": as to any Person, the Certificate of Incorporation
and By-Laws or other 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.
"Securities Act": the Securities Act of 1933, as amended.
"Substitution Event": collectively, (i) the payment in full in cash of the
Lender Obligations, (ii) the termination of all commitments by the Lenders to
extend credit under the Senior Credit Facility, (iii) the termination of the
rights of the Administrative Agent under the Intercreditor Agreement and (iv)
the continuance of the Obligations hereunder.
"Trademark License": any agreement, whether written or oral, providing for
the grant by or to any Grantor of any right to use any Trademark, including,
without limitation, any of the foregoing referred to in Schedule 6.
"Trademarks": (i) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, service marks,
logos and other source or business identifiers, and all goodwill associated
therewith, now existing or hereafter adopted or acquired, all registrations and
recordings thereof, and all applications in connection therewith, whether in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, and all common-law rights related thereto,
including, without limitation, any of the foregoing referred to in Schedule 6,
and (ii) the right to obtain all renewals thereof.
"Unperfected Collateral": as defined in Section 3.2.
"Vehicles": all cars, trucks, trailers, construction and earth moving
equipment and other vehicles covered by a certificate of title law of any state
and all tires and other appurtenances to any of the foregoing.
1.2 Other Definitional Provisions. (a) The words "hereof," "herein",
"hereto" 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 and Schedule references are to this Agreement unless
otherwise specified.
(b) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral or any
part thereof, when used in relation to a Grantor, shall refer to such Grantor's
Collateral or the relevant part thereof.
<PAGE>
6
SECTION 2. GRANT OF SECURITY INTEREST
2.1 Collateral. For the purposes of this Agreement, all of the following
property now owned or at any time hereafter acquired by a Grantor or in which a
Grantor now has or at any time in the future may acquire any right, title or
interest is collectively referred to as the "Collateral":
(a) all Accounts;
(b) all Chattel Paper;
(c) all Contracts;
(d) all Documents;
(e) all Equipment;
(f) all General Intangibles;
(g) all Instruments;
(h) all Intellectual Property;
(i) all Inventory;
(j) all Pledged Securities;
(k) all Vehicles;
(l) all Investment Property;
(m) all deposit accounts and other bank accounts;
(n) all books and records pertaining to the Collateral; and
(o) to the extent not otherwise included, all Proceeds and products of any
and all of the foregoing and all collateral security and guarantees given by any
Person with respect to any of the foregoing.
2.2 Grant of Second Priority Security Interest. As collateral security for
the prompt and complete payment and performance when due (whether at stated
maturity, acceleration or otherwise) of the Obligations, each Grantor hereby
grants, assigns and transfers to the Collateral Agent for the benefit of the
Securityholders a second priority security interest in all of its Collateral,
subject to the first priority security interest in such Collateral created in
favor of
<PAGE>
7
the Administrative Agent by the Loan Collateral Agreement, and subject to the
other Liens permitted by Section 4.6 of the Indenture.
2.3 Acknowledgment Regarding Intercreditor Agreement. Each Securityholder,
by its acceptance of the Securities, consents and agrees to the terms of the
Intercreditor Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Trustee to enter into the Indenture, the Initial Purchaser to
enter into the Amended and Restated Purchase Agreement and the prospective
purchasers of the Initial Securities to purchase the Initial Securities from the
Initial Purchaser as contemplated by the Amended and Restated Purchase Agreement
and the Indenture, each Grantor hereby represents and warrants to the Collateral
Agent on behalf of the Securityholders that:
3.1 Title; No Other Liens. Except for (a) the security interest granted to
the Administrative Agent for the benefit of the Lenders under the Senior Credit
Facility pursuant to the Loan Collateral Agreement and the other Loan Security
Documents, and the security interest granted to the Collateral Agent for the
benefit of the Securityholders pursuant to this Agreement and the other Security
Documents and (b) the other Liens permitted to exist on the Collateral by
Section 4.6 of the Indenture, such Grantor owns each item of the Collateral free
and clear of any and all Liens or claims of others. No financing statement,
other than with respect to the DIP Facilities, or other public notice with
respect to all or any part of the Collateral is on file or of record in any
public office, except such as have been filed in favor of (i) the Administrative
Agent pursuant to the Loan Collateral Agreement and the other Loan Security
Documents, (ii) the Collateral Agent pursuant to this Agreement and the other
Security Documents or except as shall be terminated on the date hereof and (iii)
the other Liens permitted to exist on the Collateral by Section 4.6 of the
Indenture..
3.2 Perfected Liens. The security interests granted pursuant to this
Agreement (a) upon completion of the filings and other actions specified on
Schedule 3 (which, in the case of all filings and other documents referred to on
said Schedule, have been delivered to the Collateral Agent in completed and duly
executed form) will constitute valid perfected security interests in all of the
Collateral (except for Vehicles and Intellectual Property not listed on Schedule
6 (the "Unperfected Collateral")) in favor of the Collateral Agent, for the
benefit of the Securityholders, as collateral security for such Grantor's
Obligations, enforceable in accordance with the terms hereof and applicable law
against all creditors of such Grantor and (b) are prior to all other Liens on
the Collateral in existence on the date hereof except for (i) Liens granted to
the Administrative Agent for the benefit of the Lenders under the Senior Credit
Facility pursuant to the Loan Collateral Agreement and the other Loan Security
Documents, (ii) Liens permitted by Section 4.6 of the Indenture, (iii) Liens
which have priority over the Liens on the Collateral by operation of law and
(iv) Liens described on Schedule 8.
3.3 Chief Executive Office. On the date hereof, such Grantor's jurisdiction
of organization and the location of such Grantor's chief executive office or
sole place of business are specified on Schedule 4.
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8
3.4 Inventory and Equipment. On the date hereof, the Inventory and the
Equipment (other than mobile goods) are kept at the locations listed on Schedule
5.
3.5 Farm Products. None of the Collateral constitutes, or is the Proceeds
of, Farm Products.
3.6 Pledged Securities. (a) The shares of Pledged Stock pledged by such
Grantor held by the Administrative Agent under the Loan Collateral Agreement and
in which, pursuant to this Agreement and the Intercreditor Agreement, the
Collateral Agent has a second security interest, constitute all the issued and
outstanding shares of all classes of the Capital Stock of each domestic Issuer
owned by such Grantor.
(b) All the shares of the Pledged Stock have been duly and validly issued
and are fully paid and nonassessable.
(c) Each of the Pledged Notes constitutes the legal, valid and binding
obligation of the obligor with respect thereto, enforceable in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
(d) Such Grantor is the record and beneficial owner of, and has good and
marketable title to, the Pledged Securities pledged by it hereunder, free of any
and all Liens or options in favor of, or claims of, any other Person, except the
security interest created by this Agreement.
(e) Pursuant to Section 8 of the Intercreditor Agreement, the
Administrative Agent has agreed, upon (i) the payment in full of all Lender
Obligations (as defined in the Intercreditor Agreement) and the termination of
all commitments to extend credit under the Senior Credit Facility and (ii) the
request of the Trustee, to (x) provide a written acknowledgment of (i) above and
that the Senior Secured Parties (as defined in the Intercreditor Agreement) have
no further rights under the Intercreditor Agreement in respect of the Collateral
and (y) deliver to the Trustee any items of Collateral held in the possession of
the Administrative Agent, provided that there are Trustee Obligations (as
defined in the Intercreditor Agreement) then outstanding.
3.7 Receivables. (a) No amount payable to such Grantor under or in
connection with any Receivable is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Administrative Agent or, after the
Substitution Event, the Collateral Agent.
(b) Substantially all of the obligors on Receivables are not Governmental
Authorities.
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9
(c) The amounts represented by such Grantor to the Securityholders and the
Collateral Agent from time to time as owing to such Grantor in respect of the
Receivables will at such times be accurate.
3.8 Contracts. (a) No consent of any party (other than such Grantor) to any
Contract is required, or purports to be required, in connection with the
execution, delivery and performance of this Agreement.
(b) Each Contract is in full force and effect and constitutes a valid and
legally enforceable obligation of the parties thereto, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
(c) No consent or authorization of, filing with or other act by or in
respect of any Governmental Authority is required in connection with the
execution, delivery, performance, validity or enforceability of any of the
Contracts by any party thereto other than those which have been duly obtained,
made or performed, are in full force and effect and do not subject the scope of
any such Contract to any material adverse limitation, either specific or general
in nature.
(d) Neither such Grantor nor (to the best of such Grantor's knowledge) any
of the other parties to the Contracts is in default in the performance or
observance of any of the terms thereof in any manner that, in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
(e) The right, title and interest of such Grantor in, to and under the
Contracts are not subject to any defenses, offsets, counterclaims or claims
that, in the aggregate, could reasonably be expected to have a Material Adverse
Effect.
(f) Such Grantor has delivered to the Collateral Agent a complete and
correct copy of each Contract, including all amendments, supplements and other
modifications thereto.
(g) No amount payable to such Grantor under or in connection with any
Contract is evidenced by any Instrument or Chattel Paper which has not been
delivered to the Administrative Agent or, after the Substitution Event, the
Collateral Agent.
(h) None of the parties to any Contract is a Governmental Authority.]
3.9 Intellectual Property. (a) Schedule 6 lists all registrations,
applications for, and all material unregistered Intellectual Property owned by
such Grantor in its own name on the date hereof.
(b) On the date hereof, all material Intellectual Property is valid,
subsisting, unexpired and enforceable, has not been abandoned and, to the best
knowledge of such Grantor, does not infringe the intellectual property rights of
any other Person.
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10
(c) Except as set forth in Schedule 6, on the date hereof, none of the
Intellectual Property is the subject of any licensing or franchise agreement
pursuant to which such Grantor is the licensor or franchisor.
(d) No holding, decision or judgment has been rendered by any Governmental
Authority which would limit, cancel or question the validity of, or such
Grantor's rights in, any Intellectual Property in any respect that could
reasonably be expected to have a Material Adverse Effect.
(e) No action or proceeding is pending, or, to the knowledge of such
Grantor, threatened, on the date hereof (i) seeking to limit, cancel or question
the validity of any Intellectual Property or such Grantor's ownership interest
therein, or (ii) which, if adversely determined, would have a material adverse
effect on the value of any Intellectual Property.
SECTION 4. COVENANTS
Each Grantor covenants and agrees with the Collateral Agent and the
Securityholders that, from and after the date of this Agreement until the
Obligations shall have been paid in full:
4.1 Delivery of Instruments and Chattel Paper. (a) If any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper, such Instrument or Chattel Paper shall be
immediately delivered to the Administrative Agent, duly indorsed in a manner
satisfactory to the Administrative Agent, to be held as Collateral pursuant to
this Agreement, subject to Section 8 of the Intercreditor Agreement.
(b) If the Substitution Event shall have occurred, if any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper, such Instrument or Chattel Paper shall be
immediately delivered to the Collateral Agent, duly indorsed in a manner
satisfactory to the Collateral Agent, to be held as Collateral pursuant to this
Agreement.
4.2 Maintenance of Insurance. (a) Such Grantor will maintain, with
financially sound and reputable companies, insurance policies (i) insuring the
Inventory, Equipment and Vehicles against loss by fire, explosion, theft and
such other casualties as may be reasonably satisfactory to the Collateral Agent
and (ii) to the extent requested by the Collateral Agent, insuring such Grantor,
the Collateral Agent, and the Securityholders against liability for personal
injury and property damage relating to such Inventory, Equipment and Vehicles,
such policies to be in such form and amounts and having such coverage as may be
reasonably satisfactory to the Collateral Agent.
(b) All such insurance shall (i) provide that no cancellation, material
reduction in amount or material change in coverage thereof shall be effective
until at least 30 days after receipt by the Collateral Agent of written notice
thereof, (ii) name the Collateral Agent as insured
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11
party or loss payee, (iii) if reasonably requested by the Collateral Agent,
include a breach of warranty clause and (iv) be reasonably satisfactory in all
other respects to the Collateral Agent.
(c) Upon the reasonable request of the Collateral Agent, the Grantors shall
deliver to the Collateral Agent, the Securityholders and the Trustee a report of
a reputable insurance broker with respect to such insurance substantially
concurrently with the delivery by the Grantors to the Collateral Agent of their
audited financial statements for each fiscal year and such supplemental reports
with respect thereto as the Collateral Agent may from time to time reasonably
request.
(d) Notwithstanding the foregoing paragraphs (a) through (c), to the extent
the powers granted to the Collateral Agent in such paragraphs are granted to the
Administrative Agent under the Loan Collateral Agreement, the Administrative
Agent's exercise of such powers shall control.
4.3 Payment of Obligations. Such Grantor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes (except as may be treated under the Plan of
Reorganization), assessments and governmental charges or levies imposed upon the
Collateral or in respect of income or profits therefrom, as well as all claims
of any kind (including, without limitation, claims for labor, materials and
supplies) against or with respect to the Collateral, except that no such charge
need be paid if the amount or validity thereof is currently being contested in
good faith by appropriate proceedings, reserves in conformity with GAAP with
respect thereto have been provided on the books of such Grantor and such
proceedings could not reasonably be expected to result in the sale, forfeiture
or loss of any material portion of the Collateral or any interest therein.
4.4 Maintenance of Perfected Security Interest; Further Documentation. (a)
Such Grantor shall maintain the security interest created by this Agreement as a
perfected security interest (except with respect to Unperfected Collateral, to
the extent that filing of UCC financing statements is insufficient to perfect a
security interest in such Unperfected Collateral) having at least the priorities
described in Section 2 hereof and shall defend such security interest against
the claims and demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Collateral Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Collateral Agent may
reasonably request, all in reasonable detail.
(c) At any time and from time to time, upon the written request of the
Collateral Agent, and at the sole expense of such Grantor, such Grantor will
promptly and duly execute and deliver, and have recorded, such further
instruments and documents and take such further actions as the Collateral Agent
may reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code (or other similar laws) in effect
in any jurisdiction with respect to the security interests created hereby.
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12
4.5 Changes in Locations, Name, etc. Such Grantor will not, except upon 15
days' prior written notice to the Collateral Agent and delivery to the
Collateral Agent of (a) all additional executed financing statements and other
documents reasonably requested by the Collateral Agent to maintain the validity,
perfection and priority of the security interests provided for herein and (b) if
applicable, a written supplement to Schedule 5 showing any additional location
at which Inventory or Equipment shall be kept:
(i) permit any of the Inventory or Equipment to be kept at a location
other than those listed on Schedule 5, except with respect to Equipment
under repair and held by bailees;
(ii) change the location of its chief executive office or sole place
of business from that referred to in Section 3.3; or
(iii) change its name, identity or corporate structure to such an
extent that any financing statement filed by the Collateral Agent in
connection with this Agreement would become misleading.
4.6 Notices. Such Grantor will advise the Collateral Agent promptly, in
reasonable detail, of:
(a) any Lien (other than security interests created hereby or Liens
permitted under the Indenture) on any of the Collateral which would adversely
affect the ability of the Collateral Agent to exercise any of its remedies
hereunder; and
(b) of the occurrence of any other event which could reasonably be expected
to have a material adverse effect on the aggregate value of the Collateral or on
the security interests created hereby (the materiality of the adverse nature of
any such occurrence or other event will not be presumed by the sending of any
such notice).
4.7 Pledged Securities. (a) Subject to Section 8 of the Intercreditor
Agreement, if, prior to the occurrence of the Substitution Event, such Grantor
shall become entitled to receive or shall receive any stock certificate
(including, without limitation, any certificate representing a stock dividend or
a distribution in connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any reorganization), option
or rights in respect of the Capital Stock of any Issuer, whether in addition to,
in substitution of, as a conversion of, or in exchange for, any shares of the
Pledged Stock, or otherwise in respect thereof, such Grantor shall accept the
same as the agent of the Administrative Agent, hold the same in trust for the
Administrative Agent, and deliver the same forthwith to the Administrative Agent
in the exact form received, duly indorsed by such Grantor to the Administrative
Agent, if required, together with an undated stock power covering such
certificate duly executed in blank by such Grantor and with, if the
Administrative Agent so requests, signature guaranteed, to be held by the
Administrative Agent, subject to the terms hereof and of the Intercreditor
Agreement, as additional collateral security for the Obligations. Subject to the
provisions of the Indenture, any sums paid upon or in respect of the Pledged
Securities upon the liquidation or dissolution of any Issuer shall be paid over
to the Administrative Agent to be held by it, subject to the terms of the
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13
Intercreditor Agreement, as additional collateral security for the Obligations,
and in case any distribution of capital shall be made on or in respect of the
Pledged Securities or any property shall be distributed upon or with respect to
the Pledged Securities pursuant to the recapitalization or reclassification of
the capital of any Issuer or pursuant to the reorganization thereof, the
property so distributed shall, unless otherwise subject to a perfected security
interest in favor of the Administrative Agent, be delivered to the
Administrative Agent to be held by it, subject to the terms of the Intercreditor
Agreement, as additional collateral security for the Obligations. If any sums of
money or property so paid or distributed in respect of the Pledged Securities
shall be received by such Grantor, such Grantor shall, until such money or
property is paid or delivered to the Administrative Agent, hold such money or
property in trust for the Collateral Agent, subject to Section 8 of the
Intercreditor Agreement, segregated from other funds of such Grantor, as
additional collateral security for the Obligations.
(b) If (i) the Substitution Event shall have occurred and (ii) any Grantor
referred to in Section 4.7(a) shall become entitled to receive or shall receive
any stock certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate issued in
connection with any reorganization), option or rights in respect of the Capital
Stock of any Issuer, whether in addition to, in substitution of, as a conversion
of, or in exchange for, any shares of the Pledged Stock, or otherwise in respect
thereof, such Grantor shall accept the same as the agent of the Collateral
Agent, hold the same in trust for the Collateral Agent, and deliver the same
forthwith to the Collateral Agent in the exact form received, duly indorsed by
such Grantor to the Collateral Agent, if required, together with an undated
stock power covering such certificate duly executed in blank by such Grantor and
with, if the Collateral Agent so requests, signature guaranteed, to be held by
the Collateral Agent, subject to the terms hereof, as additional collateral
security for the Obligations. Subject to the provisions of the Indenture any
sums paid upon or in respect of the Pledged Securities upon the liquidation or
dissolution of any Issuer shall be paid over to the Collateral Agent to be held
by it hereunder as additional collateral security for the Obligations, and in
case any distribution of capital shall be made on or in respect of the Pledged
Securities or any property shall be distributed upon or with respect to the
Pledged Securities pursuant to the recapitalization or reclassification of the
capital of any Issuer or pursuant to the reorganization thereof, the property so
distributed shall, unless otherwise subject to a perfected security interest in
favor of the Collateral Agent, be delivered to the Collateral Agent to be held
by it hereunder as additional collateral security for the Obligations. If any
sums of money or property so paid or distributed in respect of the Pledged
Securities shall be received by such Grantor, such Grantor shall, until such
money or property is paid or delivered to the Collateral Agent, hold such money
or property in trust for the Collateral Agent, pursuant to Section 8 of the
Intercreditor Agreement, segregated from other funds of such Grantor, as
additional collateral security for the Obligations.
(c) Following the occurrence of the Substitution Event and without the
prior written consent of the Collateral Agent, the Grantor referred to in
Section 4.7(a) will not (i) vote to enable, or take any other action to permit,
any Issuer to issue any stock or other equity securities of any nature or to
issue any other securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of any Issuer,
(ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the
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14
Pledged Securities or Proceeds thereof (except pursuant to a transaction
expressly permitted by the Indenture), (iii) create, incur or permit to exist
any Lien or option in favor of, or any claim of any Person with respect to, any
of the Pledged Securities or Proceeds thereof, or any interest therein, except
for the security interests created by this Agreement or (iv) enter into any
agreement or undertaking restricting the right or ability of such Grantor or the
Collateral Agent to sell, assign or transfer any of the Pledged Securities or
Proceeds thereof.
(d) In the case of each Grantor which is an Issuer, such Issuer agrees that
(i) it will be bound by the terms of this Agreement relating to the Pledged
Securities issued by it and will comply with such terms insofar as such terms
are applicable to it, (ii) it will notify the Collateral Agent promptly in
writing of the occurrence of any of the events described in Section 4.7(a) with
respect to the Pledged Securities issued by it and (iii) the terms of Sections
5.3(c) and 5.7 shall apply to it, mutatis mutandis, with respect to all actions
that may be required of it pursuant to Section 5.3(c) or 5.7 with respect to the
Pledged Securities issued by it.
4.8 Receivables. (a) Other than in the ordinary course of business
consistent with its past practice, such Grantor will not (i) grant any extension
of the time of payment of any Receivable, (ii) compromise or settle any
Receivable for less than the full amount thereof, (iii) release, wholly or
partially, any Person liable for the payment of any Receivable, (iv) allow any
credit or discount whatsoever on any Receivable or (v) amend, supplement or
modify any Receivable in any manner that could adversely affect the value
thereof.
(b) Such Grantor will deliver to the Collateral Agent a copy of each
material demand, notice or document received by it that questions or calls into
doubt the validity or enforceability of more than 5% of the aggregate amount of
the then outstanding Receivables.
4.9 Contracts. (a) Such Grantor will perform and comply in all material
respects with all its obligations under the Contracts.
(b) Such Grantor will not amend, modify, terminate or waive any provision
of any Contract in any manner which could reasonably be expected to materially
adversely affect the value of such Contract as Collateral.
(c) Such Grantor will exercise promptly and diligently each and every
material right which it may have under each Contract (other than any right of
termination).
(d) Such Grantor will deliver to the Collateral Agent a copy of each
material demand, notice or document received by it relating in any way to any
Contract that questions the validity or enforceability of such Contract.
4.10 Intellectual Property. (a) Such Grantor (either itself or through
licensees) will (i) continue to use each material Trademark on each and every
trademark class of goods applicable to its current line as reflected in its
current catalogs, brochures and price lists in order to maintain such Trademark
in full force free from any claim of abandonment for non-use, (ii) maintain as
in the past the quality of products and services offered under each material
Trademark, (iii) use such Trademark with the appropriate notice of registration
and all other
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15
notices and legends required by applicable Requirements of Law, (iv) not adopt
or use any mark which is confusingly similar or a colorable imitation of each
material Trademark unless the Collateral Agent, for the benefit of the
Securityholders, shall obtain a perfected security interest in such mark
pursuant to this Agreement, and (v) not (and not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby each
material Trademark may become invalidated or impaired in any way.
(b) Such Grantor (either itself or through licensees) will not do any act,
or omit to do any act, whereby any material Patent may become forfeited,
abandoned or dedicated to the public.
(c) Such Grantor (either itself or through licensees) (i) will not (and
will not permit any licensee or sublicensee thereof to) do any act or knowingly
omit to do any act whereby any material Copyright may become invalidated or
otherwise impaired or fall into the public domain.
(d) Such Grantor (either itself or through licensees) will not do any act
that knowingly uses any material Intellectual Property to infringe the
intellectual property rights of any other Person.
(e) Such Grantor will notify the Collateral Agent immediately if it knows,
or has reason to know, that any application or registration relating to any
material Intellectual Property may become forfeited, abandoned or dedicated to
the public, or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, the United States
Copyright Office or any court or tribunal in any country) regarding such
Grantor's ownership of, or the validity of, any material Intellectual Property
or such Grantor's right to register the same or to own and maintain the same.
(f) Whenever such Grantor, either by itself or through any agent, employee,
licensee or designee, shall file an application for the registration of any
Intellectual Property with the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, such Grantor shall report such
filing to the Collateral Agent within five Business Days after the last day of
the fiscal quarter in which such filing occurs. Upon request of the Collateral
Agent, such Grantor shall execute and deliver, and have recorded, any and all
agreements, instruments, documents, and papers as the Collateral Agent may
request to evidence the Collateral Agent's security interest in any Copyright,
Patent or Trademark and the goodwill and general intangibles of such Grantor
relating thereto or represented thereby.
(g) Such Grantor will take all reasonable and necessary steps, including,
without limitation, in any proceeding before the United States Patent and
Trademark Office, the United States Copyright Office or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the material Intellectual Property, including,
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16
without limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
(h) In the event that any material Intellectual Property is infringed,
misappropriated or diluted by a third party, such Grantor shall (i) take such
actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and promptly notify the
Collateral Agent after it learns thereof and take all appropriate remedial
action, including, when appropriate, sue for infringement, misappropriation or
dilution, to seek injunctive relief where appropriate and to recover any and all
damages for such infringement, misappropriation or dilution.
SECTION 5. REMEDIAL PROVISIONS
5.1 Certain Matters Relating to Receivables. (a) The Collateral Agent shall
have the right, following the occurrence of the Substitution Event, to make test
verifications of the Receivables in any manner and through any medium that it
reasonably considers advisable, and each Grantor shall furnish all such
assistance and information as the Collateral Agent may require in connection
with such test verifications. At any time and from time to time, following the
occurrence of the Substitution Event, upon the Collateral Agent's request and at
the expense of the relevant Grantor, such Grantor shall cause independent public
accountants or others satisfactory to the Collateral Agent to furnish to the
Collateral Agent reports showing reconciliations, aging and test verifications
of, and trial balances for, the Receivables; provided, however, that unless a
Default or Event Default shall have occurred and be continuing, the Collateral
Agent shall request no more than two (2) such reports during any calendar year.
(b) The Collateral Agent hereby authorizes each Grantor to collect such
Grantor's Receivables and the Collateral Agent may, following the occurrence of
the Substitution Event, curtail or terminate said authority at any time after
the occurrence and during the continuance of an Event of Default. If required by
the Collateral Agent, following the occurrence of the Substitution Event, at any
time after the occurrence and during the continuance of an Event of Default, any
payments of Receivables, when collected by any Grantor, (i) shall be forthwith
(and, in any event, within two Business Days) deposited by such Grantor in the
exact form received, duly indorsed by such Grantor to the Collateral Agent if
required, in a Collateral Account maintained under the sole dominion and control
of the Collateral Agent, subject to withdrawal by the Collateral Agent for the
account of Securityholders only as provided in Section 5.5, and (ii) until so
turned over, shall be held by such Grantor in trust for the Collateral Agent,
segregated from other funds of such Grantor. Each such deposit of Proceeds of
Receivables shall be accompanied by a report identifying in reasonable detail
the nature and source of the payments included in the deposit.
(c) At the Collateral Agent's request, each Grantor shall deliver to the
Collateral Agent all original and other documents evidencing, and relating to,
the agreements and transactions which gave rise to the Receivables, including,
without limitation, all original orders, invoices and shipping receipts in paper
and electronic format as may be directed by the Collateral Agent.
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17
5.2 Communications with Obligors; Grantors Remain Liable. (a) The
Collateral Agent in its own name or in the name of others may at any time after
the occurrence and during the continuance of an Event of Default, following the
occurrence of the Substitution Event, communicate with obligors under the
Receivables and parties to the Contracts to verify with them to the Collateral
Agent's satisfaction the existence, amount and terms of any Receivables or
Contracts.
(b) Upon the request of the Collateral Agent at any time after the
occurrence and during the continuance of an Event of Default, following the
occurrence of the Substitution Event, each Grantor shall notify obligors on the
Receivables and parties to the Contracts that the Receivables and the Contracts
have been assigned to the Collateral Agent for the benefit of the
Securityholders and that payments in respect thereof shall be made directly to
the Collateral Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor shall
remain liable under each of the Receivables and Contracts to observe and perform
all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise
thereto. Neither the Collateral Agent nor any Securityholder shall have any
obligation or liability under any Receivable (or any agreement giving rise
thereto) or Contract by reason of or arising out of this Agreement or the
receipt by the Collateral Agent or any Securityholder of any payment relating
thereto, nor shall the Collateral Agent or any Securityholder be obligated in
any manner to perform any of the obligations of any Grantor under or pursuant to
any Receivable (or any agreement giving rise thereto) or Contract, to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any party
thereunder, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
5.3 Pledged Stock. (a) Unless (i) the Substitution Event shall have
occurred, (ii) an Event of Default shall have occurred and be continuing and
(iii) the Collateral Agent shall have given notice to the relevant Grantor of
the Collateral Agent's intent to exercise its corresponding rights pursuant to
Section 5.3(b), each Grantor shall be permitted to receive all cash dividends
paid in respect of the Pledged Stock and all payments made in respect of the
Pledged Notes, in each case paid in the normal course of business of the
relevant Issuer and consistent with past practice, to the extent permitted in
the Indenture Agreement, and to exercise all voting and corporate rights with
respect to the Pledged Securities; provided, however, that no vote shall be cast
or corporate right exercised or other action taken which, in the Collateral
Agent's reasonable judgment, would impair the Collateral or which would be
inconsistent with or result in any violation of any provision of the Indenture
Agreement, this Agreement or any other Loan Document.
(b) If, following the occurrence of the Substitution Event, an Event of
Default shall occur and be continuing and the Collateral Agent shall give notice
of its intent to exercise such rights to the relevant Grantor or Grantors, (i)
the Collateral Agent shall have the right to receive any and all cash dividends,
payments or other Proceeds paid in respect of the Pledged
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18
Securities and make application thereof to the Obligations in the order set
forth in Section 5.5, and (ii) any or all of the Pledged Securities shall be
registered in the name of the Collateral Agent or its nominee, and the
Collateral Agent or its nominee may thereafter exercise (x) all voting,
corporate and other rights pertaining to such Pledged Securities at any meeting
of shareholders of the relevant Issuer or Issuers or otherwise and (y) any and
all rights of conversion, exchange and subscription and any other rights,
privileges or options pertaining to such Pledged Securities as if it were the
absolute owner thereof (including, without limitation, the right to exchange at
its discretion any and all of the Pledged Securities upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate structure of any Issuer, or upon the exercise by any Grantor or
the Collateral Agent of any right, privilege or option pertaining to such
Pledged Securities, and in connection therewith, the right to deposit and
deliver any and all of the Pledged Securities with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as the Collateral Agent may determine), all without liability except
to account for property actually received by it, but the Collateral Agent shall
have no duty to any Grantor to exercise any such right, privilege or option and
shall not be responsible for any failure to do so or delay in so doing.
(c) Each Grantor hereby authorizes and instructs each Issuer of any Pledged
Securities pledged by such Grantor hereunder, following the occurrence of the
Substitution Event, to (i) comply with any instruction received by it from the
Collateral Agent in writing that (x) states that an Event of Default has
occurred and is continuing and (y) is otherwise in accordance with the terms of
this Agreement, without any other or further instructions from such Grantor, and
each Grantor agrees that each Issuer shall be fully protected in so complying,
and (ii) unless otherwise expressly permitted hereby, pay any dividends or other
payments with respect to the Pledged Securities directly to the Collateral
Agent.
5.4 Proceeds to be Turned Over To Collateral Agent. (a) In addition to the
rights of the Collateral Agent specified in Section 5.1 with respect to payments
of Receivables, all Proceeds received by any Grantor consisting of cash, checks
and other near-cash items shall be held by such Grantor in trust for the
Collateral Agent to the extent of its second priority interest therein,
segregated from other funds of such Grantor, and shall, forthwith upon receipt
by such Grantor, be turned over to the Administrative Agent, pursuant to the
Intercreditor Agreement, in the exact form received by such Grantor (duly
indorsed by such Grantor to the Administrative Agent, if required). All Proceeds
received by the Administrative Agent hereunder shall be held by the
Administrative Agent in a Collateral Account maintained under its sole dominion
and control subject to the rights of the Collateral Agent pursuant to Section 8
of the Intercreditor Agreement. All Proceeds while held by the Administrative
Agent in a Collateral Account (or by such Grantor in trust for the Collateral
Agent and the Securityholders) shall continue to be held as collateral security
for all the Obligations and shall not constitute payment thereof until applied
as provided in Section 5.5.
(b) If (i) the Substitution Event shall have occurred and (ii) an Event of
Default shall occur and be continuing and the Collateral Agent shall give notice
of its intent to exercise such rights to the relevant Grantor or Grantors, (i)
the Collateral Agent shall have the right to receive any and all cash dividends,
payments or other Proceeds paid in respect of the Pledged Securities and make
application thereof to the Obligations in the order set forth in Section 5.5,
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19
and (ii) any or all of the Pledged Securities shall be registered in the name of
the Collateral Agent or its nominee, and the Collateral Agent or its nominee may
thereafter exercise (x) all voting, corporate and other rights pertaining to
such Pledged Securities at any meeting of shareholders of the relevant Issuer or
Issuers or otherwise and (y) any and all rights of conversion, exchange and
subscription and any other rights, privileges or options pertaining to such
Pledged Securities as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged
Securities upon the merger, consolidation, reorganization, recapitalization or
other fundamental change in the corporate structure of any Issuer, or upon the
exercise by any Grantor or the Collateral Agent of any right, privilege or
option pertaining to such Pledged Securities, and in connection therewith, the
right to deposit and deliver any and all of the Pledged Securities with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as the Collateral Agent may determine), all without
liability except to account for property actually received by it, but the
Collateral Agent shall have no duty to any Grantor to exercise any such right,
privilege or option and shall not be responsible for any failure to do so or
delay in so doing.
5.5 Application of Proceeds. If (i) the Substitution Event shall have
occurred and (ii) an Event of Default shall have occurred and be continuing, at
any time at the Collateral Agent's election, the Collateral Agent may apply all
or any part of Proceeds constituting Collateral, whether or not held in any
Collateral Account in payment of the Obligations in the order specified in the
Indenture.
5.6 Code and Other Remedies. If an Event of Default shall occur and be
continuing, the Collateral Agent, on behalf of the Securityholders and the
Trustee, may exercise, in addition to all other rights and remedies granted to
them in this Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations, all rights and remedies of a secured
party under the New York UCC or any other applicable law, subject to the
Intercreditor Agreement. Without limiting the generality of the foregoing and
subject to the Intercreditor Agreement, the Collateral Agent, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon any
Grantor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived) may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give option or options
to purchase, or otherwise dispose of and deliver the Collateral or any part
thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, at any exchange, broker's board or office of
the Collateral Agent or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk. Subject to the
Intercreditor Agreement, the Collateral Agent shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold, free
of any right or equity of redemption in any Grantor, which right or equity is
hereby waived and released. Each Grantor further agrees, at the Collateral
Agent's request, to assemble the Collateral and make it available to the
Collateral Agent at places which the Collateral Agent shall reasonably select,
whether at such Grantor's premises or elsewhere. The Collateral Agent shall
apply the net proceeds of any action taken by it pursuant to this Section 5.6,
after deducting all reasonable
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20
costs and expenses of every kind incurred in connection therewith or incidental
to the care or safekeeping of any of the Collateral or in any way relating to
the Collateral or the rights of the Collateral Agent or the Securityholders
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Obligations, in such
order as the Collateral Agent may elect, and only after such application and
after the payment by the Collateral Agent of any other amount required by any
provision of law, including, without limitation, Section 9-504(1)(c) of the New
York UCC, need the Collateral Agent account for the surplus, if any, to any
Grantor. To the extent permitted by applicable law, each Grantor waives all
claims, damages and demands it may acquire against the Collateral Agent or any
Securityholder arising out of the exercise by them of any rights hereunder. If
any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition.
5.7 Registration Rights. (a) If (i) the Collateral Agent shall determine to
exercise its right to sell any or all of the Pledged Stock pursuant to Section
5.6, (ii) the Substitution Event shall have occurred and (iii) in the opinion of
the Collateral Agent it is necessary or advisable to have the Pledged Stock, or
that portion thereof to be sold, registered under the provisions of the
Securities Act, then the relevant Grantor will cause the Issuer thereof to (i)
execute and deliver, and cause the directors and officers of such Issuer to
execute and deliver, all such instruments and documents, and do or cause to be
done all such other acts as may be, in the opinion of the Collateral Agent,
necessary or advisable to register the Pledged Stock, or that portion thereof to
be sold, under the provisions of the Securities Act, (ii) use its best efforts
to cause the registration statement relating thereto to become effective and to
remain effective for a period of one year from the date of the first public
offering of the Pledged Stock, or that portion thereof to be sold, and (iii)
make all amendments thereto and/or to the related prospectus which, in the
opinion of the Collateral Agent, are necessary or advisable, all in conformity
with the requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Each Grantor agrees to
cause such Issuer to comply with the provisions of the securities or "Blue Sky"
laws of any and all jurisdictions which the Collateral Agent shall designate and
to make available to its Securityholders, as soon as practicable, an earnings
statement (which need not be audited) which will satisfy the provisions of
Section 11(a) of the Securities Act.
(b) Each Grantor recognizes that the Collateral Agent may be unable to
effect a public sale of any or all the Pledged Stock, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Collateral
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.
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21
(c) Each Grantor agrees to use its best efforts to do or cause to be done
all such other acts as may be necessary to make such sale or sales of all or any
portion of the Pledged Stock pursuant to this Section 5.7 valid and binding and
in compliance with any and all other applicable Requirements of Law. Each
Grantor further agrees that a breach of any of the covenants contained in this
Section 5.7 will cause irreparable injury to the Collateral Agent and the
Securityholders, that the Collateral Agent and the Securityholders have no
adequate remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained in this Section 5.7 shall be specifically
enforceable against such Grantor, and such Grantor hereby waives and agrees not
to assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred under the
Indenture.
5.8 Waiver; Deficiency. Each Grantor waives and agrees not to assert any
rights or privileges which it may acquire under Section 9-112 of the New York
UCC. Each Grantor shall remain liable for any deficiency if the proceeds of any
sale or other disposition of the Collateral are insufficient to pay its
Obligations and the fees and disbursements of any attorneys employed by the
Collateral Agent or any Securityholder to collect such deficiency.
SECTION 6. THE COLLATERAL AGENT
6.1 Collateral Agent's Appointment as AttorneyinFact, etc. (a) Subject to
the Loan Collateral Agreement and the Intercreditor Agreement, each Grantor,
pursuant to Section 11.1 of the Indenture, hereby irrevocably constitutes and
appoints the Collateral Agent and any officer or agent thereof, with full power
of substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Grantor and in the name of
such Grantor or in its own name, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, and, without limiting the generality of the
foregoing, each Grantor hereby gives the Collateral Agent the power and right,
on behalf of such Grantor, without notice to or assent by such Grantor to do any
or all of the following:
(i) in the name of such Grantor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Receivable or Contract or with respect to any other Collateral and file any
claim or take any other action or proceeding in any court of law or equity
or otherwise deemed appropriate by the Collateral Agent for the purpose of
collecting any and all such moneys due under any Receivable or Contract or
with respect to any other Collateral whenever payable;
(ii) in the case of any Intellectual Property, execute and deliver,
and have recorded, any and all agreements, instruments, documents and
papers as the Collateral Agent may request to evidence the Collateral
Agent's security interest in such Intellectual Property and the goodwill
and general intangibles of such Grantor relating thereto or represented
thereby;
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22
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of the
premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in Section 5.6
or 5.7, any indorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
(v) (1) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Collateral Agent or as the Collateral Agent
shall direct; (2) ask or demand for, collect, and receive payment of and
receipt for, any and all moneys, claims and other amounts due or to become
due at any time in respect of or arising out of any Collateral; (3) sign
and indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (4) commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any portion thereof and to enforce any other right in respect
of any Collateral; (5) defend any suit, action or proceeding brought
against such Grantor with respect to any Collateral; (6) settle, compromise
or adjust any such suit, action or proceeding and, in connection therewith,
give such discharges or releases as the Collateral Agent may deem
appropriate; (7) assign any Copyright, Patent or Trademark (along with the
goodwill of the business to which any such Copyright, Patent or Trademark
pertains), throughout the world for such term or terms, on such conditions,
and in such manner, as the Collateral Agent shall in its sole discretion
determine; and (8) generally, sell, transfer, pledge and make any agreement
with respect to or otherwise deal with any of the Collateral as fully and
completely as though the Collateral Agent were the absolute owner thereof
for all purposes, and do, at the Collateral Agent's option and such
Grantor's expense, at any time, or from time to time, all acts and things
which the Collateral Agent deems necessary to protect, preserve or realize
upon the Collateral and the Collateral Agent's security interests therein
and to effect the intent of this Agreement, all as fully and effectively as
such Grantor might do.
Anything in this Section 6.1(a) to the contrary notwithstanding, the
Collateral Agent agrees that it will not exercise any rights under the power of
attorney provided for in this Section 6.1(a) (except for the rights provided in
Section 6.1(a)(iii)) unless an Event of Default shall have occurred and be
continuing, subject to the Intercreditor Agreement.
(b) Subject to the Loan Collateral Agreement and the Intercreditor
Agreement, any Grantor fails to perform or comply with any of its agreements
contained herein, the Collateral Agent, at its option, but without any
obligation so to do, may perform or comply, or otherwise cause performance or
compliance, with such agreement.
(c) The expenses of the Collateral Agent incurred in connection with
actions undertaken as provided in this Section 6.1, together with interest
thereon at a rate per annum equal to the Defaulted Interest under the Indenture,
from the date of payment by the Collateral
<PAGE>
23
Agent to the date reimbursed by the relevant Grantor, shall be payable by such
Grantor to the Collateral Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. All powers, authorizations and agencies
contained in this Agreement are coupled with an interest and are irrevocable
until this Agreement is terminated and the security interests created hereby are
released.
6.2 Duty of Collateral Agent. Without limiting any of the rights of the
Collateral Agent hereunder, the Collateral Agent's sole duty with respect to the
custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the New York UCC or otherwise, shall be to
deal with it in the same manner as the Collateral Agent deals with similar
property in its capacity as an indenture trustee, taking into account whether an
Event of Default has occurred and it is continuing. The Collateral Agent's sole
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the New York UCC or
otherwise, shall be to deal with it in the same manner as the Collateral Agent
deals with similar property for its own account. Neither the Collateral Agent
nor any Securityholder nor any of their respective officers, directors,
employees or agents shall be liable for failure to demand, collect or realize
upon any of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
any Grantor or any other Person or to take any other action whatsoever with
regard to the Collateral or any part thereof. The powers conferred on the
Collateral Agent hereunder are solely to protect the Collateral Agent's
interests in the Collateral for the benefit of the Securityholders and shall not
impose any duty upon the Collateral Agent or any Securityholder to exercise any
such powers. The Collateral Agent shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers, and neither they
nor any of their officers, directors, employees or agents shall be responsible
to any Grantor for any act or failure to act hereunder, except for their own
gross negligence or willful misconduct.
6.3 Execution of Financing Statements. Pursuant to Section 9-402 of the New
York UCC and any other applicable law, each Grantor authorizes the Collateral
Agent to file or record financing statements and other filing or recording
documents or instruments with respect to the Collateral without the signature of
such Grantor in such form and in such offices as the Collateral Agent reasonably
determines appropriate to perfect the security interests of the Collateral Agent
under this Agreement. A photographic or other reproduction of this Agreement
shall be sufficient as a financing statement or other filing or recording
document or instrument for filing or recording in any jurisdiction.
6.4 Authority of Collateral Agent. Each Grantor acknowledges that the
rights and responsibilities of the Collateral Agent under this Agreement with
respect to any action taken by the Collateral Agent or the exercise or
non-exercise by the Collateral Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Collateral Agent and the
Securityholders, be governed by the Indenture and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Collateral Agent and Grantors, the Collateral Agent shall be conclusively
presumed to be acting as agent for the Securityholders with full and
<PAGE>
24
valid authority so to act or refrain from acting, and no Grantor shall be under
any obligation, or entitlement, to make any inquiry respecting such authority.
SECTION 7. MISCELLANEOUS
7.1 Amendments in Writing . None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with Section 10.1 of the Indenture.
7.2 Notices. All notices, requests and demands to or upon the Collateral
Agent or any Grantor hereunder shall be effected in the manner provided for in
Section 12.2 of the Indenture.
7.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the
Collateral Agent, nor any Securityholder shall by any act (except by a written
instrument pursuant to Section 7.1), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Collateral Agent or any Securityholder any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Collateral Agent or any Securityholder of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Collateral Agent or such Securityholder would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
7.4 Enforcement Expenses; Indemnification. (a) Each Grantor agrees to pay
or reimburse each Securityholder and the Collateral Agent for all its costs and
expenses incurred in enforcing or preserving any rights under this Agreement and
the other Loan Documents to which such Grantor is a party, including, without
limitation, the fees and disbursements of counsel (including the allocated fees
and expenses of in-house counsel) to each Lender and of counsel to the
Collateral Agent.
(b) Each Grantor agrees to pay, and to save the Collateral Agent and the
Securityholders harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales or other
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.
(c) The agreements in this Section shall survive repayment of the
Obligations and all other amounts payable under the Indenture and the other
Operative Documents.
7.5 Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of each Grantor and of the Collateral Agent and shall
inure to the benefit of the Collateral Agent and the Securityholders and their
successors and assigns; provided that no
<PAGE>
25
Grantor may assign, transfer or delegate any of its rights or obligations under
this Agreement without the prior written consent of the Collateral Agent.
7.6 Set-Off. Each Grantor hereby irrevocably authorizes the Collateral
Agent and each Securityholder at any time and from time to time while an Event
of Default shall have occurred and be continuing, without notice to such Grantor
or any other Grantor, any such notice being expressly waived by each Grantor, to
set-off and appropriate and apply 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 the Collateral Agent or such Securityholder to or for the credit or the
account of such Grantor (other than for the account of any Grantor acting in a
fiduciary or other special capacity), or any part thereof in such amounts as the
Collateral Agent or such Securityholder may elect, against and on account of the
obligations and liabilities of such Grantor to the Collateral Agent, such
Securityholder hereunder and claims of every nature and description of the
Collateral Agent or such Securityholder against such Grantor, in any currency,
whether arising hereunder, under the Indenture, any other Operative Document or
otherwise, as the Collateral Agent or such Securityholder may elect, whether or
not the Collateral Agent or any Securityholder has made any demand for payment
and although such obligations, liabilities and claims may be contingent or
unmatured. The Collateral Agent and each Securityholder shall notify such
Grantor promptly of any such set-off and the application made by the Collateral
Agent or such Lender of the proceeds thereof, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Collateral Agent and each Securityholder under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Collateral Agent or such Securityholder may have.
7.7 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.
7.8 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.
7.9 Section Headings. The Section headings used in this Agreement are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
7.10 Integration. This Agreement and the other Operative Documents
represent the agreement of the Grantors and the Collateral Agent with respect to
the subject matter hereof and thereof, and there are no promises, undertakings,
representations or warranties by the Collateral Agent or any Securityholder
relative to subject matter hereof and thereof not expressly set forth or
referred to herein or in the other Loan Documents.
<PAGE>
26
7.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
7.12 Submission To Jurisdiction; Waivers. Each of the Grantors and the
Collateral Agent hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Operative Documents to
which it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such party
at its address referred to in Section 7.2 or, with respect to the Grantors,
at such other address of which the Collateral Agent shall have been
notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent permitted by law, any right it may
have to claim or recover in any legal action or proceeding referred to in
this Section any special, exemplary, punitive or consequential damages.
7.13 Acknowledgements. Each of the Grantors and the Collateral Agent hereby
acknowledges that with respect to itself:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Operative Documents to which it is
a party;
(b) neither the Collateral Agent nor any Securityholder has any
fiduciary relationship with or duty to any Grantor arising out of or in
connection with this Agreement or any of the other Operative Documents, and
the relationship between the Grantors, on the one hand, and the Collateral
Agent and the Securityholders, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
<PAGE>
27
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Securityholders and the Collateral Agent or among the Grantors, the
Securityholders and the Collateral Agent.
7.14 Additional Grantors. Each Restricted Subsidiary that is required to
become a party to this Agreement pursuant to Section 10.7 of the Indenture shall
become a Grantor for all purposes of this Agreement upon execution and delivery
by such Restricted Subsidiary of an Assumption Agreement in the form of Annex 1
hereto.
7.15 Releases. (a) At such time as the Obligations shall have been paid in
full, the Collateral shall be released from the Liens created hereby, and this
Agreement and all obligations (other than those expressly stated to survive such
termination) of the Collateral Agent and each Grantor hereunder shall terminate,
all without delivery of any instrument or performance of any act by any party,
and all rights to the Collateral shall revert to the Grantors. At the request
and sole expense of any Grantor following any such termination, the Collateral
Agent shall deliver to such Grantor any Collateral held by the Collateral Agent
hereunder, and execute and deliver to such Grantor such documents as such
Grantor shall reasonably request to evidence such termination.
(b) If any of the Collateral shall be sold, transferred or otherwise
disposed of by any Grantor in a transaction permitted by the Indenture, then the
Collateral Agent, at the request and sole expense of such Grantor, shall execute
and deliver to such Grantor all releases or other documents reasonably necessary
or desirable for the release of the Liens created hereby on such Collateral.
7.16 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
<PAGE>
28
IN WITNESS WHEREOF, each of the undersigned has caused this Collateral
Agreement to be duly executed and delivered as of the date first above written.
HARVARD INDUSTRIES, INC.
By: /s/ D. Craig Bowman
-------------------------------
Name:
Title:
DOEHLER-JARVIS, INC.
HARVARD TRANSPORTATION CORPORATION
DOEHLER-JARVIS GREENEVILLE, INC.
POTTSTOWN PRECISION CASTING, INC.
DOEHLER-JARVIS TECHNOLOGIES, INC.
DOEHLER-JARVIS TOLEDO, INC.
HARMAN AUTOMOTIVE, INC.
HAYES-ALBION CORPORATION
THE KINGSTON-WARREN CORPORATION
On behalf of each of the above
Subsidiary Guarantors
By: /s/ D. Craig Bowman
-------------------------------
Name:
Title:
<PAGE>
Schedule 1
Intentionally Left Blank
<PAGE>
Schedule 2
DESCRIPTION OF PLEDGED SECURITIES
Pledged Stock:
Issuer Class of Stock Stock Certificate No. No. of Shares
------ -------------- --------------------- -------------
Pledged Notes:
Issuer Payee Principal Amount
------ ----- ----------------
<PAGE>
Schedule 3
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
Uniform Commercial Code Filings
[List each office where a financing statement is to be filed]
Patent and Trademark Filings
[List all filings]
Actions with respect to Pledged Stock
Other Actions
[Describe other actions to be taken]
<PAGE>
Schedule 4
LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE
Grantor Location
------- --------
Harvard Industries, Inc.
Doehler-Jarvis, Inc.
Harvard Transportation Corporation
Doehler-Jarvis Greeneville, Inc.
Pottstown Precision Casting, Inc.
Doehler-Jarvis Technologies, Inc.
Doehler-Jarvis Toledo, Inc.
Harman Automotive, Inc.
Hayes-Albion Corporation
The Kingston-Warren Corporation
<PAGE>
Schedule 5
LOCATION OF INVENTORY AND EQUIPMENT
Grantor Locations
------- ---------
Harvard Industries, Inc.
Doehler-Jarvis, Inc.
Harvard Transportation Corporation
Doehler-Jarvis Greeneville, Inc.
Pottstown Precision Casting, Inc.
Doehler-Jarvis Technologies, Inc.
Doehler-Jarvis Toledo, Inc.
Harman Automotive, Inc.
Hayes-Albion Corporation
The Kingston-Warren Corporation
<PAGE>
Schedule 6
COPYRIGHTS AND COPYRIGHT LICENSES
Harvard Industries, Inc.
Doehler-Jarvis, Inc.
Harvard Transportation Corporation
Doehler-Jarvis Greeneville, Inc.
Pottstown Precision Casting, Inc.
Doehler-Jarvis Technologies, Inc.
Doehler-Jarvis Toledo, Inc.
Harman Automotive, Inc.
Hayes-Albion Corporation
The Kingston-Warren Corporation
<PAGE>
PATENTS AND PATENT LICENSES
Harvard Industries, Inc.
Doehler-Jarvis, Inc.
Harvard Transportation Corporation
Doehler-Jarvis Greeneville, Inc.
Pottstown Precision Casting, Inc.
Doehler-Jarvis Technologies, Inc.
Doehler-Jarvis Toledo, Inc.
Harman Automotive, Inc.
Hayes-Albion Corporation
The Kingston-Warren Corporation
<PAGE>
TRADEMARKS AND TRADEMARK LICENSES
Harvard Industries, Inc.
Doehler-Jarvis, Inc.
Harvard Transportation Corporation
Doehler-Jarvis Greeneville, Inc.
Pottstown Precision Casting, Inc.
Doehler-Jarvis Technologies, Inc.
Doehler-Jarvis Toledo, Inc.
Harman Automotive, Inc.
Hayes-Albion Corporation
The Kingston-Warren Corporation
<PAGE>
Schedule 7
CONTRACTS
<PAGE>
Schedule 8
EXISTING PRIOR LIENS
<PAGE>
ISSUER
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the Collateral
Agreement dated as of November 24, 1998 (the "Agreement"), made by the Grantors
party thereto in favor of ________, as Collateral Agent. The undersigned agrees
for the benefit of the Collateral Agent, the Securityholders and the Trustee as
follows:
1. The undersigned will be bound by the terms of the Agreement and will
comply with such terms insofar as such terms are applicable to the undersigned.
2. The undersigned will notify the Collateral Agent promptly in writing of
the occurrence of any of the events described in Section 4.7(a) of the
Agreement.
3. The terms of Sections 5.3(a) and 5.7 of the Agreement shall apply to it,
mutatis mutandis, with respect to all actions that may be required of it
pursuant to Section 5.3(a) or 5.7 of the Agreement.
[NAME OF ISSUER]
By
---------------------------
Title
---------------------
Address for Notices:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Fax:
---------------------
<PAGE>
Annex 1 to
Collateral Agreement
FORM OF ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT, dated as of ________________, ____, made by
______________________________, a ______________ corporation (the "Additional
Grantor"), in favor of ___________________, as Collateral Agent for the
Securityholders, dated as of November 24, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Indenture"). All capitalized terms
not defined herein shall have the meaning ascribed to them in such Indenture.
W I T N E S S E T H :
WHEREAS, in connection with the Indenture, the Grantors (other than the
Additional Grantor) have entered into the Collateral Agreement, dated as of
November 24, 1998 (as amended, supplemented or otherwise modified from time to
time, the "Collateral Agreement") in favor of the Collateral Agent for the
benefit of the Securityholders;
WHEREAS, the Indenture requires the Additional Grantor to become a party to
the Collateral Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Collateral Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Collateral Agreement. By executing and delivering this Assumption
Agreement, the Additional Grantor, as provided in Section 7.14 of the Collateral
Agreement, hereby becomes a party to the Collateral Agreement as a Grantor
thereunder with the same force and effect as if originally named therein as a
Grantor and, without limiting the generality of the foregoing, hereby expressly
assumes all obligations and liabilities of a Grantor thereunder. The information
set forth in Annex 1-A hereto is hereby added to the information set forth in
Schedules ____________ to the Collateral Agreement. The Additional Grantor
hereby represents and warrants that each of the representations and warranties
contained in Section 3 of the Collateral Agreement is true and correct on and as
the date hereof (after giving effect to this Assumption Agreement) as if made on
and as of such date.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
<PAGE>
2
IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to
be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTOR]
By:
------------------
Name:
Title:
<PAGE>
HARVARD INDUSTRIES, INC.
and
STATE STREET BANK AND TRUST COMPANY
as Warrant Agent
--------------------------------
Warrants to Purchase 631,578 Shares of Common Stock
--------------------------------
WARRANT AGREEMENT
Dated as of November 24, 1998
<PAGE>
TABLE OF CONTENTS
[page references are to original document, not exhibit]
<TABLE>
<CAPTION>
Page
<S> <C>
1. DEFINITIONS............................................................................................. 1
2. APPOINTMENT OF WARRANT AGENT............................................................................ 3
2.1. Appointment.................................................................................... 3
3. REGISTRATION, FORM AND EXECUTION OF WARRANTS............................................................ 3
3.1. Registration................................................................................... 3
3.2. Form of Warrant................................................................................ 3
3.3. Countersignature of Warrants................................................................... 3
4. EXERCISE OF WARRANTS.................................................................................... 4
4.1. Manner of Exercise............................................................................. 4
4.2. Payment of Taxes............................................................................... 4
4.3. Fractional Shares.............................................................................. 5
5. TRANSFER, DIVISION AND COMBINATION...................................................................... 5
5.1. Transfer....................................................................................... 5
5.2. Division and Combination....................................................................... 5
5.3. Maintenance of Books........................................................................... 5
6. ADJUSTMENTS............................................................................................. 5
6.1. Adjustment for Change in Capital Stock......................................................... 5
6.2. Adjustment for Rights Issue.................................................................... 6
6.3. Adjustment for Other Distributions............................................................. 7
6.4. Adjustment for Common Stock Issue.............................................................. 8
6.5. Adjustment for Convertible Securities Issue.................................................... 9
6.6. Market Price................................................................................... 10
6.7. Consideration Received......................................................................... 10
6.8. When Adjustment May Be Deferred................................................................ 11
6.9. When No Adjustment Required.................................................................... 11
6.10. Notice of Adjustment........................................................................... 11
6.11. Voluntary Reduction............................................................................ 11
6.12. Notice of Certain Transactions................................................................. 11
6.13. Preservation of Purchase Rights Upon Reclassification, Consolidation, etc...................... 11
6.13. Preservation of Purchase Rights Upon Reclassification, Consolidation, etc...................... 11
6.14. Adjustment to the Number of Shares Purchasable Upon Exercise of Warrants-, Current
Warrant Price Not Less than Par Value...................................................... 12
6.15. Other Dilutive Events.......................................................................... 12
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
6.16. Company Determination Final.................................................................... 12
6.17. Form of Warrants............................................................................... 12
7. NOTICES TO HOLDERS...................................................................................... 13
7.1. Notice of Adjustments.......................................................................... 13
7.2. Notice of Corporate Action..................................................................... 13
8. COVENANTS............................................................................................... 13
9. RESERVATION AND AUTHORIZATION OF COMMON STOCK: REGISTRATION WITH OR APPROVAL OF ANY
GOVERNMENTAL AUTHORITY............................................................................. 14
10. STOCK AND WARRANT TRANSFER BOOKS........................................................................ 14
11. LOSS OR MUTILATION...................................................................................... 14
12. OFFICE OF COMPANY....................................................................................... 14
13. WARRANT AGENT........................................................................................... 14
13.1. Merger or Consolidation or Change of Name of Warrant Agent..................................... 14
13.2. Certain Terms and Conditions Concerning the Warrant Agent...................................... 15
13.3. Change of Warrant Agent........................................................................ 17
13.4. Disposition of Proceeds on Exercise of Warrants, Inspection of Warrant Agreement............... 17
14. MISCELLANEOUS........................................................................................... 17
14.1. Notice Generally............................................................................... 17
14.1. Notice Generally............................................................................... 17
14.2. Successors and Assigns......................................................................... 18
14.3. Amendment...................................................................................... 18
14.4. Severability................................................................................... 19
14.5. Headings....................................................................................... 19
14.6. Governing Law.................................................................................. 19
14.7. Counterparts................................................................................... 19
EXHIBITS
Exhibit A - Form of Warrant Certificate
</TABLE>
(ii)
<PAGE>
THIS WARRANT AGREEMENT (this "Warrant Agreement"), dated as of November 24,
1998, is made by and between Harvard Industries, Inc., a Delaware corporation
(the "Company"), and State Street Bank and Trust Company, a Massachusetts
trust company, as warrant agent (the "Warrant Agent").
W I T N E S S E T H:
WHEREAS, the Company will issue to holders of Allowed
Interests in Class 7 and 8 under the Plan (as defined below), warrants, as
hereinafter described (the " Warrants"), to purchase up to an aggregate of
631,578 shares of its Common Stock pursuant to Articles 6.7 and 6.8 of the
Plan, as confirmed by the United States Bankruptcy Court for the District of
Delaware (the "Court"), by order entered October 15, 1998, under Title 11 of
the United States Code; and
WHEREAS, the purpose of this Warrant Agreement is to set
forth the terms and conditions which shall govern the issuance of all of the
Warrants, the purchase of Common Stock of the Company upon the exercise
thereof, the adjustments in the terms and price of such Warrants pursuant to
the anti-dilution provisions hereof and such other terms and conditions as
hereinafter set forth;
WHEREAS, the Company has requested the Warrant Agent to act
on behalf of the Company, and the Warrant Agent is willing so to act, in
connection with the issuance, division, transfer, exchange and exercise of
Warrants;
NOW, THEREFORE, in consideration of the foregoing and for
the purpose of defining the terms and provisions of the Warrants and the
respective rights and obligations thereunder and hereunder of the Company, the
Warrant Agent, and the Holders (as defined below), and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and affirmed, the Company and the Warrant Agent hereby agree as
follows:
1. DEFINITIONS.
As used in this Warrant Agreement, the following terms
have the respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company after the Effective Date, other than
Warrant Stock.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in the
State of New York or the Commonwealth of Massachusetts.
"Common Stock" shall mean (except where the context
otherwise indicates) the Common Stock, $.01 par value per share, of the
Company as constituted on the Effective Date or shortly thereafter, and any
capital stock into which such Common Stock may thereafter be changed, and
shall also include shares of common stock of any successor or acquiring
corporation received by or distributed to the holders of Common Stock of the
Company in the circumstances contemplated by Section 6.
<PAGE>
"Company" shall have the meaning assigned to such term in
the first paragraph of this Warrant Agreement.
"Court" shall have the meaning assigned to such term in the
recitals to this Warrant Agreement.
"Current Warrant Price" shall mean, in respect of a share of
Common Stock at any date herein specified, $41.67 per share of Common Stock,
subject to adjustment in accordance with Section 6.
"Effective Date" shall have the meaning set forth in the Plan.
"Expiration Date" shall mean November 23, 2003.
"GAAP" shall mean generally accepted accounting principles
in the United States of America as from time to time in effect.
"Holder" shall mean the Person in whose name a Warrant is
registered in the warrant register of the Company maintained by or on behalf
of the Company for such purpose.
"Majority Holders" shall mean the Holders of Warrants
exercisable for in excess of 50% of the aggregate number of shares of Common
Stock then purchasable upon exercise of all Warrants.
"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor corporation thereto.
"Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be
determined, all issued shares of Common Stock, except shares then owned or
held by or for the account of the Company or any subsidiary thereof, and shall
include all shares issuable in respect of outstanding scrip or any
certificates representing fractional interests in shares of Common Stock.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, incorporated organization, association,
corporation, limited liability company, limited liability partnership,
institution, public benefit corporation, entity or government (whether
federal, state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or department
thereof).
"Plan" shall mean the Debtors' Consolidated Plan of
Reorganization under Chapter 11 of the Bankruptcy Code dated July 10, 1998,
filed by the Company and its subsidiaries and the Official Committee of
Unsecured Creditors, as co-proponents, as may be amended, modified or
supplemented in accordance with the terms thereof.
"Warrant Agent" shall have the meaning assigned to such term
in the first paragraph of this Warrant Agreement and shall include any
successor Warrant Agent hereunder.
"Warrant Agent's Principal Office" shall mean the principal
office of the Warrant Agent's service agent, Boston Equiserve Limited
Partnership, in Canton, Massachusetts (or such other
-2-
<PAGE>
office of the Warrant Agent or any successor thereto hereunder acceptable to
the Company as set forth in a written notice provided to the Company and the
Holders).
"Warrant Agreement" shall have the meaning assigned to such
term in the first paragraph of this Warrant Agreement.
"Warrant Price" shall mean an amount equal to (1) the number
of shares of Common Stock being purchased upon exercise of a Warrant pursuant
to Section 4.1, multiplied by (2) the Current Warrant Price as of the date of
such exercise.
"Warrants" shall have the meaning assigned to such term in
the recitals to this Warrant Agreement, and shall include all warrants issued
upon transfer, division or combination of, or in substitution for, any
thereof. All Warrants shall at all times be identical as to terms and
conditions and date, except as to the number of shares of Common Stock for
which they may be exercised.
"Warrant Stock" shall mean the shares of Common Stock
purchased by the Holders of the Warrants upon the exercise thereof.
2. APPOINTMENT OF WARRANT AGENT.
2.1. Appointment. The Company hereby appoints the Warrant Agent to
act as agent for the Company in accordance with the instructions set forth in
this Warrant Agreement, and the Warrant Agent hereby accepts such appointment.
3. REGISTRATION, FORM AND EXECUTION OF WARRANTS.
3.1. Registration. All Warrants shall be numbered and shall be
registered in a warrant register maintained at the Warrant Agent's Principal
Office by the Warrant Agent as they are issues. The Company and the Warrant
Agent shall be entitled to treat a Holder as the owner in fact for all
purposes whatsoever of each Warrant registered in such Holder's name.
3.2. Form of Warrant. The text of each Warrant and of the Election
to Purchase Form and Assignment Form shall be substantially as set forth in
Exhibit A attached hereto. Each Warrant shall be executed on behalf of the
Company by its President or one of its Vice Presidents, under its corporate seal
reproduced thereon or facsimile thereof attested by its Secretary or an
Assistant Secretary. The signature of any of such officers on the Warrants may
be manual or facsimile.
Warrants bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any one of them shall have
ceased to hold such offices prior to the delivery of such Warrants or did not
hold such offices on the date of this Warrant Agreement.
Warrants shall be dated as of the date of countersignature
thereof by the Warrant Agent either upon initial issuance or upon division,
exchange, substitution or transfer.
3.3. Countersignature of Warrants. Each Warrant shall be manually
countersigned by the Warrant Agent (or any successor to the Warrant Agent then
acting as warrant agent under this Warrant Agreement) and shall not be valid
for any purpose unless so countersigned. Warrants may be countersigned,
however, by the Warrant Agent (or by its successor as warrant agent hereunder)
and may be delivered by the Warrant Agent, notwithstanding that the persons
whose manual signatures
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appear thereon as proper officers of the Company shall have ceased to be such
officers at the time of such countersignature, issuance or delivery. The
Warrant Agent shall, upon written instructions of the President, a Vice
President, the Secretary, or an Assistant Secretary of the Company,
countersign, issue and deliver Warrants entitling the Holders thereof to
purchase not more than 1,000,000 shares of Common Stock (subject to adjustment
as set forth herein) and shall countersign and deliver such Warrants as
otherwise provided in this Warrant Agreement.
4. EXERCISE OF WARRANTS.
4.1. Manner of Exercise. From and after the Effective Date and
until 5:00 p.m., New York City time, on the Expiration Date, a Holder may
exercise any of its Warrants, on any Business Day, for all or any part of the
number of shares of Common Stock purchasable thereunder.
In order to exercise a Warrant, in whole or in part, a
Holder shall deliver to the Company at the Warrant Agent's Principal Office,
(1) a written notice of such Holder's election to exercise such Warrant, which
notice shall include the number of shares of Common Stock to be purchased, (2)
payment of the Warrant Price for the account of the Company and (3) such
Warrant. Such notice shall be substantially in the form of the Election to
Purchase Form set forth on the reverse side of the form of Warrant Certificate
attached as Exhibit A hereto, duly executed by such Holder or its agent or
attorney. Upon receipt thereof, the Warrant Agent shall, as promptly as
practicable, and in any event within five Business Days thereafter, deliver or
cause to be delivered to such Holder an executed certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise. The stock certificate or certificates so delivered shall be, to
the extent possible, in such denomination or denominations as such Holder
shall request in the notice and shall be registered in the name of such Holder
or such other name as shall be designated in such notice. Each Warrant shall
be deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued, and such Holder or any other Person so designated
to be named therein shall be deemed to have become a holder of record of such
shares for all purposes, as of the date such notice, together with cash, or
certified check or official bank check or wire transfer in lawful money of the
United States of America for payment of the Warrant Price and such Warrant, is
received by the Warrant Agent as described above and all taxes required to be
paid by such Holder, if any, pursuant to Section 4.2 prior to the issuance of
such shares have been paid. If any Warrant shall have been exercised in part,
the Warrant Agent shall, at the time of delivery of the certificate or
certificates representing Warrant Stock, deliver to the Holder a new Warrant
evidencing the rights of such Holder to purchase the unpurchased shares of
Common Stock called for by such Warrant, which new Warrant shall in all other
respects be identical with the Warrant exercised in part, or, at the request
of such Holder, appropriate notation may be made on such exercised Warrant and
the same returned to such Holder. Notwithstanding any provision herein to the
contrary, the Warrant Agent shall not be required to register shares in the
name of any Person who acquired a Warrant (or part thereof) or any Warrant
Stock otherwise than in accordance with such Warrant and this Warrant
Agreement.
Payment of the Warrant Price shall be made at the option of
the Holder by certified or official bank check or wire transfer or any
combination thereof, duly executed by such Holder or by such Holder's attorney
duly authorized in writing.
4.2. Payment of Taxes. All shares of Common Stock issuable upon the
exercise of any Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable and without any preemptive rights. The Holder
shall pay all expenses in connection with, and all taxes and other
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governmental charges that may be imposed with respect to, the issuance or
delivery of Warrants or Common Stock.
4.3. Fractional Shares. The Company shall not be required to issue
a fractional share of Common Stock upon exercise of any Warrant. Whenever any
distribution of warrants exercisable into fractional shares of Common Stock
would otherwise be called for, the actual distribution thereof will reflect a
rounding up or down to the nearest share of Common Stock, provided that,
whenever any distribution of a Warrant that is exercisable into exactly one-half
of a share of Common Stock would otherwise be called for, the actual
distribution will reflect a rounding down to the nearest share of Common Stock.
5. TRANSFER, DIVISION AND COMBINATION.
5.1. Transfer. Transfer of any Warrant and all rights hereunder, in
whole or in part, shall be registered in the warrant register of the Company
to be maintained for such purpose at the Warrant Agent's Principal Office,
upon surrender of such Warrant at the Warrant Agent's Principal Office,
together with a written assignment of such Warrant substantially in the form
set forth on the reverse side of the form of Warrant Certificate attached as
Exhibit A hereto duly executed by the Holder or its agent or attorney and
payment of all funds sufficient to pay any taxes payable upon the making of
such transfer. Upon such surrender and, if required, such payment and subject
to Section 9 hereof, the Company shall execute and the Warrant Agent shall
countersign and deliver a new Warrant or Warrants in the name of the assignee
or assignees and in the denomination specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the
portion of such Warrant not so assigned, and the surrendered Warrant shall
promptly be cancelled. A Warrant, if properly assigned, may be exercised by a
new Holder for the purchase of shares of Common Stock without having a new
warrant issued.
5.2. Division and Combination. Any Warrant may be divided or
combined with other Warrants upon presentation thereof at the Warrant Agent's
Principal Office, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the Holder or
its agent or attorney. Subject to compliance with Section 5.1, as to any
transfer which may be involved in such division or combination, the Company
shall execute and the Warrant Agent shall countersign and deliver a new Warrant
or Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
5.3. Maintenance of Books. The Warrant Agent agrees to maintain, at
the Warrant Agent's Principal Office, the warrant register for the
registration of Warrants and the registration of transfer of the Warrants.
6. ADJUSTMENTS.
The Current Warrant Price and the number of Warrant Stock issuable
upon the exercise of each Warrant are subject to adjustment from time to time
upon the occurrence of the events enumerated in this Section 6. The Company
will promptly notify the Warrant Agent of any adjustment and will provide
instruction regarding the same.
6.1. Adjustment for Change in Capital Stock.
If the Company:
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(a) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
(b) subdivides its outstanding shares of Common Stock into
a greater number of shares;
(c) combines its outstanding shares of Common Stock into a
smaller number of shares;
(d) makes a distribution on Common Stock in shares of its
capital stock other than Common Stock; or
(e) issues by reclassification of Common Stock any shares
of its capital stock;
then the exercise right and the Current Warrant Price in
effect immediately prior to such action shall be adjusted so that the holder of
Warrants may receive upon exercise of the Warrants the number of shares of
capital stock of the Company which it would have owned immediately following
such action if it had exercised the Warrants immediately prior to such action.
The adjustment shall become effective immediately after the record date in the
case of a distribution and immediately after the effective date in the case of a
combination or reclassification.
If, after an adjustment, the holder of Warrants may receive
shares of two or more classes of capital stock of the Company, the Company and
the holders of a majority of the Warrants shall mutually agree upon the
allocation of the adjusted exercise price between the classes of capital stock.
After such Allocation, the exercise privilege and the Current Warrant Price of
each class of capital stock shall thereafter be subject to adjustment on terms
comparable to those applicable to Common Stock in this Section 6.
6.2. Adjustment for Rights Issue. If the Company distributes any
rights, options or warrants to all holders of Common Stock entitling them for
a period expiring within 60 days after the record date mentioned below to
purchase shares of Common Stock at a price per share less than the current
market price per share on that record date, the Current Warrant Price shall be
adjusted in accordance with the formula:
W(1) = W * ((O * M) + (N * P)) / (M * (O + N))
where
W(1) = the adjusted Current Warrant Price.
W = the then current Current Warrant Price.
O = the number of shares of Common Stock outstanding on the
record date.
N = the number of additional shares of Common Stock offered
or issuable on the exercise of the rights, options or warrants.
P = the offering price per share of the additional shares
subject to the rights or warrants.
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M = current market price per share of Common Stock on the
record date.
The adjustment shall be made successively whenever any such
rights, options or warrants are issued and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
the rights, options or warrants.
If at the end of the period during which such warrants or
rights are exercisable, which period shall not exceed 60 days, not all warrants
or rights shall have been exercised, the Current Warrant Price shall be
immediately readjusted to what it would have been if "N" in the above formula
had been the number of shares actually issued.
This Section 6.2 does not apply to: (a) the Warrants issued by
the Company pursuant to the Plan or (b) options issued pursuant to the Company's
Incentive Plan or Emergence Bonus Plan (as such terms are described in the Plan)
or any similar plan.
6.3. Adjustment for Other Distributions. If the Company distributes
to all holders of Common Stock any of its assets (other than any cash
dividends periodically paid to holders of Common Stock from profits or
retained earnings of the Company, but only to the extent such distributions
are (i) on a per share basis not in excess of 4% of the per share market price
of the Common Stock on the date such distributions are made and (ii) made
pursuant to a policy of quarterly cash dividends adopted by the Company and
publicly announced) or debt securities or any rights or warrants to purchase
assets, debt securities or other securities of the Company, the Current
Warrant Price shall be adjusted in accordance with the formula:
W(1) = W * (M - F) / M
where:
W(1) = the adjusted Current Warrant Price.
W = the then current Current Warrant Price.
M = the current market price per share of Common Stock
on the record date mentioned below.
F = the aggregate fair market value (as determined by an
Appraiser chosen in accordance with Section 6.6), on the record date, of the
assets (including cash), securities, rights or warrants so distributed divided
by the number of outstanding shares of Common Stock on the record date;
provided, that, in the event that the value of F exceeds the
value of M, or in the event that the value of M exceeds the value of F by less
than 10%, in lieu of the foregoing adjustment, adequate provision shall be made
so that the holders of the Warrants shall receive, upon exercise of the Warrants
and the payment of the current Warrant Price, a pro rata share of the aggregate
distribution based upon the maximum number of shares of Common Stock at the time
issuable to such holders (determined without regard to whether the Warrants are
exercisable at such time).
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The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
If at the end of the period during which any such warrants or
rights are exercisable, which period shall not exceed 90 days, not all of such
warrants or rights shall have been exercised, the Current Warrant Price shall be
immediately readjusted to what it would have been if "F" in the above formula
had not included the fair market value on the record date of the expired
warrants or rights, but were still divided by the same number of outstanding
shares of Common Stock.
This Section 6.3 does not apply to distributions of rights,
options or warrants referred to in Section 6.2.
6.4. Adjustment for Common Stock Issue. If the Company issues
shares of Common Stock for consideration per share less than the current market
price per share on the date the Company fixes the offering price of such
additional shares, the Current Warrant Price shall be adjusted in accordance
with the formula:
W(1) = W * ((O * M) + P) / (A * M)
where:
W(1) = the adjusted Current Warrant Price.
W = the then current Current Warrant Price.
O = the number of shares outstanding immediately
prior to the issuance of such additional shares.
P = the aggregate consideration received for the issuance
of such additional shares.
M = the current market price per share on the date of
issuance of such additional shares.
A = the number of shares outstanding immediately after the
issuance of such additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
This Section 6.4 does not apply to:
(a) issuances of Common Stock pursuant to the Plan,
(b) issuances of Common Stock to directors, consultants,
officers or empoyees of the Company and its subsidiaries under the Incentive
Plan, the Emergence Bonus Plan or any similar plans
(c) any of the transactions or distributions described in
Sections 6.2, 6.3 or 6.5,
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(d) the exercise of the Warrants issued by the Company
pursuant to the Plan,
(e) the conversion or exchange of securities convertible or
exchangeable for Common Stock and the exercise of rights or warrants issued to
the holders of Common Stock, in each case only if the issuance of such
securities, rights or warrants were subject to the provisions of this Section 6,
or
(f) issuances of Common Stock pursuant to a public offering
pursuant to a firm commitment underwriting.
6.5. Adjustment for Convertible Securities Issue. If the Company
issues any securities convertible into or exchangeable or exercisable for
Common Stock (other than the securities issued in transactions described in
Sections 6.2 and 6.3) for consideration per share of Common Stock initially
deliverable upon conversion, exchange or exercise of such securities less than
the current market price per share on the date of issuance of such securities
the Current Warrant Price shall be adjusted in accordance with the formula:
W(1) = W * ((O * M) + P + (D * E)) / (M * (O + D))
where:
W(1) = the adjusted Current Warrant Price.
W = the then current Current Warrant Price.
O = the number of shares outstanding immediately prior to
the issuance of such securities which are convertible into or exchangeable or
exercisable for Common Stock.
P = the aggregate consideration received for the issuance
of such securities.
M = the current market price per share of Common Stock on
the date of issuance of such securities.
D = the maximum number of shares deliverable upon
conversion, exchange or exercise of such securities at the initial conversion,
exchange or exercise rate.
E = the conversion, exchange or exercise price per share of
Common Stock of such securities.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion,
exchange or exercise of such securities has not been issued when such
securities are no longer outstanding, then the Current Warrant Price shall
immediately be readjusted to the Current Warrant Price which would then be in
effect had the adjustment upon the issuance of such securities been made on
the basis of the actual number of shares of Common Stock issued upon
conversion, exchange or exercise of such securities.
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This Section 6.5 does not apply to:
(1) any of the transactions or distributions described in
Sections 6.2 and 6.3,
(2) issuances of Common Stock to directors, consultants,
officers or empoyees of the Company and its subsidiaries under the Incentive
Plan, the Emergence Bonus Plan or any similar plans, or
(3) issuances of securities convertible into or exchangeable
or exercisable for Common Stock pursuant to a public offering pursuant to a firm
commitment underwriting.
6.6. Market Price. The "current market price" per share of Common
Stock on any date is the average of the Quoted Prices of the Common Stock for
15 consecutive trading days commencing 16 days before the date in question.
The "Quoted Price" of the Common Stock is the last reported sales price of the
Common Stock as reported by the Nasdaq National Market, or if the Common Stock
is listed on another national securities exchange, the last reported sales
price of the Common Stock on such exchange which shall be for consolidated
trading if applicable to such exchange, or if neither so reported or listed,
the last reported bid price of the Common Stock. In the absence of one or more
such quotations, the current market price shall be determined by mutual
agreement of the Company and the holders of a majority of the Warrants or, in
the absence of such mutual agreement, shall be determined in good faith by a
nationally recognized investment banking firm that is a member firm of the
NASD and independent of the Company and chosen in accordance with the
following sentence (an "Appraiser"). The Appraiser shall be chosen by mutual
agreement of the holders of a majority of the Warrants and the Company;
provided, that if there shall be a disagreement as to the selection of any
Appraiser, then each of the Company and the holders of a majority of the
Warrants shall choose one investment banking firm satisfying-the foregoing
criteria and those two firms then shall agree upon a third such investment
banking firm who shall act as the Appraiser. If applicable, in connection with
the sale of units consisting of Common Stock and other securities, such
investment bank shall take into consideration the value of each component of
such unit. If there shall be more than one class of Common Stock outstanding,
the "current market price" per share of Common Stock shall be the highest of
the "current market prices" per share of such classes of Common Stock.
6.7. Consideration Received. For purposes of any computation with
respect to consideration received pursuant to Sections 6.4 and 6.5, the
following shall apply:
(a) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash (provided that in no
case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or otherwise
in connection therewith) plus, where the issuance is pursuant to the exercise of
an option, warrant or right, all cash amounts paid to the Company for such
option, warrant or right at its issue, including without limitation, any amount
allocable to such option, warrant, or right if issued together with other
securities in a unit;
(b) in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof as determined by
an Appraiser, whose determination shall be given to the holders of the Warrants;
and
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(c) in the case of the issuance of securities convertible into
or exchangeable for shares of Common Stock, the aggregate consideration received
therefor shall be deemed to be the consideration received by the Company for the
issuance of such securities plus the additional minimum consideration, if any,
to be received by the Company upon the conversion or exchange thereof (the
consideration in each case to be determined in the same manner as provided in
clauses (a) and (b) of this Section 6.7).
6.8. When Adjustment May Be Deferred. If the amount of any
adjustment of the Current Warrant Price required pursuant to this Section 6
would be less than one percent (1%) of the Current Warrant Price in effect at
the time such adjustment is otherwise so required to be made, such amount shall
be carried forward and adjustment with respect thereto made at the time of and
together with any subsequent adjustment which, together with such amount and any
other amount or amounts so carried forward, shall aggregate at least one percent
(1%) of such Current Warrant Price. All calculations under this Section 6 shall
be made to the nearest cent or to the nearest 1/100th of a share, as the case
may be.
6.9. When No Adjustment Required. No adjustment need be made for
(a) rights to purchase Common Stock pursuant to a Company plan for reinvestment
of dividends, the Company's Incentive Plan or Emergence Bonus Plan or any
similar plans, and (b) a change in the par value or no par value of Common
Stock; provided, that the Company shall not increase the par value to exceed the
Current Warrant Price. To the extent the Warrants become exercisable into cash,
no adjustment need be made thereafter as to the cash. Interest will not accrue
on the cash.
6.10. Notice of Adjustment. Whenever an event occurs which requires
an adjustment to the Current Warrant Price or number of shares of Warrant
Stock, the Company shall promptly mail (first class) to the holders of the
Warrants a notice of such event and the computation of the adjustment. The
Company shall provide the holders of the Warrants with a certificate from the
Company's chief financial officer briefly stating the facts requiring the
adjustment and the manner of computing it.
6.11. Voluntary Reduction. The Company from time to time may reduce
the Current Warrant Price by any amount for any period of time if the period
is at least 20 days and if the reduction is irrevocable during the period. A
reduction of the Current Warrant Price pursuant to this Section 6.11 does not
change or adjust the Current Warrant Price otherwise in effect for purposes of
Sections 6.1, 6.2, 6.3, 6.4 or 6.5. The Company in its discretion may make
such reductions in the Current Warrant Price in addition to those required by
this Section 6 as it considers to be advisable in order that any event treated
for federal income tax purposes as a dividend of stock or stock rights shall
not be taxable to the recipients.
6.12. Notice of Certain Transactions. If the Company takes any
action that would require an adjustment pursuant to Sections 6.1, 6.2, 6.3, 6.4
or 6.5, the Company shall mail (first class) to the holders of the Warrants a
notice stating the proposed record date for a dividend or distribution or the
proposed effective date of a subdivision, combination, reclassification,
consolidation, merger, transfer, lease, liquidation or dissolution or any other
transaction or event requiring an adjustment in the Current Warrant Price. The
Company shall mail the notice at least 15 days before such date; provided,
however, that in no event must the Company give the holders of the Warrants
notice prior to the public announcement of the event requiring such adjustment.
Failure to mail the notice or any defect in it shall not affect the validity of
the transaction.
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6.13. Preservation of Purchase Rights Upon Reclassification,
Consolidation. etc. If the Company consolidates or merges with or into, or
transfers or leases all or substantially all its assets to, any person, upon
consummation of such transaction, the Warrants shall automatically become
exercisable for the kind and amount of securities, cash or other assets that
the holder of a Warrant would have owned immediately after the consolidation,
merger or transfer or lease if the holder had exercised the Warrant
immediately before the effective date of the transaction. Concurrently with
the consummation of such transaction, the corporation formed by or surviving
any such consolidation or merger if other than the Company, or the person to
which such sale or conveyance shall have been made, shall enter into a
supplemental Warrant Agreement so providing and further providing for
adjustments which shall be as nearly equivalent as may be practical to the
adjustments provided for in this Section. The successor Company shall mail to
Warrant holders a notice describing the supplemental Warrant Agreement.
If the issuer of securities deliverable upon exercise of
Warrants under the supplemental Warrant Agreement is an affiliate of the formed,
surviving, transferee or lessee corporation, that issuer shall join in the
supplemental Warrant Agreement.
If this Section 6.13 applies to any transaction, Sections 6.1,
6.2, 6.3, 6.4 and 6.5 shall not apply to such transaction. The provisions of
this Section 6.13 shall similarly apply to successive consolidations, mergers,
sales or conveyances.
6.14. Adjustment to the Number of Shares Purchasable Upon Exercise
of Warrants; Current Warrant Price Not Less than Par Value. Upon each adjustment
of the Current Warrant Price pursuant to this Section 6, each Warrant shall
thereupon evidence the right to purchase that number of shares of Common Stock
(calculated to the nearest hundredth of a share) obtained by multiplying the
number of shares of Common Stock purchasable immediately prior to such
adjustment upon exercise of the Warrant by the Current Warrant Price in effect
immediately prior to such adjustment and dividing the product so obtained by the
Current Warrant Price in effect immediately after such adjustment. The
adjustment pursuant to this Section 6.14 to the number of shares of Common Stock
purchasable upon exercise of a Warrant shall be made each time an adjustment of
the Current Warrant Price is made pursuant to this Section 6 (or would be made
but for the proviso in Section 6.3). In no event shall the Current Warrant Price
be adjusted below the par value per share of the Common Stock, provided,
however, that in the event such adjustment would have been made but for this
sentence, the number of shares issuable upon exercise of a Warrant shall be
adjusted in accordance with the remainder of this Section 6.14 as though such
adjustment in the Current Warrant Price had been made.
6.15. Other Dilutive Events. In case any event shall occur as to
which the provisions of this Section 6 are not strictly applicable but the
failure to make any adjustment would not fairly protect the purchase rights
represented by the Warrants in accordance with the essential intent and
principles of such sections, then, in each such case, the Company shall make a
good faith adjustment to the Current Warrant Price and number of shares of
Warrant Stock into which each Warrant is exercisable in accordance with the
intent of this Section 6.
6.16. Company Determination Final. Absent manifest error, any
determination that the Company or the Board of Directors of the Company must
make in good faith pursuant to Sections 6.3, 6.6 or 6.8, shall be conclusive,
if reasonable.
6.17. Form of Warrants. The Company may, at its option, issue new
warrant certificates evidencing Warrants in such form as may be approved by
its Board of Directors to reflect any
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adjustment or change in the Current Warrant Price per Warrant Stock and the
number or kind or class of shares or other securities or property purchasable
under the Warrant Certificates made in accordance with the provisions of this
Agreement.
7. NOTICES TO HOLDERS.
7.1. Notice of Adjustments. Whenever the number of shares of Common
Stock for which a Warrant is exercisable, or whenever the price at which a
share of such Common Stock may be purchased upon exercise of the Warrants,
shall be adjusted pursuant to Section 6, the Company shall forthwith prepare a
certificate to be executed by the chief financial officer of the Company
setting forth, in reasonable detail, the event requiring the adjustment and
the method by which such adjustment was calculated, specifying the number of
shares of Common Stock for which a Warrant is exercisable and describing the
number and kind of any other shares of stock or other property for which a
Warrant is exercisable, and any change in the purchase price or prices
thereof, after giving effect to such adjustment or change. The Company shall
promptly cause a signed copy of such certificate to be delivered to each
Holder in accordance with Section 14.1, and will provide a copy of the same to
the Warrant Agent.
7.2. Notice of Corporate Action. In case:
(a) of any consolidation or merger to which the Company is a
party and for which approval of any stockholders of the Company is required, or
of the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any reclassification or change of Common
Stock issuable upon exercise of the Warrants (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination); or
(b) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then the Company shall cause to be given to each of the
Holders at his or her address appearing on the Warrant register, at least 10
days prior to the applicable record date hereinafter specified, or promptly in
the case of events for which there is no record date, in accordance with
Section 14.1, a written notice stating the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up is expected to become effective or consummated, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange such shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up. The failure to give the
notice required by this Section 7.2 or any defect therein shall not affect the
legality or validity of any consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up, or the vote upon any action.
8. COVENANTS.
The Company will (1) not increase the par value of any
shares of Common Stock receivable upon the exercise of a Warrant above the
amount payable therefor upon such exercise immediately prior to such increase
in par value and (2) take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of any Warrant.
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9. RESERVATION AND AUTHORIZATION OF COMMON STOCK: REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY.
From and after the Effective Date, the Company shall at all
times reserve and keep available for issue upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon exercise of
any Warrant and payment therefor in accordance with the terms of this Warrant
Agreement and such Warrant, shall be duly and validly issued and fully paid and
nonassessable, and not subject to preemptive rights.
Before taking any action which would cause an adjustment
reducing the Current Warrant Price below the then par value, if any, of the
shares of Common Stock issuable upon exercise of the Warrants, the Company shall
take any corporate action which may be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of such Common
Stock at such adjusted Current Warrant Price.
10. STOCK AND WARRANT TRANSFER BOOKS.
The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
11. LOSS OR MUTILATION.
Upon receipt by the Company and the Warrant Agent from any
Holder of evidence reasonably satisfactory to them of the ownership of and the
loss, theft, destruction or mutilation of such Holder's Warrant and indemnity
and surety bond reasonably satisfactory to them, and in case of mutilation upon
surrender and cancellation thereof, the Company will execute and the Warrant
Agent will countersign and deliver in lieu thereof a new Warrant of like tenor
to such Holder.
12. OFFICE OF COMPANY.
As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive offices
of the Company) where the Warrants may be presented for exercise, registration
of transfer, division or combination as provided in this Warrant Agreement. The
Company shall initially maintain such an agency at the Warrant Agent's Principal
Offices.
13. WARRANT AGENT.
13.1. Merger or Consolidation or Change of Name of Warrant
Agent. Any corporation into which the Warrant Agent may be merged or with which
it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the transfer agent and related business of the Warrant Agent,
shall be the successor to the Warrant Agent hereunder without the execution or
filing of any paper or any further act on the part of any of the parties hereto;
provided that such corporation must be eligible for appointment as a successor
Warrant Agent under the provisions of Section 13.3 hereof if at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Warrant Agreement any of the Warrants shall have been countersigned but not
delivered, any such successor to the Warrant Agent may adopt the
countersignature of the predecessor Warrant Agent and deliver such Warrants so
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<PAGE>
countersigned; and if at that time any of the Warrants shall not have been
countersigned, any successor to the Warrant Agent may countersign such Warrants
either in the name of the predecessor Warrant Agent or in the name of the
successor Warrant Agent; and in all such cases Warrants shall have the full
force provided in the Warrants and in this Warrant Agreement. If at any time the
name of the Warrant Agent shall be changed and at such time Warrants shall have
been countersigned but not delivered, the Warrant Agent may adopt the
countersignatures under its prior name and deliver such Warrants so
countersigned; and if at that time any of the Warrants shall not have been
countersigned, the Warrant Agent may countersign such Warrants either in its
prior name or in its changed name; and in all such cases such Warrants shall
have the full force provided in the Warrants and in this Warrant Agreement.
13.2. Certain Terms and Conditions Concerning the Warrant Agent. The
Warrant Agent undertakes the duties and obligations imposed by this Warrant
Agreement upon the following terms and conditions, by all of which the Company
and the Holders, by their acceptance of Warrants, shall be bound:
(a) Correctness of Statements. The statements contained herein
and in the Warrants shall be taken as statements of the Company and the Warrant
Agent assumes no responsibility for the correctness of any of the same except
such as describe the Warrant Agent or action taken by it. The Warrant Agent
assumes no responsibility with respect to the distribution of the Warrants
except as herein otherwise provided.
(b) Breach of Covenants. The Warrant Agent shall not be
responsible for any failure of the Company to comply with any of the covenants
contained in this Warrant Agreement or in the Warrants to be complied with
specifically by the Company.
(c) Performance of Duties. The Warrant Agent may execute and
exercise any of the rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or agents (which shall
not include its employees) and shall not be responsible for the misconduct or
negligence of any agent appointed with due care.
(d) Reliance on Counsel. The Warrant Agent may consult at any
time with legal counsel satisfactory to it (who may be counsel for the Company)
and the Warrant Agent shall incur no liability or responsibility to the Company
or to any Holder in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the opinion or the advice of such
counsel provided that such counsel shall have been selected with due care.
(e) Proof of Actions Taken. Whenever in the performance of its
duties under this Warrant Agreement the Warrant Agent shall deem it necessary or
desirable that any fact or matter be proved or established by the Company prior
to taking or suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be deemed
conclusively to be proved and established by a certificate signed by the
President, a Vice President, the Secretary or an Assistant Secretary of the
Company and delivered to the Warrant Agent; and such certificate shall be full
authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Warrant Agreement in reliance upon such
certificate.
(f) Compensation. The Company agrees to pay the Warrant Agent
compensation as set forth in the fee schedule attached hereto as Exhibit B for
all services rendered by the Warrant Agent in the performance of its duties
under this Warrant Agreement, to reimburse the Warrant Agent
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<PAGE>
for all expenses, taxes and governmental charges and other charges of any kind
and nature incurred by the Warrant Agent in the performance of its duties under
this Warrant Agreement, and to indemnify the Warrant Agent and save it harmless
against any and all liabilities, including judgments, costs and counsel fees,
for anything done or omitted by the Warrant Agent in the performance of its
duties under this Warrant Agreement except as a result of the Warrant Agent's
gross negligence, willful misconduct, unlawful conduct or bad faith.
(g) Legal Proceedings. The Warrant Agent shall be under no
obligation to institute any action, suit or legal proceeding or to take any
other action likely to involve expense unless the Company or one or more Holders
shall furnish the Warrant Agent with reasonable security and indemnity for any
costs and expenses that may be incurred, but this provision shall not affect the
power of the Warrant Agent to take such action as the Warrant Agent may consider
proper, whether with or without any such security or indemnity. All rights of
action under this Warrant ' Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the Warrants or
the production thereof at any trial or other proceeding relative thereto, and
any such action, suit or proceeding instituted by the Warrant Agent shall be
brought in its name as Warrant Agent, and any recovery of judgment shall be for
the ratable benefit of the Holders, as their respective rights or interests may
appear.
(h) Other Transactions in Securities of the Company. The
Warrant Agent and any stockholder, director, officer or employee of the Warrant
Agent may buy, sell or deal in any of the Warrants or other securities of the
Company or become pecuniarily interested in any transaction in which the Company
may be interested, or contract with or lend money to the Company or otherwise
act as fully and freely as though it were not Warrant Agent under this Warrant
Agreement. Nothing herein shall preclude the Warrant Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) Liability of Warrant Agent. The Warrant Agent shall act
hereunder solely as agent, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not be liable for anything that it
may do or refrain from doing in connection with this Warrant Agreement except
for its own gross negligence, willful misconduct, unlawful conduct or bad faith.
(j) Reliance on Documents. The Warrant Agent will not incur
any liability or responsibility to the Company or to any Holder for any action
taken in reliance on any notice, resolution, waiver, consent, order,
certificate, or other paper, document or instrument reasonably believed by it to
be genuine and to have been signed, sent or presented by the proper party or
parties.
(k) Validity of Agreements. The Warrant Agent shall not be
under any responsibility in respect of the validity of this Warrant Agreement or
the execution and delivery hereof (except the due execution and delivery hereof
by the Warrant Agent) or in respect of the validity or execution of any Warrant
(except its countersignature and delivery thereof); nor shall the Warrant Agent
by any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Warrant Stock (or other stock) to be issued
pursuant to this Warrant Agreement or any Warrant, or as to whether any Warrant
Stock (or other stock) will, when issued, be validly issued, fully paid and
nonassessable, or as to the Warrant Price or the number or amount of Warrant
Stock or other securities or other property issued upon exercise of any Warrant.
(l) Instructions from Company. The Warrant Agent is hereby
authorized and directed to accept instructions with respect to the performance
of its duties hereunder from the
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<PAGE>
President, a Vice President, the Secretary or any Assistant Secretary of the
Company, and to apply to such officers for advice or instructions in connection
with its duties, and shall not be liable for any action taken or suffered to be
taken by it in good faith in accordance with instructions of any such officer or
officers.
13.3. Change of Warrant Agent. The Warrant Agent may resign and be
discharged from its duties under this Warrant Agreement by giving to the
Company 30 days advance notice in writing. The Warrant Agent may be removed by
like notice to the Warrant Agent from the Company. If the Warrant Agent shall
resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Warrant Agent. If the Company shall
fail to make such appointment within a period of 30 days after such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Warrant Agent, then any Holder may apply to the
Court for the appointment of a successor to the Warrant Agent. Pending the
appointment of the successor warrant agent, the Company shall perform the
duties of the Warrant Agent. Any successor warrant agent, whether appointed by
the Company or the Court, shall be a bank or trust company, in good standing,
incorporated under the laws of the United States of America or any state
thereof and having at the time of its appointment as warrant agent a combined
capital and surplus of at least $50,000,000. After appointment, the successor
warrant agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Warrant Agent without
further act or deed; but the former Warrant Agent shall deliver and transfer
to the successor warrant agent any property at the time held by it hereunder,
and execute and deliver any further assurance, conveyance, act or deed
necessary for the purpose. Failure to file any notice provided for in this
Section 13.3, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Warrant Agent or the appointment
of the successor warrant agent, as the case may be. In the event of such
resignation or removal, the successor warrant agent shall mail, first class,
to each Holder, written notice of such removal or resignation and the name and
address of such successor warrant agent.
13.4. Disposition of Proceeds on Exercise of Warrants, Inspection of
Warrant Agreement. The Warrant Agent shall account promptly to the Company
with respect to Warrants exercised and concurrently pay to the Company all
immediately available funds received by the Warrant Agent for the purchase of
the Warrant Stock through the exercise of such Warrants. The Warrant Agent
shall, upon request of the Company from time to time, deliver to the Company
such complete reports of registered ownership of the Warrants and such
complete records or transactions with respect to the Warrants and the shares
of Common Stock as the Company may request. The Warrant Agent shall also make
available to the Company for inspection by the Company's agents or employees,
from time to time as the Company may request, such original books of accounts
and records maintained by the Warrant Agent in connection with the issuance
and exercise of Warrants hereunder, such inspections to occur at the Warrant
Agent's Principal Office. The Warrant Agent shall keep copies of this Warrant
Agreement and any notices given or received hereunder available for inspection
by the Company or the Holders at the Warrant Agent's Principal Office. The
Company shall supply the Warrant Agent from time to time with such numbers of
copies of this Warrant Agreement as the Warrant Agent may request.
14. MISCELLANEOUS.
14.1. Notice Generally. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant Agreement shall be sufficiently
given or made if in writing and either delivered in person with receipt
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<PAGE>
acknowledged or sent by registered or certified mail, return receipt
requested, postage prepaid or by telecopy and confined by telecopy answerback,
addressed as follows:
(a) If to any Holder or holder of Warrant Stock, at its last
known address appearing on the warrant register of the Company maintained for
such purpose.
(b) If to the Company, at:
Harvard Industries, Inc.
3 Werner Way
Lebanon, New Jersey 08833
Attention: Roger Pollazzi
Telephone: (908) 437-4107
Facsimile: (908) 236-0071
(c) If to the Warrant Agent, at:
State Street Bank and Trust Company
c/o Boston Equiserve Limited Partnership
150 Royall Street
Canton, MA 02021
Attention: Client Administration
Telephone: 781-575-2395
Facsimile: 781-575-2549
or at such other address as may be substituted by notice
given as herein provided. The giving of any notice required hereunder may be
waived in writing by the party entitled to receive such notice. Every notice,
demand, request, consent, approval, declaration, delivery or other
communication hereunder shall be deemed to have been duly given or served on
the date on which personally delivered, with receipt acknowledged, telecopied
and confirmed by telecopy answerback or five Business Days after the same
shall have been deposited in the United States mail, certified with return
receipt requested, whichever is earlier. Failure or delay in delivering copies
of an notice, demand, request, approval, declaration, delivery or other
communication to the Person designated above to receive a copy shall in no way
adversely affect the effectiveness of such notice, demand, request, approval,
declaration, delivery or other communication.
14.2. Successors and Assigns. All covenants and provisions of this
Warrant Agreement by or for the benefit of the Company or the Warrant Agent
shall bind and inure to the benefit of their respective successors and assigns
hereunder.
14.3. Amendment. This Warrant Agreement and the Warrants may only be
modified or amended or the provisions hereof and thereof waived with the
written consent of the Company, the Warrant Agent and the Majority Holders;
provided, that no Warrant may be modified or amended to reduce the number of
shares of Common Stock for which such Warrant is exercisable or to increase
the price at which such shares may be purchased upon exercise of such Warrant
(other than giving effect to any adjustment as provided herein and therein)
without the prior written consent of the Holder thereof.
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<PAGE>
14.4. Third-Party Beneficiaries. All covenants and provisions of
this Warrant Agreement shall inure to the benefit of each holder from time to
time of Common Stock.
14.5. Severability. Wherever possible, each provision of this
Warrant Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Warrant Agreement shall
be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Warrant Agreement.
14.6. Headings. The headings used in this Warrant Agreement are for
the convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant Agreement.
14.7. Governing Law. This Warrant Agreement and the Warrants shall
be governed by the laws of the State of New York, without regard to the
provisions thereof relating to conflict of laws.
14.8. Counterparts. This Warrant Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, each of the Company and the Warrant Agent
has caused this Warrant Agreement to be duly executed by its duly authorized
officers as of the date first above written.
HARVARD INDUSTRIES, INC.
By: /s/ D.Craig Bowman
---------------------------------------
Name: D. Craig Bowman
Title:Vice President, Law and Secretary
STATE STREET BANK AND TRUST COMPANY,
as Warrant Agent
By: /s/ Tyler Haynes
---------------------------------------
Name: Tyler Haynes
-------------------------------------
Title: Administrative Manager
------------------------------------
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<PAGE>
EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]
WARRANT TO PURCHASE COMMON STOCK
OF HARVARD INDUSTRIES, INC.
- -------------------------------------------------------------------------------
Warrant Certificate No.: Number of Warrants:
CUSIP No. 417434 12 3
- -------------------------------------------------------------------------------
See Reverse for Certain Definitions
Exercisable from and after November 24, 1998 until 5:00 p.m.,
New York City time on November 23, 2003.
This Warrant Certificate certifies that [__________] or
registered assigns, is the registered holder of the number of Warrants set
forth above expiring at 5:00 p.m., New York City time, on November 23, 2003
or, if such date is not a business day, the next succeeding business day (the
"Warrants") to purchase Common Stock, par value $0.01 per share (the "Common
Stock"), of Harvard Industries, Inc., a Delaware corporation (the "Company").
The Common Stock issuable upon exercise of Warrants is hereinafter referred to
as the "Warrant Stock." Subject to the immediately succeeding paragraph, each
Warrant entitles the holder upon exercise to purchase from the Company on or
before 5:00 p.m., New York City time, on November 23, 2003 or, if such date is
not a business day, the next succeeding business day, one share of Common
Stock, at the purchase price of $41.67 per share, each subject to adjustment
as set forth herein and in the Warrant Agreement dated as of November 24, 1998
(the "Warrant Agreement") by and between the Company and State Street Bank and
Trust Company, a Massachusetts trust company, as warrant agent (the "Warrant
Agent") in whole or in part on and subject to the terms and conditions set
forth herein and in the Warrant Agreement. Such purchase shall be payable in
lawful money of the United States of America by certified or official bank
check or wire transfer or any combination thereof to the order of the Warrant
Agent for the account of the Company at the principal office of the Warrant
Agent, but only subject to the conditions set forth herein and in the Warrant
Agreement. The number of shares of Common Stock for which each Warrant is
exercisable, and the price at which such shares may be purchased upon exercise
of each Warrant, are subject to adjustment upon the occurrence of certain
events as set forth in the Warrant Agreement. Whenever the number of shares of
Common Stock for which a Warrant is exercisable, or the price at which a share
of such Common Stock may be purchased upon exercise of the Warrants, is
adjusted pursuant to the Warrant Agreement, the Company shall cause to be
given to each of the registered holders of the Warrants at such holders'
addresses appearing on the warrant register written notice of such adjustment
by first class mail postage pre-paid.
No Warrant may be exercised before 9:00 a.m., New York City
time, on November 24, 1998 or after 5:00 p.m., New York City time, on November
23, 2003 or, if such date is not a business day, the next succeeding business
day, and to the extent not exercised by such time such Warrants shall become
void.
<PAGE>
Reference is hereby made to the further provisions of this
Warrant Certificate set forth on the reverse side hereof and such further
provisions shall for all purposes have the same effect as though fully set
forth at this place.
This Warrant Certificate shall not be valid unless
countersigned by the Warrant Agent.
THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO THE PROVISIONS THEREOF RELATING TO
CONFLICT OF LAWS.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be signed by its President and has caused its corporate seal to
be affixed hereunto or imprinted hereon.
Dated:
(Seal)
Attest: HARVARD INDUSTRIES, INC.
___________________________ By: _________________________________
Name:______________________ Name:
Title: Secretary Title:
COUNTERSIGNED:
__________________, as Warrant Agent
By:__________________________________
Name:________________________________
Title:_______________________________
[Authorized Signature]
-3-
<PAGE>
[FORM OF REVERSE OF WARRANT CERTIFICATE]
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants expiring at 5:00 p.m., New York City time,
on November 23, 2003 or, if such date is not a business day, the next succeeding
business day, entitling the holder on exercise to purchase shares of Common
Stock, par value $0.01 per share, of the Company, and are issued or to be issued
pursuant to the Warrant Agreement, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Warrant Agent, the Company and the
Holders (the words "Holders" or "Holder" meaning the registered holders or
registered holder of the Warrants). A copy of the Warrant Agreement may be
obtained by the Holder hereof upon written request to the Company.
Warrants may be exercised at any time on and after 9:00 a.m.,
New York City time, on November 24, 1998 and on or before 5:00 p.m., New York
City time, on November 23, 2003 or, if such date is not a business day, the next
succeeding business day. The Holder of Warrants evidenced by this Warrant
Certificate may exercise them by surrendering this Warrant Certificate, with the
form of election to purchase set forth hereon properly completed and executed,
together with payment of the purchase price by certified or official bank check
or wire transfer or any combination thereof to the order of the Warrant Agent
for the account of the Company and the other required documentation. In the
event that upon any exercise of Warrants evidenced hereby the number of Warrants
exercised shall be less than the total number of Warrants evidenced hereby,
there shall be issued to the Holder hereof or his assignee a new Warrant
Certificate evidencing the number of Warrants not exercised.
The Warrant Agreement provides that the number of shares of
Common Stock for which each Warrant is exercisable, and the price at which such
shares may be purchased upon exercise of each Warrant, are subject to adjustment
upon the occurrence of certain events as set forth in the Warrant Agreement. The
Company shall not be required to issue any fractional share of Common Stock upon
the exercise of any Warrant, but the Company shall round up or down to the
nearest share of Common Stock as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the
Warrant Agent by the registered Holder thereof in person or by such Holder's
legal representative or attorney duly authorized in writing, may be exchanged,
in the manner and subject to the limitations provided in the Warrant Agreement,
but without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentation for registration of transfer of this
Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate
or Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee in exchange for this
Warrant Certificate, subject to the limitations provided in the Warrant
Agreement without charge except for any tax imposed in connection therewith.
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<PAGE>
[ELECTION TO PURCHASE FORM]
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of __________ Shares of Common Stock
of HARVARD INDUSTRIES, INC. and herewith makes payment therefor, all at the
price and on the terms and conditions specified in this Warrant and the
Warrant Agreement and requests that certificates for the shares of Common
Stock hereby purchased (and any securities or other property issuable upon
such exercise) be issued in the name of and delivered to _________________
whose address is _________________ and, if such shares of Common Stock shall
not include all of the shares of Common Stock issuable as provided in this
Warrant, that a new Warrant of like tenor and date for the balance of the
shares of Common Stock issuable hereunder be delivered to the undersigned.
______________________________________________
(Name of Registered Owner)
______________________________________________
(Signature of Registered Owner)
______________________________________________
(Street Address)
______________________________________________
(City) (State) (Zip Code)
NOTICE: The signature on this election to purchase must correspond
with the name as written upon the face of the within Warrant
in every particular, without alteration or enlargement or
any change whatsoever.
<PAGE>
[ASSIGNMENT FORM]
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all
of the rights of the undersigned under this Warrant, with respect to the
number of shares of Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
- ---------------------------- ----------------
and does hereby irrevocably constitute and appoint __________________
attorney-in-fact to register such transfer on the books of HARVARD INDUSTRIES,
INC. maintained for the purpose, with full power of substitution in the
premises.
Dated: __________________________ Print Name: ______________________________
Signature: _______________________________
Witness: _________________________________
NOTICE: The signature on this assignment must correspond with the
name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE>
As Amended
December 9, 1998
HARVARD INDUSTRIES, INC.
1998 STOCK INCENTIVE PLAN
1. Purpose
The purpose of the Plan is to provide a means through which the
Company and its Subsidiaries and Affiliates may attract able persons to enter
and remain in the employ of the Company and its Subsidiaries and Affiliates and
to provide a means whereby employees, directors and consultants of the Company
and its Subsidiaries and Affiliates can acquire and maintain Common Stock
ownership, or be paid incentive compensation measured by reference to the value
of Common Stock, thereby strengthening their commitment to the welfare of the
Company and its Subsidiaries and Affiliates and promoting an identity of
interest between stockholders and these employees.
So that the appropriate incentive can be provided, the Plan provides
for granting Incentive Stock Options, Nonqualified Stock Options, Stock
Appreciation Rights, Restricted Stock Awards, Phantom Stock Unit Awards,
Performance Share Unit Awards and Stock Bonus Awards, or any combination of the
foregoing. The Plan also provides for the automatic formula grant of
Nonqualified Stock Options to Non-Employee Directors.
2. Definitions
The following definitions shall be applicable throughout the Plan.
(a) "Affiliate" means any affiliate of the Company within the meaning
of 17 CFR ss. 230.405.
(b) "Award" means, individually or collectively, any Incentive Stock
Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock
Award, Phantom Stock Unit Award, Performance Share Unit Award, Stock Bonus
Award or Director Stock Award.
(c) "Award Period" means a period of time within which performance is
measured for the purpose of determining whether an Award of Performance Share
Units has been earned.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means the Company, a Subsidiary or Affiliate having cause
to terminate a Participant's employment or service under any existing
employment, consulting or any other agreement between the Participant and the
Company or a Subsidiary or
<PAGE>
Affiliate or, in the absence of such an employment, consulting or other
agreement, upon (i) the determination by the Committee that the Participant has
substantially and materially failed to perform his duties to the Company, a
Subsidiary or Affiliate (other than as a result of his incapacity due to
physical or mental illness or injury), (ii) the Committee's determination that
the Participant has engaged in conduct materially injurious to the Company, a
Subsidiary or Affiliate or (iii) the Participant having been convicted of a
felony.
(f) "Change in Control" shall mean (i) the acquisition by any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 50% or more of the then outstanding shares of Common
Stock of the Company (the "Outstanding Company Common Stock"); provided,
however, that for purposes of this subsection (i), the following acquisitions
shall not constitute a Change of Control: (v) any acquisition by the Company or
any "affiliate" of the Company, within the meaning of 17 C.F.R. ss. 230.405 (an
"Affiliate"), (w) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any Affiliate of the Company
or (x) any acquisition by any corporation pursuant to a transaction which
complies with clauses (A), (B) and (C) of subsection (iii) of this Section 2;
or
(ii) individuals who, as of December 9, 1998, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, unless the election or the
nomination for election by the Company's shareholders of each
new director was approved by a vote of at least three-quarters
of the directors then still in office who were directors, or
approved by directors at December 9, 1998; or
(iii) consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case,
unless, following such Business Combination, (A) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company
Common Stock immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors, as the case may be, of the corporation
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resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and (B) no Person (excluding
any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Affiliate of the Company, or
such corporation resulting from such Business Combination or
any Affiliate of such corporation) beneficially owns, directly
or indirectly, 50% or more (on a fully diluted basis) of,
respectively, the then outstanding shares of common stock of
the corporation resulting from such Business Combination and
(C) at least a majority of the members of the board of
directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of
the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination;
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company; or
(v) Sale of at least 50% of the assets or outstanding stock of the
Company to an unrelated party, or completion of a transaction
having a similar effect.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations under
such section.
(h) "Committee" means the full Board, the Compensation Committee of
the Board or such other committee of at least two people as the Board may
appoint to administer the Plan.
(i) "Common Stock" means the common stock par value $0.01 per share,
of the Company.
(j) "Company" means Harvard Industries, Inc., a Delaware corporation.
(k) "Date of Grant" means the date on which the granting of an Award
is authorized or such other date as may be specified in such authorization.
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(l) "Director Stock Option" means the Award of a Nonqualified Stock
Option to Non-Employee Directors pursuant to Section 12.
(m) "Director Stock Option Agreement" means the agreement entered
into with respect to a Director Stock Option pursuant to Section 12.
(n) "Disability" means disability as defined in the long-term
disability plan of the Company, a Subsidiary or Affiliate, as may be applicable
to the Participant in question, or, in the absence of such a plan, the complete
and permanent inability by reason of illness or accident to perform the duties
of the occupation at which a Participant was employed or served when such
disability commenced or, if the Participant was retired when such disability
commenced, the inability to engage in any substantial gainful activity, in
either case as determined by the Committee based upon medical evidence
acceptable to it.
(o) "Disinterested Person" means a person who is (i) a "nonemployee
director" within the meaning of Rule 16b-3 under the Exchange Act, or any
successor rule or regulation and (ii) an "outside director" within the meaning
of Section 162(m) of the Code; provided, however, that clause (ii) shall apply
only with respect to grants of Awards with respect to which the Company's tax
deduction could be limited by Section 162(m) of the Code if such clause did not
apply.
(p) "Effective Date" means the Effective Date as defined in the Plan
of Reorganization.
(q) "Eligible Person" means any (i) person regularly employed by the
Company, a Subsidiary or Affiliate who satisfies all of the requirements of
Section 6; provided, however, that no such employee covered by a collective
bargaining agreement shall be an Eligible Person unless and to the extent that
such eligibility is set forth in such collective bargaining agreement or in an
agreement or instrument relating thereto; (ii) director of the Company, a
Subsidiary or Affiliate; or (iii) consultant to the Company, a Subsidiary or
Affiliate.
(r) "Exchange Act" means the Securities Exchange Act of 1934.
(s) "Fair Market Value" on a given date means (i) if the Stock is
listed on a national securities exchange, the average between the highest and
lowest sale prices reported as having occurred on the primary exchange with
which the Stock is listed and traded on the date prior to such date, or, if
there is no such sale on that date, then on the last preceding date on which
such a sale was reported; (ii) if the Stock is not listed on any national
securities exchange but is quoted in the National Market System of the National
Association of Securities Dealers Automated Quotation System on a last sale
basis, the average
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between the highest and lowest sale prices reported on the date prior
to such date, or, if there is no such sale on that date, then on the last
preceding date on which a sale was reported; or (iii) if the Stock is not
listed on a national securities exchange nor quoted in the National Market
System of the National Association of Securities Dealers Automated Quotation
System on a last sale basis, the amount determined by the Committee to be the
fair market value based upon a good faith attempt to value the Stock accurately
and computed in accordance with applicable regulations of the Internal Revenue
Service.
(t) "Holder" means a Participant who has been granted an Award.
(u) "Incentive Stock Option" means an Option granted by the Committee
to a Participant under the Plan which is designated by the Committee as an
Incentive Stock Option pursuant to Section 422 of the Code.
(v) "Non-Employee Director" means a director of the Company who is
not also an employee of the Company.
(w) "Nonqualified Stock Option" means an Option granted by the
Committee to a Participant under the Plan which is not designated by the
Committee as an Incentive Stock Option.
(x) "Normal Termination" means termination of employment or service
with the Company and all Subsidiaries and Affiliates:
(i) Upon retirement;
(ii) On account of Disability;
(iii) With the written approval of the Committee;
(iv) By the Company, a Subsidiary or Affiliate without Cause; or
(v) In the case of an executive with an employment agreement,
which permits the executive to resign for "Good Reason" (or
similar concept), by the Executive for such Good Reason.
(y) "Option" means an Award granted under Section 7 of the Plan.
(z) "Option Period" means the period described in Section 7(c).
(ab) "Option Price" means the exercise price set for an Option
described in Section 7(a).
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(ac) "Participant" means an Eligible Person who has been selected by
the Committee to participate in the Plan and to receive an Award pursuant to
Section 6 and a Non-Employee Director who has received an automatic grant
pursuant to Section 12.
(ad) "Performance Goals" means the performance objectives of the
Company, a Subsidiary or Affiliate during an Award Period or Restricted Period
established for the purpose of determining whether, and to what extent, Awards
will be earned for an Award Period or Restricted Period.
(ae) "Performance Share Unit" means a hypothetical investment
equivalent equal to one share of Stock granted in connection with an Award made
under Section 9 of the Plan.
(af) "Phantom Stock Unit" means a hypothetical investment equivalent
equal to one share of Stock granted in connection with an Award made under
Section 10 of the Plan.
(ag) "Plan" means the Company's 1998 Stock Incentive Plan.
(ah) "Plan of Reorganization" means the First Amended and Modified
Consolidated Plan under Chapter 11 of the United States Bankruptcy Code, dated
August 19, 1998, proposed by the Company and its debtor subsidiaries named
therein and filed in the United States Bankruptcy Court for the District of
Delaware on August 19, 1998.
(ai) "Restricted Period" means, with respect to any share of
Restricted Stock or any Phantom Stock Unit, the period of time determined by
the Committee during which such Award is subject to the restrictions set forth
in Section 10.
(aj) "Restricted Stock" means shares of Stock issued or transferred
to a Participant subject to forfeiture and the other restrictions set forth in
Section 10.
(ak) "Restricted Stock Award" means an Award of Restricted Stock
granted under Section 10 of the Plan.
(al) "Securities Act" means the Securities Act of 1933, as amended.
(am) "Stock" means the Common Stock or such other authorized shares
of stock of the Company as the Committee may from time to time authorize for
use under the Plan.
(an) "Stock Appreciation Right" or "SAR" means an Award granted under
Section 8 of the Plan.
(ao) "Stock Bonus" means an Award granted under Section 11 of the
Plan.
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(ap) "Stock Option Agreement" means the agreement between the Company
and a Participant who has been granted an Option pursuant to Section 7 which
defines the rights and obligations of the parties as required in Section 7(d).
(aq) "Subsidiary" means any subsidiary of the Company as defined in
Section 424(f) of the Code.
(ar) "Vested Unit" shall have the meaning ascribed thereto in Section
10(e).
3. Effective Date, Duration and Stockholder Approval
The Plan was adopted pursuant to authorization of the United States
Bankruptcy Court for the District of Delaware. The Plan was approved by the
stockholders of the Company in connection with the approval of the Plan of
Reorganization. The Plan is effective as of the Effective Date.
The expiration date of the Plan, after which no Awards may be granted
hereunder, shall be the date that is ten years after the Effective Date;
provided, however, that the administration of the Plan shall continue in effect
until all matters relating to the payment of Awards previously granted have
been settled.
4. Administration
The Committee shall administer the Plan. Unless the full Board is
acting as the Committee, each member of the Committee shall, at the time he
takes any action with respect to an Award under the Plan, be a Disinterested
Person. The majority of the members of the Committee shall constitute a quorum.
The acts of a majority of the members present at any meeting at which a quorum
is present or acts approved in writing by a majority of the Committee shall be
deemed the acts of the Committee. While the ultimate decision with respect to
all Awards under the Plan lies in the sole discretion of the Committee, the
Chief Executive Officer of the Company, or his designate, may make
recommendations to the Committee as to the Eligible Persons to be granted
Awards and as to the nature and terms of Awards to be granted to such Eligible
Persons.
Subject to the provisions of the Plan, the Committee shall have
exclusive power to:
(a) Select the Eligible Persons to participate in the Plan;
(b) Determine the nature and extent of the Awards, other than
Director Stock Options, to be made to each Participant;
(c) Determine the time or times when Awards, other than Director
Stock Options, will be made;
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(d) Determine the duration of each Award Period and Restricted
Period, except with respect to a Director Stock Option;
(e) Determine the conditions to which the payment of Awards, other
than Director Stock Options, may be subject;
(f) Establish the Performance Goals for each Award Period;
(g) Prescribe the form or forms of Stock Option Agreement or other
form or forms evidencing Awards; and
(h) Cause records to be established in which there shall be entered,
from time to time as Awards are made to Participants, the date of each Award,
the number of Incentive Stock Options, Nonqualified Stock Options, SARs,
Phantom Stock Units, Performance Share Units, shares of Restricted Stock and
Stock Bonuses awarded to each Participant, the expiration date, the Award
Period and the duration of any applicable Restricted Period.
The Committee shall have the authority, subject to the provisions of
the Plan, to establish, adopt, or revise such rules and regulations and to make
all such determinations relating to the Plan as it may deem necessary or
advisable for the administration of the Plan. The Committee's interpretation of
the Plan or any documents evidencing Awards granted pursuant thereto and all
decisions and determinations by the Committee with respect to the Plan shall be
final, binding, and conclusive on all parties unless otherwise determined by
the Board.
5. Grant of Awards; Shares Subject to the Plan
The Committee may, from time to time, grant Awards of Options, Stock
Appreciation Rights, Restricted Stock, Phantom Stock Units, Performance Share
Units and/or Stock Bonuses to one or more Eligible Persons (including
Non-Employee Directors), in its sole discretion; provided, however, that:
(a) Subject to Section 14, the maximum aggregate number of shares of Stock
available for issuance with respect to all Awards shall be [2,117,647] shares;
(b) Such shares shall be deemed to have been used in payment of Awards whether
they are actually delivered or the Fair Market Value equivalent of such shares
is paid in cash. In the event any Option, SAR not attached to an Option,
Restricted Stock, Phantom Stock Unit or Performance Share Unit shall be
surrendered, terminate, expire, or be forfeited, the number of shares of Stock
no longer subject thereto shall thereupon be released and shall thereafter be
available for new Awards under the Plan;
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(c) Stock delivered by the Company in settlement of Awards under the
Plan may be authorized and unissued Stock or Stock held in the treasury of the
Company or may be purchased on the open market or by private purchase; and
(d) No individual may be granted Options or SARs under the Plan with
respect to more than 1,500,000 shares of Stock in any calendar year.
6. Eligibility
Participation shall be limited to Eligible Persons who have received
written notification from the Committee, or from a person designated by the
Committee, that they have been selected to participate in the Plan and
Non-Employee Directors who receive Director Stock Options.
7. Discretionary Grant of Stock Options
The Committee is authorized to grant one or more Incentive Stock
Options or Nonqualified Stock Options to any Eligible Person; provided,
however, that no Incentive Stock Options shall be granted to any Eligible
Person who is not an employee of the Company or a Subsidiary. Each Option so
granted shall be subject to the following conditions, or to such other
conditions as may be reflected in the applicable Stock Option Agreement.
(a) Option price. The exercise price per share of Stock for each
Option shall be set by the Committee at the time of grant but shall not be less
than the Fair Market Value of a share of Stock on the Date of Grant.
(b) Manner of exercise and form of payment. Options which have become
exercisable may be exercised by delivery of written notice of exercise to the
Committee accompanied by payment of the Option Price. The Option Price shall be
payable in cash, by certified or bank cashiers check and/or by delivery of
shares of Stock valued at the Fair Market Value at the time the Option is
exercised (provided, however, that such surrendered shares have either been
held for six months or previously acquired on the open market) or, in the
discretion of the Committee, either (i) in other property having a fair market
value on the date of exercise equal to the Option Price, or (ii) by delivering
to the Committee a copy of irrevocable instructions to a stockbroker to deliver
promptly to the Company an amount of sale or loan proceeds sufficient to pay
the Option Price.
(c) Option Period and Expiration. Options shall vest and become
exercisable in such manner and on such date or dates determined by the
Committee and shall expire after such period, not to exceed ten years, as may
be determined by the Committee (the "Option Period"); provided, however, that
notwithstanding any vesting dates set by the Committee, the Committee may in
its
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sole discretion accelerate the exercisability of any Option, which
acceleration shall not affect the terms and conditions of any such Option other
than with respect to exercisability. If an Option is exercisable in
installments, such installments or portions thereof which become exercisable
shall remain exercisable until the Option expires. Unless otherwise stated in
the applicable Option Agreement or provided by the Committee, the Option shall
expire earlier than the end of the Option Period in the following
circumstances:
(i) If prior to the end of the Option Period, the Holder shall
undergo a Normal Termination, the Option shall expire on the
earlier of the last day of the Option Period or the date
that is three months after the date of such Normal
Termination. In such event, the Option shall remain
exercisable by the Holder until its expiration, only to the
extent the Option was exercisable at the time of such Normal
Termination.
(ii) If the Holder dies prior to the end of the Option Period and
while still in the employ or service of the Company, a
Subsidiary or Affiliate, or within three months of Normal
Termination, the Option shall expire on the earlier of the
last day of the Option Period or the date that is twelve
months after the date of death of the Holder. In such event,
the Option shall remain exercisable by the person or persons
to whom the Holder's rights under the Option pass by will or
the applicable laws of descent and distribution until its
expiration, only to the extent the Option was exercisable by
the Holder at the time of death.
(iii) If the Holder ceases employment or service with the Company
and all Subsidiaries and Affiliates for reasons other than
Normal Termination or death, the Option shall expire
immediately upon such cessation of employment or service.
(d) Stock Option Agreement - Other Terms and Conditions. Each Option
granted under the Plan shall be evidenced by a Stock Option Agreement, which
shall contain such provisions as may be determined by the Committee and, except
as may be specifically stated otherwise in such Stock Option Agreement, which
shall be subject to the following terms and conditions:
(i) Each Option or portion thereof that is exercisable shall be
exercisable for the full amount or for any part thereof.
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(ii) Each share of Stock purchased through the exercise of an
Option shall be paid for in full at the time of the
exercise. Each Option shall cease to be exercisable, as to
any share of Stock, when the Holder purchases the share or
exercises a related SAR or when the Option expires.
(iii) Subject to Section 13(k), Options shall not be transferable
by the Holder except by will or the laws of descent and
distribution and shall be exercisable during the Holder's
lifetime only by him.
(iv) Each Option shall vest and become exercisable by the Holder
in accordance with the vesting schedule established by the
Committee and set forth in the Stock Option Agreement.
(v) Each Stock Option Agreement may contain a provision that,
upon demand by the Committee for such a representation, the
Holder shall deliver to the Committee at the time of any
exercise of an Option a written representation that the
shares to be acquired upon such exercise are to be acquired
for investment and not for resale or with a view to the
distribution thereof. Upon such demand, delivery of such
representation prior to the delivery of any shares issued
upon exercise of an Option shall be a condition precedent to
the right of the Holder or such other person to purchase any
shares. In the event certificates for Stock are delivered
under the Plan with respect to which such investment
representation has been obtained, the Committee may cause a
legend or legends to be placed on such certificates to make
appropriate reference to such representation and to restrict
transfer in the absence of compliance with applicable
federal or state securities laws.
(vi) Each Incentive Stock Option Agreement shall contain a
provision requiring the Holder to notify the Company in
writing immediately after the Holder makes a disqualifying
disposition of any Stock acquired pursuant to the exercise
of such Incentive Stock Option. A disqualifying disposition
is any disposition (including any sale) of such Stock before
the later of (a) two years after the Date of Grant of the
Incentive Stock Option or (b) one year after the date the
Holder acquired the Stock by exercising the Incentive Stock
Option.
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(e) Incentive Stock Option Grants to 10% Stockholders. Notwithstanding
anything to the contrary in this Section 7, if an Incentive Stock Option is
granted to a Holder who owns stock representing more than ten percent of the
voting power of all classes of stock of the Company or of a Subsidiary, the
Option Period shall not exceed five years from the Date of Grant of such Option
and the Option Price shall be at least 110 percent of the Fair Market Value (on
the Date of Grant) of the Stock subject to the Option.
(f) $100,000 Per Year Limitation for Incentive Stock Options. To the
extent the aggregate Fair Market Value (determined as of the Date of Grant) of
shares of Stock for which Incentive Stock Options are exercisable for the first
time by any Participant during any calendar year (under all plans of the
Company and its Subsidiaries) exceeds $100,000, Incentive Stock Options
relating to such shares shall be treated as Nonqualified Stock Options.
(g) Prohibition on Repricing of Options. The Committee may not effect
a repricing of Options once issued.
8. Stock Appreciation Rights
Any Option granted under the Plan may include SARs, either at the Date
of Grant or, except in the case of an Incentive Stock Option, by subsequent
amendment. The Committee also may award SARs to Eligible Persons independent of
any Option. An SAR shall be subject to such terms and conditions not
inconsistent with the Plan as the Committee shall impose, including, but not
limited to, the following:
(a) Vesting. SARs granted in connection with an Option shall become
exercisable, be transferable and shall expire according to the same vesting
schedule, transferability rules and expiration provisions as the corresponding
Option. An SAR granted independent of an Option shall become exercisable, be
transferable and shall expire in accordance with a vesting schedule,
transferability rules and expiration provisions as established by the Committee
and reflected in an Award agreement.
(b) Automatic exercise. If on the last day of the Option Period (or in
the case of an SAR independent of an Option, the period established by the
Committee after which the SAR shall expire), the Fair Market Value of the Stock
exceeds the Option Price (or in the case of an SAR granted independent of an
Option, the Fair Market Value of the Stock on the Date of Grant), the Holder
has not exercised the SAR or the corresponding Option, and neither the SAR nor
the corresponding Option has expired, such SAR shall be deemed to have been
exercised by the Holder on such last day and the Company shall make the
appropriate payment therefor.
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(c) Payment. Upon the exercise of an SAR, the Company shall pay to the
Holder an amount equal to the number of shares subject to the SAR multiplied by
the excess, if any, of the Fair Market Value of one share of Stock on the
exercise date over the Option Price, in the case of an SAR granted in
connection with an Option, or the Fair Market Value of one share of Stock on
the Date of Grant, in the case of an SAR granted independent of an Option.
(d) Method of exercise. A Participant may exercise an SAR at such time
or times as may be determined by the Committee at the time of grant by filing
an irrevocable written notice with the Committee or its designee, specifying
the number of SARs to be exercised, and the date on which such SARs were
awarded.
(e) Expiration. Except as otherwise provided in the case of SARs
granted in connection with Options, an SAR shall expire on a date designated by
the Committee which is not later than ten years after the Date of Grant of the
SAR.
9. Performance Shares
(a) Award grants. The Committee is authorized to establish Performance
Share Unit programs to be effective over designated Award Periods determined by
the Committee. At the beginning of each Award Period, the Committee will
establish in writing Performance Goals based upon financial objectives for the
Company for such Award Period and a schedule relating the accomplishment of the
Performance Goals to the Awards to be earned by Participants. Performance Goals
may include, earnings per share, absolute or relative growth in earnings per
share or rate of return on stockholders' equity, or rate or time of repayment
of debt and may be determined on an individual basis or by categories of
Participants. The Committee shall determine the number of Performance Share
Units to be awarded, if any, to each Participant who is selected to receive
such an Award. The Committee may add new Participants to a Performance Share
program after its commencement by making pro rata grants.
(b) Determination of Award. At the completion of a Performance Share
Award Period, or at other times as specified by the Committee, the Committee
shall calculate the number of shares of Stock earned with respect to each
Participant's Performance Share Unit Award by multiplying the number of
Performance Share Units granted to the Participant by a performance factor
representing the degree of attainment of the Performance Goals.
(c) Partial Awards. A Participant for less than a full Award Period,
whether by reason of commencement or termination of employment or otherwise,
shall receive such portion of an Award, if any, for that Award Period as the
Committee shall determine.
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(d) Payment of Performance Share Unit Awards. Performance Share Unit
Awards shall be payable in that number of shares of Stock determined in
accordance with Section 9(b); provided, however, that, at its discretion, the
Committee may make payment to any Participant in the form of cash upon the
specific request of such Participant. The amount of any payment made in cash
shall be based upon the Fair Market Value of the Stock on the day prior to
payment. Payments of Performance Share Unit Awards shall be made as soon as
practicable after the completion of an Award Period.
(e) Adjustment of Performance Goals. The Committee shall, during the
Award Period, make such equitable adjustments to Performance Goals as it may
deem appropriate, to compensate for, or reflect, (i) extraordinary or
non-recurring events experienced during an Award Period by the Company or by
any other corporation whose performance is relevant to the determination of
whether Performance Goals have been attained; (ii) any significant changes that
may have occurred during such Award Period in applicable accounting rules or
principles or changes in the Company's method of accounting or in that of any
other corporation whose performance is relevant to the determination of whether
an Award has been earned or (iii) any significant changes that may have
occurred during such Award Period in tax laws or other laws or regulations that
alter or affect the computation of the measures of Performance Goals used for
the calculation of Awards; provided, however, that with respect to such Awards
intended to qualify as "performance-based compensation" under Section 162(m) of
the Code, such adjustment shall be made only to the extent that the Committee
determines that such adjustments may be made without a loss of deductibility
for such Award under Section 162(m) of the Code.
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10. Discretionary Restricted Stock Awards and Phantom Stock Units
(a) Award of Restricted Stock and Phantom Stock Units.
(i) The Committee shall have the authority (1) to grant
Restricted Stock and Phantom Stock Unit Awards to Eligible
Persons, (2) to issue or transfer Restricted Stock to
Participants, and (3) to establish terms, conditions and
restrictions applicable to such Restricted Stock and Phantom
Stock Units, including the Restricted Period, which may
differ with respect to each grantee, the time or times at
which Restricted Stock or Phantom Stock Units shall be
granted or become vested and the number of shares or units
to be covered by each grant.
(ii) The Holder of a Restricted Stock Award shall execute and
deliver to the Company an Award agreement with respect to
the Restricted Stock setting forth the restrictions
applicable to such Restricted Stock. If the Committee
determines that the Restricted Stock shall be held in escrow
rather than delivered to the Holder pending the release of
the applicable restrictions, the Holder additionally shall
execute and deliver to the Company (i) an escrow agreement
satisfactory to the Committee, and (ii) the appropriate
blank stock powers with respect to the Restricted Stock
covered by such agreements. If a Participant shall fail to
execute a Restricted Stock agreement and, if applicable, an
escrow agreement and stock powers, the Award shall be null
and void. Subject to the restrictions set forth in Section
10(b), the Holder shall generally have the rights and
privileges of a stockholder as to such Restricted Stock,
including the right to vote such Restricted Stock. At the
discretion of the Committee, cash dividends and stock
dividends with respect to the Restricted Stock may be either
currently paid to the Holder or withheld by the Company for
the Holder's account, and interest may be paid on the amount
of cash dividends withheld at a rate and subject to such
terms as determined by the Committee. Cash dividends or
stock dividends so withheld by the Committee shall not be
subject to forfeiture.
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(iii) Upon the Award of Restricted Stock, the Committee shall
cause a stock certificate registered in the name of the
Holder to be issued and, if it so determines, deposited
together with the stock powers with an escrow agent
designated by the Committee. If an escrow arrangement is
used, the Committee shall cause the escrow agent to issue to
the Holder a receipt evidencing any stock certificate held
by it registered in the name of the Holder.
(iv) The terms and conditions of a grant of Phantom Stock Units
shall be reflected in a written Award agreement. No shares
of Stock shall be issued at the time a Phantom Stock Unit
Award is made, and the Company will not be required to set
aside a fund for the payment of any such Award. Holders of
Phantom Stock Units may, in the Committee's discretion,
receive an amount equal to the cash dividends paid by the
Company upon one share of Stock for each Phantom Stock Unit
then credited to such Holder's account ("Dividend
Equivalents"). The Committee shall, in its sole discretion,
determine whether to credit to the account of, or to
currently pay to, each Holder of an Award of Phantom Stock
Units such Dividend Equivalents. Dividend Equivalents
credited to a Holder's account shall be subject to
forfeiture on the same basis as the related Phantom Stock
Units, and may bear interest at a rate and subject to such
terms as are determined by the Committee.
(b) Restrictions.
(i) Restricted Stock awarded to a Participant shall be subject
to the following restrictions until the expiration of the
Restricted Period, and to such other terms and conditions as
may be set forth in the applicable Award agreement: (1) if
an escrow arrangement is used, the Holder shall not be
entitled to delivery of the stock certificate; (2) the
shares shall be subject to the restrictions on
transferability set forth in the Award agreement; (3) the
shares shall be subject to forfeiture to the extent provided
in subparagraph (d) and the Award agreement and, to the
extent such shares are forfeited, the stock certificates
shall be returned to the Company, and all rights of the
Holder to such shares and as a shareholder shall terminate
without further obligation on the part of the Company.
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(ii) Phantom Stock Units awarded to any Participant shall be
subject to (1) forfeiture until the expiration of the
Restricted Period, to the extent provided in subparagraph
(d) and the Award agreement, and to the extent such Awards
are forfeited, all rights of the Holder to such Awards shall
terminate without further obligation on the part of the
Company and (2) such other terms and conditions as may be
set forth in the applicable Award agreement.
(iii) The Committee shall have the authority to remove any or all
of the restrictions on the Restricted Stock and Phantom
Stock Units whenever it may determine that, by reason of
changes in applicable laws or other changes in circumstances
arising after the date of the Restricted Stock Award or
Phantom Stock Award, such action is appropriate.
(c) Restricted Period. The Restricted Period of Restricted Stock and
Phantom Stock Units shall commence on the Date of Grant and shall expire from
time to time as to that part of the Restricted Stock and Phantom Stock Units
indicated in a schedule established by the Committee.
(d) Forfeiture Provisions. Except to the extent determined by the
Committee and reflected in the underlying Award agreement, in the event a
Holder terminates employment with the Company and all Subsidiaries and
Affiliates during a Restricted Period, that portion of the Award with respect
to which restrictions have not expired ("Non-Vested Portion") shall be treated
as follows.
(i) Upon the voluntary resignation (other than a Normal
Termination) of a Participant or discharge by the Company, a
Subsidiary or Affiliate for Cause, the Non-Vested Portion of
the Award shall be completely forfeited.
(ii) Upon Normal Termination, the Non-Vested Portion of the Award
shall be prorated for service during the Restricted Period
and shall be received as soon as practicable following
termination.
(iii) Upon death, the Non-Vested Portion of the Award shall be
prorated for service during the Restricted Period and paid
to the Participant's beneficiary as soon as practicable
following death.
(e) Delivery of Restricted Stock and Settlement of Phantom Stock
Units. Upon the expiration of the Restricted Period with
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<PAGE>
respect to any shares of Stock covered by a Restricted Stock Award,
the restrictions set forth in Section 10(b) and the Award agreement shall be of
no further force or effect with respect to shares of Restricted Stock which
have not then been forfeited. If an escrow arrangement is used, upon such
expiration, the Company shall deliver to the Holder, or his beneficiary,
without charge, the stock certificate evidencing the shares of Restricted Stock
which have not then been forfeited and with respect to which the Restricted
Period has expired (to the nearest full share) and any cash dividends or stock
dividends credited to the Holder's account with respect to such Restricted
Stock and the interest thereon, if any.
Upon the expiration of the Restricted Period with respect to any
Phantom Stock Units covered by a Phantom Stock Unit Award, the Company shall
deliver to the Holder, or his beneficiary, without charge, one share of Stock
for each Phantom Stock Unit which has not then been forfeited and with respect
to which the Restricted Period has expired ("Vested Unit") and cash equal to
any Dividend Equivalents credited with respect to each such Vested Unit and the
interest thereon, if any; provided, however, that, if so noted in the
applicable Award agreement, the Committee may, in its sole discretion, elect to
pay cash or part cash and part Stock in lieu of delivering only Stock for
Vested Units or Dividend Equivalents. If cash payment is made in lieu of
delivering Stock, the amount of such payment shall be equal to the Fair Market
Value of the Stock as of the date on which the Restricted Period lapsed with
respect to such Vested Unit.
(f) Stock Restrictions. Each certificate representing Restricted Stock
awarded under the Plan shall bear the following legend until the lapse of all
restrictions with respect to such Stock:
"Transfer of this certificate and the shares represented hereby
is restricted pursuant to the terms of a Restricted Stock Agreement,
dated as of , between Harvard Industries, Inc. and .
A copy of such Agreement is on file at the offices of the Company at 3
Werner Way, 2nd Floor, Suite 210, Lebanon, N.J. 08833."
Stop transfer orders shall be entered with the Company's transfer
agent and registrar against the transfer of legended securities.
11. Stock Bonus Awards
The Committee may issue unrestricted Stock under the Plan to Eligible
Persons, alone or in tandem with other Awards, in such amounts and subject to
such terms and conditions as the Committee shall from time to time in its sole
discretion determine. Stock Bonus Awards under the Plan shall be granted as, or
in payment of, a bonus, or to provide incentives or recognize special
achievements or contributions.
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<PAGE>
12. Automatic Grants of Stock and Stock Options to Non-Employee Directors
As of December 9, 1998, each Non-Employee Director shall be
automatically granted a Nonqualified Stock Option to purchase 20,000 shares of
Stock. On the same date, and annually thereafter, beginning in 1999, for the
remainder of the term of the Plan and provided he remains a Non-Employee
Director of the Company, on the date of each of the Company's Annual Meeting of
Stockholders, each Non-Employee Director shall be automatically granted without
further action by the Board or the Committee a number of shares of Stock equal
to $15,000 divided by the Fair Market Value of one share of Stock on December
9, 1998, or on the date of such Annual Meeting, as applicable. All Options
granted to Non-Employee Directors shall hereinafter be referred to as Director
Stock Options.
(a) Option Price; Vesting; Term. All Director Stock Options granted
pursuant to this Section 12 shall have an Option Price per share equal to the
closing price of a share of Stock on the exchange or trading system with the
largest volume on the Date of Grant. All Director Stock Options granted
pursuant to this Section 12 shall be fully vested and exercisable with respect
to 4,000 shares of Stock as of the Effective Date and thereafter shall vest and
become exercisable with respect to 4,000 additional shares of Stock on each of
the first, second, third and fourth anniversaries of the Effective Date. The
term of each Director Stock Option ("Term"), after which each such Option shall
expire, shall be ten years from the Date of Grant.
(b) Expiration. If prior to the expiration of the Term of a Director
Stock Option the Non-Employee Director shall cease to be a member of the Board
for any reason other than his death, the Director Stock Option shall expire on
the earlier of the expiration of the Term or the date that is three months
after the date of such cessation. If prior to the expiration of the Term of a
Director Stock Option a Non-Employee Director shall cease to be a member of the
Board by reason of his death, the Director Stock Option shall expire on the
earlier of the expiration of the Term or the date that is one year after the
date of such cessation. In the event a Non-Employee Director ceases to be a
member of the Board for any reason, any unexpired Director Stock Option shall
thereafter be exercisable until its expiration only to the extent that such
Option was exercisable at the time of such cessation.
(c) Director Stock Option Agreement. Each Director Stock Option shall
be evidenced by a Director Stock Option Agreement, which shall contain such
provisions as may be determined by the Committee.
(d) Nontransferability. Subject to Section 13(k), Director Stock
Options shall not be transferable except by will or the
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<PAGE>
laws of descent and distribution and shall be exercisable during the
Non-Employee Director's lifetime only by him.
13. General
(a) Additional Provisions of an Award. Awards under the Plan also may
be subject to such other provisions (whether or not applicable to the benefit
awarded to any other Participant) as are not otherwise inconsistent with the
terms of the Plan and as the Committee determines appropriate including,
without limitation, provisions to assist the Participant in financing the
purchase of Stock upon the exercise of Options, provisions for the forfeiture
of or restrictions on resale or other disposition of shares of Stock acquired
under any Award, provisions giving the Company the right to repurchase shares
of Stock acquired under any Award in the event the Participant elects to
dispose of such shares, and provisions to comply with Federal and state
securities laws and Federal and state tax withholding requirements. Any such
provisions shall be reflected in the applicable Award agreement.
(b) Privileges of Stock Ownership. Except as otherwise specifically
provided in the Plan, no person shall be entitled to the privileges of stock
ownership in respect of shares of Stock which are subject to Awards hereunder
until such shares have been issued to that person.
(c) Government and Other Regulations. The obligation of the Company to
make payment of Awards in Stock or otherwise shall be subject to all applicable
laws, rules, and regulations, and to such approvals by governmental agencies as
may be required. Notwithstanding any terms or conditions of any Award to the
contrary, the Company shall be under no obligation to offer to sell or to sell
and shall be prohibited from offering to sell or selling any shares of Stock
pursuant to an Award unless such shares have been properly registered for sale
pursuant to the Securities Act with the Securities and Exchange Commission or
unless the Company has received the advice of counsel, satisfactory to the
Company, that such shares may be offered or sold without such registration
pursuant to an available exemption therefrom and the terms and conditions of
such exemption have been fully complied with. The Company shall use its best
efforts to as soon as practicable register for sale under the Securities Act
all of the shares of Stock to be offered or sold under the Plan. If the shares
of Stock offered for sale or sold under the Plan are offered or sold pursuant
to an exemption from registration under the Securities Act, the Company may
restrict the transfer of such shares and may legend the Stock certificates
representing such shares in such manner as it deems advisable to ensure the
availability of any such exemption.
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<PAGE>
(d) Tax Withholding. Notwithstanding any other provision of the Plan,
the Company, a Subsidiary or an Affiliate, as appropriate, shall have the right
to deduct from all Awards and payment with respect thereto cash and/or Stock,
valued at Fair Market Value on the date of payment, in an amount necessary to
satisfy all Federal, state or local taxes as required by law to be withheld
with respect to such Awards and Award payments and, in the case of Awards paid
in Stock, the Holder or other person receiving such Stock may be required to
pay to the Company or a Subsidiary, as appropriate, prior to delivery of such
Stock, the amount of any such taxes which the Company or Subsidiary is required
to withhold, if any, with respect to such Stock. Subject in particular cases to
the disapproval of the Committee, the Company may accept shares of Stock of
equivalent Fair Market Value in payment of such withholding tax obligations if
the Holder of the Award elects to make payment in such manner.
(e) Claim to Awards and Employment Rights. No employee or other person
shall have any claim or right to be granted an Award under the Plan or, having
been selected for the grant of an Award, to be selected for a grant of any
other Award. Neither the Plan nor any action taken hereunder shall be construed
as giving any Participant any right to be retained in the employ or service of
the Company, a Subsidiary or an Affiliate.
(f) Designation and Change of Beneficiary. Each Participant may file
with the Committee a written designation of one or more persons as the
beneficiary who shall be entitled to receive the amounts payable with respect
to an Award of Performance Share Units, Phantom Stock Units or Restricted
Stock, if any, due under the Plan upon his death. A Participant may, from time
to time, revoke or change his beneficiary designation without the consent of
any prior beneficiary by filing a new designation with the Committee. The last
such designation received by the Committee shall be controlling; provided,
however, that no designation, or change or revocation thereof, shall be
effective unless received by the Committee prior to the Participant's death,
and in no event shall it be effective as of a date prior to such receipt. If no
beneficiary designation is filed by the Participant, the beneficiary shall be
deemed to be his or her spouse or, if the Participant is unmarried at the time
of death, his or her estate.
(g) Payments to Persons Other Than Participants. If the Committee
shall find that any person to whom any amount is payable under the Plan is
unable to care for his affairs because of illness or accident, or is a minor,
or has died, then any payment due to such person or his estate (unless a prior
claim therefor has been made by a duly appointed legal representative) may, if
the Committee so directs the Company, be paid to his spouse, child, relative,
an institution maintaining or having custody of such person, or any other
person deemed by the Committee to be a proper recipient on behalf of such
person
21
<PAGE>
otherwise entitled to payment. Any such payment shall be a complete
discharge of the liability of the Committee and the Company therefor.
(h) No Liability of Committee Members. No member of the Committee
shall be personally liable by reason of any contract or other instrument
executed by such member or on his behalf in his capacity as a member of the
Committee nor for any mistake of judgment made in good faith, and the Company
shall indemnify and hold harmless each member of the Committee and each other
employee, officer or director of the Company to whom any duty or power relating
to the administration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim) arising out of any act or
omission to act in connection with the Plan unless arising out of such person's
own fraud or willful bad faith; provided, however, that approval of the Board
shall be required for the payment of any amount in settlement of a claim
against any such person. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Articles of Incorporation or By-Laws, as a matter
of law, or otherwise, or any power that the Company may have to indemnify them
or hold them harmless.
(i) Governing law. The Plan shall be governed by and construed in
accordance with the internal laws of the State of Delaware without regard to
the principles of conflicts of law thereof.
(j) Funding. Except as provided under Section 10, no provision of the
Plan shall require the Company, for the purpose of satisfying any obligations
under the Plan, to purchase assets or place any assets in a trust or other
entity to which contributions are made or otherwise to segregate any assets,
nor shall the Company maintain separate bank accounts, books, records or other
evidence of the existence of a segregated or separately maintained or
administered fund for such purposes. Holders shall have no rights under the
Plan other than as unsecured general creditors of the Company, except that
insofar as they may have become entitled to payment of additional compensation
by performance of services, they shall have the same rights as other employees
under general law.
(k) Nontransferability. A person's rights and interest under the Plan,
including amounts payable, may not be sold, assigned, donated, or transferred
or otherwise disposed of, mortgaged, pledged or encumbered except, in the event
of a Holder's death, to a designated beneficiary to the extent permitted by the
Plan, or in the absence of such designation, by will or the laws of descent and
distribution; provided, however, the Committee may, in its sole discretion,
either at the time of grant or at any time prior to exercise, allow for
transfer of
22
<PAGE>
Awards other than Incentive Stock Options to a member or members of
the Holder's family, subject to such conditions or limitations as it may
establish.
(l) Reliance on Reports. Each member of the Committee and each member
of the Board shall be fully justified in relying, acting or failing to act, and
shall not be liable for having so relied, acted or failed to act in good faith,
upon any report made by the independent public accountant of the Company and
its Subsidiaries and Affiliates and upon any other information furnished in
connection with the Plan by any person or persons other than himself.
(m) Relationship to Other Benefits. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
profit sharing, group insurance or other benefit plan of the Company or any
Subsidiary except as otherwise specifically provided in such other plan.
(n) Expenses. The expenses of administering the Plan shall be borne by
the Company and its Subsidiaries and Affiliates.
(o) Pronouns. Masculine pronouns and other words of masculine gender
shall refer to both men and women.
(p) Titles and Headings. The titles and headings of the sections in
the Plan are for convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such titles or headings shall
control.
(q) Termination of Employment. For all purposes herein, a person who
transfers from employment or service with the Company to employment or service
with a Subsidiary or Affiliate or vice versa shall not be deemed to have
terminated employment or service with the Company, a Subsidiary or Affiliate.
14. Changes in Capital Structure
Awards granted under the Plan and any agreements evidencing such
Awards, the maximum number of shares of Stock subject to all Awards and the
maximum number of shares of Stock with respect to which any one person may be
granted Options or SARs during any year shall be subject to adjustment or
substitution, as determined by the Committee in its sole discretion to be
equitable, as to the number, price or kind of a share of Stock or other
consideration subject to such Awards or as otherwise determined by the
Committee to be equitable (i) in the event of changes in the outstanding Stock
or in the capital structure of the Company by reason of stock dividends, stock
splits, reverse stock splits, recapitalizations, reorganizations, mergers,
consolidations, combinations, exchanges, or other relevant changes in
capitalization occurring after the Date of Grant of any such Award or (ii) in
the event of any change in applicable
23
<PAGE>
laws or any change in circumstances which results in or would result
in any substantial dilution or enlargement of the rights granted to, or
available for, Participants in the Plan, or which otherwise warrants equitable
adjustment because it interferes with the intended operation of the Plan. In
addition, in the event of any such adjustments or substitution, the aggregate
number of shares of Stock available under the Plan and the per person limits
shall be appropriately adjusted by the Committee, whose determination shall be
conclusive. Any adjustment in Incentive Stock Options under this Section 14
shall be made only to the extent not constituting a "modification" within the
meaning of Section 424(h)(3) of the Code, and any adjustments under this
Section 14 shall be made in a manner which does not adversely affect the
exemption provided pursuant to Rule 16b-3 under the Exchange Act. Further, with
respect to Awards intended to qualify as "performance-based compensation" under
Section 162(m) of the Code, such adjustments or substitutions shall be made
only to the extent that the Committee determines that such adjustments or
substitutions may be made without a loss of deductibility for Awards under
Section 162(m) of the Code. The Company shall give each Participant notice of
an adjustment hereunder and, upon notice, such adjustment shall be conclusive
and binding for all purposes.
Notwithstanding the above, in the event of any of the following:
A. The Company is merged or consolidated with another
corporation or entity and, in connection therewith,
consideration is received by shareholders of the Company in a
form other than stock or other equity interests of the
surviving entity;
B. All or substantially all of the assets of the Company are
acquired by another person (other than an Affiliate);
C. The liquidation or dissolution of the Company; or
D. The Company shall enter into a written agreement to undergo
an event described in clauses A, B or C above,
then the Committee may, in its discretion and upon at least 10 days advance
notice to the affected persons, cancel any outstanding Awards and pay to the
Holders thereof, in cash or, unless the Award by its terms would otherwise be
settled in cash, stock, or any combination thereof, the value of such Awards
based upon the price per share of Stock received or to be received by other
shareholders of the Company in the event. The terms of this Section 14 may be
varied by the Committee in any particular Award agreement.
15. Effect of Change in Control
24
<PAGE>
Except to the extent otherwise specifically provided in a particular
Award agreement:
(a) In the event of a Change in Control, notwithstanding any schedule
for vesting or exercisability with respect to an Award of Options (including
Director Stock Options), SARs or Phantom Stock Units, such Option or SAR shall
become immediately vested and exercisable with respect to 100 percent of the
shares subject to such Option or SAR, and the Restricted Period shall expire
immediately with respect to 100 percent of such Phantom Stock Units. With
respect to any outstanding shares of Restricted Stock, in the event of a Change
in Control, the restrictions shall lapse on a proportionate number of shares of
Restricted Stock equal to that portion of the Restricted Period that has
elapsed between the Date of Grant and the date of the Change in Control.
(b) In the event of a Change in Control, all incomplete Award Periods
in effect on the date the Change in Control occurs shall end on the date of such
change, and the Committee shall (i) determine the extent to which Performance
Goals with respect to each such Award Period have been met based upon such
audited or unaudited financial information then available as it deems relevant,
(ii) cause to be paid to each Participant partial or full Awards with respect to
Performance Goals for each such Award Period based upon the Committee's
determination of the degree of attainment of Performance Goals, and (iii) cause
all previously deferred Awards to be settled in full as soon as possible.
(c) In addition, in the event of a Change in Control, the Committee
may in its discretion and upon at least 10 days' advance notice to the affected
persons, cancel any outstanding Awards and pay to the Holders thereof, in cash
or stock, or any combination thereof, the value of such Awards based upon the
price per share of Stock received or to be received by other shareholders of
the Company in the event.
(d) The obligations of the Company under the Plan shall be binding
upon any successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Company, or upon any successor
corporation or organization succeeding to substantially all of the assets and
business of the Company. The Company agrees that it will make appropriate
provisions for the preservation of Participant's rights under the Plan in any
agreement or plan which it may enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of assets.
16. Nonexclusivity of the Plan
Neither the adoption of this Plan by the Board nor the submission of
this Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the
25
<PAGE>
power of the Board to adopt such other incentive arrangements as it
may deem desirable, including, without limitation, the granting of stock
options otherwise than under this Plan, and such arrangements may be either
applicable generally or only in specific cases.
17. Amendments and Termination
The Board may at any time terminate the Plan. Subject to Section 14,
with the express written consent of an individual Participant, the Board or the
Committee may cancel or reduce or otherwise alter outstanding Awards if, in its
judgment, the tax, accounting, or other effects of the Plan or potential
payouts thereunder would not be in the best interest of the Company. The Board
or the Committee may, at any time, or from time to time, amend or suspend and,
if suspended, reinstate, the Plan in whole or in part; provided, however, that
(i) no such action shall adversely effect the rights of Participants with
respect to Awards previously issued thereto and (ii) without further
stockholder approval neither the Board nor the Committee shall make any
amendment to the Plan which would:
(a) Materially increase the maximum number of shares of Stock which may be
issued pursuant to Awards or the maximum number of shares with respect to which
Options or SARs may be granted to any individual in any calendar year, except
as provided in Section 14;
(b) Change the minimum Option Price;
(c) Alter the eligibility with respect to Incentive Stock Options;
(d) Extend the maximum Option Period; or
(e) Extend the termination date of the Plan.
* * *
As approved by stockholders in connection with the approval of the Plan of
Reorganization, adopted on the Effective Date pursuant to authorization of the
United States Bankruptcy Court for the District of Delaware, and amended by the
Board of Directors of Harvard Industries, Inc. December 9, 1998.
26
<PAGE>
SUBSIDIARIES:
- -------------
Executive Office Jurisdictions
- ---------------- -------------
Harman Automotive Michigan
3 Werner Way, Suite 210
Lebanon, NJ 08833
Hayes-Albion Corporation Michigan
3 Werner Way, Suite 210
Lebanon, NJ 08833
Trim Trends Canada, Inc. Canada
3 Werner Way, Suite 210
Lebanon, NJ 08833
Kingston-Warren Corp, New Hampshire
3 Werner Way, Suite 210
Lebanon, NJ 08833
Harvard Transportation, Inc. Michigan
3 Werner Way, Suite 210
Lebanon, NJ 08833
Doehler-Jarvis, Inc. Delaware
3 Werner Way, Suite 210
Lebanon, NJ 08833
Doehler-Jarvis Greeneville, Inc. Delaware
3 Werner Way, Suite 210
Lebanon, NJ 08833
Pottstown Precision Casting, Inc. Delaware
(Formerly Doehler-Jarvis Pottstown, Inc.)
3 Werner Way, Suite 210
Lebanon, NJ 08833
Doehler-Jarvis Technologies, Inc. Delaware
3 Werner Way, Suite 210
Lebanon, NJ 08833
Doehler-Jarvis Toledo, Inc. Delaware
3 Werner Way, Suite 210
Lebanon, NJ 08833
177192 Canada, Inc. Canada
c/o The Law Firm Of
Stikeman, Elliott
1155, Boulevard
Rene-Levesque Quest
Montreal, Canada H3B 3V2
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent public accountants we hereby consent to the incorporation of our
report, dated January 12, 1999, included in this Form 10-K, into the Company's
previously filed Registration Statement File Nos. 33-90166 and 33-98748 on Form
S-8.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
January 12, 1999
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-90166 and 33-98748) of Harvard Industries, Inc.
of our report dated November 14, 1997, except for Note 9 as to which the date is
December 29, 1997, appearing on Page 47 of this Form 10-K.
PRICEWATERHOUSECOOPERS, LLP
New York, New York
January 12, 1999
