<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 10, 1994
REGISTRATION NO. 33-52833
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------------
SPX CORPORATION
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C>
Delaware 38-1016240
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
700 Terrace Point Drive
Muskegon, Michigan 49443
(616) 724-5000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
---------------------
James M. Sheridan
Vice President, Administration and General Counsel
700 Terrace Point Drive
Muskegon, Michigan 49443
(616) 724-5000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
Copies to:
<TABLE>
<S> <C>
George C. McKann William R. Kunkel
Gardner, Carton & Douglas Skadden, Arps, Slate, Meagher & Flom
321 North Clark Street 333 West Wacker Drive
Chicago, Illinois 60610 Chicago, Illinois 60606
(312) 644-3000 (312) 407-0700
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: / /
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 10, 1994
PROSPECTUS
[LOGO] $260,000,000
SPX CORPORATION
% SENIOR SUBORDINATED NOTES DUE 2002
------------------------
Interest on the % Senior Subordinated Notes due 2002 (the "Notes") of
SPX Corporation ("SPX" or the "Company") is payable semi-annually on
and of each year, commencing , 1994. The Notes
will mature on , 2002. The Notes will be subject to redemption at the
option of the Company, in whole or in part, at any time on or after ,
1998 at the redemption prices set forth herein, together with accrued and unpaid
interest, if any, to the date of redemption. Prior to , 1996, up to
30% of the aggregate principal amount of the Notes outstanding on the date of
the Indenture (as defined herein) will be redeemable at the option of the
Company from the net proceeds of a Public Equity Offering (as defined herein) at
% of the principal amount to be redeemed, together with accrued and unpaid
interest, if any, to the date of redemption. Upon a Change of Control (as
defined herein), (i) the Company will have the option to redeem the Notes, in
whole or in part, at a redemption price equal to the principal amount thereof,
together with accrued and unpaid interest, if any, to the date of redemption,
plus the Applicable Premium (as defined herein) and (ii) subject to certain
conditions, the Company will be required to make an offer to purchase each
holder's Notes at 101% of the principal amount thereof, together with accrued
and unpaid interest, if any, to the date of purchase. There can be no assurance
that the Company will have sufficient funds to satisfy its repurchase
obligations upon a Change of Control. Under certain circumstances, the Company
may become obligated to offer to repurchase the Notes at 100% of the principal
amount thereof, together with accrued and unpaid interest, if any, to the date
of purchase with the net proceeds of certain Asset Sales (as defined herein).
See "Description of the Notes."
The Notes will be unsecured senior subordinated obligations of the Company,
senior in right of payment to Subordinated Indebtedness (as defined herein) of
the Company and subordinated in right of payment to all existing and future
Senior Indebtedness (as defined herein) of the Company. The Company conducts a
significant portion of its operations through subsidiaries, and the Notes will
be effectively subordinated to all liabilities of these subsidiaries, including
trade payables. As of March 31, 1994, on a pro forma basis after giving effect
to the Refinancing (as defined herein), including the sale of the Notes offered
hereby (the "Offering") and the application of the estimated net proceeds
therefrom, the aggregate principal amount of Senior Indebtedness outstanding of
the Company and indebtedness and trade payables of the Company's subsidiaries
that effectively rank senior to the Notes would have been approximately $200
million. The Indenture will limit, but not prohibit, the incurrence by the
Company of additional Senior Indebtedness or Pari Passu Indebtedness (as defined
herein).
SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS WHICH
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN EVALUATING AN INVESTMENT IN THE
NOTES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNT (2) COMPANY (1)(3)
- ------------------------------------------------------------------------------------------------------
Per Note............................... % % %
- ------------------------------------------------------------------------------------------------------
Total.................................. $ $ $
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from , 1994.
(2) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $991,156.
------------------------
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if issued by the Company and accepted by the Underwriters, subject
to approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the Notes will be made in New York, New York on or about ,
1994.
------------------------
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES
CORPORATION
WERTHEIM SCHRODER & CO.
INCORPORATED
------------------------
The date of this Prospectus is , 1994.
<PAGE> 3
[Insert Pictures]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the related notes, appearing elsewhere in this Prospectus. An
investment in the Notes involves certain risks which should be considered by
prospective purchasers. See "Investment Considerations." Prospective purchasers
are urged to read this Prospectus in its entirety. Unless the context otherwise
requires, the terms "SPX" and the "Company" refer to SPX Corporation and its
consolidated subsidiaries. References herein to "pro forma" information reflect
adjustments giving effect to the 1993 Transactions and the Refinancing (as such
terms are defined herein), except that references herein to "pro forma"
information as of March 31, 1994 and for the three months ended March 31, 1994
reflect adjustments giving effect only to the Refinancing.
THE COMPANY
The Company is a global leader in the design, manufacture and marketing of
specialty service tools for the franchised dealers of vehicle manufacturers and
of piston rings and automatic transmission filters for original equipment
manufacturers ("OEMs"). The Company also is a designer, manufacturer and
marketer of electronic engine diagnostic equipment, emission testing equipment,
wheel service equipment and other specialty service tools for independent
vehicle aftermarket users in North America and Europe. The Company also provides
numerous other original equipment components, including cylinder sleeves, die
cast parts, valve train components and solenoid valves, to OEMs, and specialty
service tools to other non-vehicle markets. In 1993, on a pro forma basis, the
Company sold approximately one-third of its products to new vehicle
manufacturers, and substantially all of the balance to the vehicle aftermarket.
The Company operates in two principal business segments: specialty service
tools and original equipment components. The specialty service tools segment
designs, manufactures and markets a wide range of specialty service tools and
diagnostic equipment through widely recognized brand names, such as Allen
Testproducts, Bear(R), Kent-Moore(R), Lowener, Miller Special Tools, OTC(R),
Power Team(R), Robinair(R) and V.L. Churchill. These products include specialty
hand-held mechanical tools, gauges, hand-held electronic diagnostic instruments,
wheel service equipment, performance test equipment, emission testing equipment,
refrigerant recovery and recycling equipment, battery testing equipment,
high-pressure hydraulics, engine coolant recovery and recycling systems and air
conditioning and refrigeration service equipment. The Company's specialty
service tools are primarily sold to the vehicle maintenance and repair market
and are used primarily by the OEMs' franchised dealers and other independent
service technicians to diagnose and service a wide range of vehicle systems and
equipment. The Company's sales of specialty service tools represented
approximately 52% of its total sales in 1993, on a pro forma basis.
The original equipment components segment designs, manufactures and markets
component parts for vehicles. These parts primarily fall into five product
lines: (i) piston and transmission rings, cylinder sleeves and other castings,
(ii) precision die castings, (iii) tappets, valve guides and roller rocker arms,
(iv) automatic transmission fluid filters and other filter products and (v)
solenoid valves. The Company sells these products to OEMs directly and to the
replacement parts market ("aftermarket") through private brand organizations,
which include the service divisions of OEMs. The Company's sales of original
equipment components represented approximately 46% of its total sales in 1993,
on a pro forma basis.
The Company believes that it is a technological leader in the design and
manufacture of its principal products and that it is one of the highest quality
manufacturers of specialty service tools and original equipment components in
its markets. The Company is a "Tier 1" supplier to many OEMs and has received
numerous quality awards and certifications from General Motors, Ford, Chrysler
and other OEM customers. Suppliers that design, engineer, manufacture and
conduct quality control testing are generally referred to as "Tier 1" suppliers.
The Company believes that the markets it serves offer significant growth
opportunities for its businesses. The Company's business strategy is to focus on
and invest in these core markets for specialty service tools and original
equipment components and to expand its leading market positions. The key
elements of this strategy include: (i) implementation of structural changes to
operations, (ii) operational improvements, (iii) increased specialty service
tool offerings and (iv) leveraging of long-term relationships with existing
customers.
3
<PAGE> 5
Implementation of Structural Changes to Operations. In 1993, the Company
completed several transactions which increased the Company's revenues by
approximately 25% from approximately $801 million in 1992 to $1.0 billion on a
pro forma basis in 1993. These transactions, described below, were completed in
order to increase the Company's product offerings, strengthen its sales and
service capabilities and better position the Company to capitalize on prevailing
market and industry trends and opportunities.
- Created the Automotive Diagnostics division through the acquisition of
Allen Testproducts and its combination with the Company's Bear Automotive
business. This new division will enhance the Company's electronic engine
diagnostics, emission testing and wheel service equipment capabilities
and is expected to result in annualized cost savings to the Company,
through consolidation of operations and work force reductions, in excess
of $20 million.
- Created SPX Credit Corporation through the acquisition of the leasing
company affiliated with Allen Testproducts and its combination with the
Company's existing leasing operations. This business supports the
Automotive Diagnostics division by providing customers with a leasing
option when purchasing the division's products.
- Divested the Company's aftermarket parts distribution business and the
Company's window and door hardware manufacturing business. These
divestitures generated approximately $189 million in net cash proceeds
which the Company used to reduce indebtedness and to further invest in
its core businesses.
- Acquired the 49% interest in Sealed Power Technologies Limited
Partnership ("SPT") held by Riken Corporation ("Riken"), a Japanese
corporation (the "SPT Purchase"). SPT represents substantially all of the
Company's original equipment components segment.
The foregoing transactions, together with the consolidation of Sealed Power
Technologies (Europe) Limited Partnership ("SP Europe") into the Company's
financial statements, are referred to herein as the "1993 Transactions."
Operational Improvements. The Company continually explores ways to
increase its operational efficiency while maintaining its reputation as a
manufacturer of high-quality products. Ongoing programs to meet this objective
include the addition of new machinery, consolidation of facilities and other
productivity improvements.
Increased Specialty Service Tool Offerings. The market for the Company's
specialty service tools has increased as a result of several recent trends: (i)
the increase in the frequency of new model introductions by OEMs, (ii) the
advance in the engineering, computerization and technological complexity of
these new introductions and (iii) the increase in service dollars spent at
franchise dealers as a result of extended new vehicle warranty periods. By
continuing to strengthen its involvement in the design phase of OEM product
development and identifying applications for new and existing specialty service
tools, the Company believes it can capitalize on these trends. In addition, the
growing number of environmental laws and regulations have created a demand for
new technologies and products, including the Company's refrigerant recycling
systems and vehicle exhaust emission testing equipment. The Company will
continue to aggressively pursue this market by continuing to develop new
products and technologies.
Leveraging of Long-Term Relationships With Existing Customers. The trend
of OEMs to contract sourcing of components to fewer outside suppliers favors
larger, more efficient suppliers with high-quality products. The Company
historically has had strong relationships, some of which date back 80 years,
with major OEMs, including General Motors, Ford and Chrysler. In addition, the
Company believes that its status as a Tier 1 supplier to many OEMs, which
permits the Company to assume primary responsibility for the design,
engineering, manufacturing and quality control of certain product or product
assembly programs, will continue to provide the Company with opportunities to
offer products to its customers at a lower cost and afford the Company a
competitive advantage in securing new business for both of its business
segments.
The Company has international operations located in Australia, Brazil,
Canada, France, Germany, Italy, The Netherlands, Singapore, Spain, Switzerland
and the United Kingdom. It also has a 70% interest in SP Europe, which has
operations in France, Germany and Spain, a 50% interest in two Japanese
corporations, a 50% interest in a German corporation and a 40% interest in a
Mexican corporation. See "Business--International Operations." In addition, the
Company is involved in a joint venture located in the United States and will
continue to pursue other joint venture and investment relationships as
opportunities inside and outside the United States arise.
4
<PAGE> 6
THE REFINANCING
The Offering is part of a refinancing plan (the "Refinancing") designed to
provide the Company with additional financial and operating flexibility and
better position the Company to implement its business strategy. The Refinancing
will increase the Company's available cash flow by reducing scheduled principal
amortization payments. The Company believes the Refinancing will increase its
operating flexibility by, among other things, permitting the Company to
capitalize on internal and external growth opportunities. The Refinancing
consists of the:
(i) execution of a new credit agreement (the "Bank Credit Agreement") in
March 1994 which provides the Company with a $250 million revolving
credit facility (the "Revolving Credit Facility") which, upon
consummation of the Offering, will be reduced to provide the Company
with up to $225 million of borrowing capacity;
(ii) borrowing of approximately $174 million under the Revolving Credit
Facility which, in combination with $31 million in cash, will be used to
repay approximately $205 million of the Company's outstanding
indebtedness, and the use of approximately $65 million of cash to
consummate the SPT Purchase for $39 million and pay prepayment and other
fees and expenses relating to these transactions aggregating
approximately $26 million; and
(iii) sale of $260 million aggregate principal amount of the Notes offered
hereby and the application of the net proceeds therefrom (estimated to
be $251 million) to (a) reduce the outstanding borrowings under the
Revolving Credit Facility from approximately $174 million to
approximately $141 million, (b) repay all outstanding indebtedness of
SPT, aggregating approximately $208 million, and (c) pay
approximately $11 million of certain prepayment fees related to these
transactions.
Upon completion of the Refinancing, the Company expects to have approximately
$84 million of remaining borrowing capacity under the Revolving Credit Facility.
See "Use of Proceeds."
The following table sets forth the sources and uses of funds in the
Refinancing, including the Initial Transactions (as defined herein) and the
Final Transactions (as defined herein). See "Capitalization."
<TABLE>
<CAPTION>
FIRST SECOND
QUARTER QUARTER
INITIAL INITIAL FINAL COMPLETE
TRANSACTIONS TRANSACTIONS TRANSACTIONS REFINANCING
------------ ------------ ------------ -----------
(in millions)
<S> <C> <C> <C> <C>
SOURCES:
Bank Credit Agreement......................... $ 35.0 $138.9 $(32.7) $ 141.2
The Notes..................................... -- -- 260.0 260.0
Cash.......................................... 94.2 2.3 -- 96.5
------------ ------------ ------------ -----------
Total Sources.............................. $129.2 $141.2 $227.3 $ 497.7
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
USES:
Existing SPX debt............................. $ 80.1 $124.7 -- $ 204.8
Existing SPT debt............................. -- -- 207.8 207.8
Payment to consummate SPT Purchase............ 39.0 -- -- 39.0
Payment of fees and expenses related to the
Refinancing................................ 10.1 16.5 19.5 46.1
------------ ------------ ------------ -----------
Total Uses................................. $129.2 $141.2 $227.3 $ 497.7
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
</TABLE>
5
<PAGE> 7
THE OFFERING
<TABLE>
<S> <C>
Notes Offered................. $260,000,000 aggregate principal amount of % Senior
Subordinated Notes due 2002.
Maturity Date................. , 2002.
Interest Payment Dates........ and of each year, commencing ,
1994.
Mandatory Redemption.......... None.
Optional Redemption........... The Notes will be redeemable at the option of the Company,
in whole or in part, at any time on or after ,
1998 at the redemption prices set forth herein, plus accrued
and unpaid interest, if any, to the date of redemption.
Prior to , 1996, up to 30% of the aggregate
principal amount of the Notes outstanding on the date of the
Indenture will be redeemable at the option of the Company
from the net proceeds of a Public Equity Offering at % of
the principal amount to be redeemed, together with accrued
and unpaid interest, if any, to the date of redemption. See
"Description of the Notes--Optional Redemption."
Change of Control............. Upon a Change of Control, (i) the Company will have the
option to redeem the Notes, in whole or in part, at a
redemption price equal to the principal amount thereof,
together with accrued and unpaid interest, if any, to the
date of redemption, plus the Applicable Premium and (ii)
subject to certain conditions, the Company will be required
to make an offer to purchase each holder's Notes at 101% of
the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase. The Company
will not, however, be obligated to make such an offer to
purchase each holder's Notes if a third party makes such an
offer in the manner, at the times and otherwise in
compliance with the requirements applicable to such an offer
made by the Company and purchases all Notes validly tendered
and not withdrawn under such an offer. See "Description of
the Notes--Certain Covenants--Purchase of Notes Upon Change
of Control," "Investment Considerations-- Substantial
Indebtedness" and "Investment Considerations--Change of
Control."
Ranking....................... The Notes will be unsecured senior subordinated obligations
of the Company, subordinated to all existing and future
Senior Indebtedness, which includes borrowings under the
Bank Credit Agreement. The Notes will rank pari passu with
any existing and future senior subordinated indebtedness of
the Company and will rank senior to all other Subordinated
Indebtedness (as defined herein). As of March 31, 1994, on a
pro forma basis, the aggregate principal amount of Senior
Indebtedness outstanding of the Company and indebtedness and
trade payables of the Company's subsidiaries that
effectively rank senior to the Notes would have been
approximately $200 million. See "Description of the
Notes--Subordination."
Restrictive Covenants......... The Indenture pursuant to which the Notes will be issued
will contain certain covenants, including, but not limited
to, covenants with respect to the following matters: (i)
limitation on indebtedness, (ii) limitation on dividends and
other restricted payments, (iii) limitation on redemption of
capital stock of the Company and of certain subordinated
obligations of the Company, (iv) limitation on liens, (v)
limitation on
</TABLE>
6
<PAGE> 8
<TABLE>
<S> <C>
disposition of proceeds of asset sales, (vi) restriction on
transfer of assets, (vii) limitation on issuance and sale of
capital stock by restricted subsidiaries, (viii) limitation
on transactions with affiliates, (ix) limitation on dividend
and other payment restrictions affecting restricted
subsidiaries, (x) limitation on guarantees by restricted
subsidiaries, (xi) limitation on certain other subordinated
indebtedness and (xii) restrictions on mergers,
consolidations and the transfer of all or substantially all
of the assets of the Company to another person. See
"Description of the Notes--Certain Covenants."
Use of Proceeds............... The net proceeds to the Company from the sale of the Notes
offered hereby will be used to: (i) reduce the outstanding
borrowings under the Revolving Credit Facility from
approximately $174 million to approximately $141 million,
(ii) repay all outstanding indebtedness under SPT's existing
credit facilities, aggregating approximately $107 million,
and certain other indebtedness of SPT, aggregating
approximately $1 million, (iii) redeem $100 million
aggregate principal amount of SPT's 14 1/2% Senior
Subordinated Debentures due May 15, 1999 (the "SPT
Debentures") and (iv) pay approximately $11 million of
certain prepayment fees related to these transactions. See
"Use of Proceeds" and "Capitalization."
Absence of Public Market...... There is no public market for the Notes and the Company does
not intend to apply for listing of the Notes on any national
securities exchange or for quotation of the Notes on the
Nasdaq Stock Market ("Nasdaq"). The Company has been advised
by the Underwriters that, following the completion of the
initial offering of the Notes, the Underwriters presently
intend to make a market in the Notes; however, the
Underwriters are under no obligation to do so and may
discontinue such market-making activities at any time
without notice. No assurance can be given as to the
liquidity of the trading market for the Notes or that an
active public market for the Notes will develop. If an
active public market does not develop, the market price and
liquidity of the Notes may be adversely affected.
</TABLE>
Prior to making an investment decision, prospective purchasers should
consider all of the information set forth in this Prospectus and should evaluate
the factors set forth in "Investment Considerations" herein.
7
<PAGE> 9
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following table presents summary historical consolidated financial data
for the periods indicated. The financial data for the five years ended December
31, 1993 have been derived from the audited Consolidated Financial Statements of
the Company for such periods. The financial data for the three months ended
March 31, 1994 and March 31, 1993 are unaudited, but in the opinion of the
Company reflect all adjustments necessary for a fair presentation of such data.
The data for the three months ended March 31, 1994 and March 31, 1993 are not
necessarily indicative of results of operations for the fiscal year. The
following summary financial information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Company and related
notes thereto included elsewhere or incorporated by reference in this
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31 YEAR ENDED DECEMBER 31
---------------- -----------------------------------------------
1994 1993 1993 1992 1991 1990 1989
------ ------ ------- ------ ------ ------ ------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues.............................................. $277.5 $179.2 $ 756.1 $801.2 $673.5 $708.2 $632.0
Costs and expenses:
Cost of products sold............................... 207.4 121.8 508.0 533.2 461.6 466.7 419.1
Selling, general and administrative................. 54.2 50.8 207.6 209.9 194.0 193.9 172.1
Other, net.......................................... 0.6 1.5 7.5 6.6 3.1 1.5 1.8
Restructuring and special charges (1)............... - - 27.5 - 18.2 - -
SPT equity losses (2)............................... - 0.6 26.9 2.4 8.5 5.3 4.7
SP Europe equity losses (3)......................... - - 21.5 - - - -
------ ------ ------- ------ ------ ------ ------
Operating income (loss)............................... 15.3 4.5 (42.9) 49.1 (11.9) 40.8 34.3
Interest expense, net............................... 10.2 3.9 17.8 15.1 16.8 17.7 9.9
(Gain) on sale of businesses (4).................... - - (105.4) - - - (8.9)
------ ------ ------- ------ ------ ------ ------
Income (loss) before income taxes and cumulative
effect of change in accounting methods and
extraordinary loss.................................. 5.1 0.6 44.7 34.0 (28.7) 23.1 33.3
Provision (benefit) for income taxes.................. 2.0 0.2 29.5 13.4 (7.1) 8.8 12.7
------ ------ ------- ------ ------ ------ ------
Income (loss) before cumulative effect of change in
accounting methods and extraordinary loss........... 3.1 0.4 15.2 20.6 (21.6) 14.3 20.6
Cumulative effect of change in accounting methods,
net of taxes (5).................................... - (31.8) (31.8) (5.7) - - -
Extraordinary loss, net of taxes (6).................. - - (24.0) - - - -
Discontinued operations, net of taxes................. - - - - - - 57.7
------ ------ ------- ------ ------ ------ ------
Net income (loss)..................................... $ 3.1 $(31.4) $ (40.6) $ 14.9 $(21.6) $ 14.3 $ 78.3
------ ------ ------- ------ ------ ------ ------
------ ------ ------- ------ ------ ------ ------
Ratio of earnings to fixed charges (7)................ 1.46x 1.24x 5.15x 2.98x - 2.30x 4.05x
FINANCIAL RATIOS AND OTHER DATA:
EBITDA (8)............................................ $ 25.1 $ 11.5 $ 57.4 $ 76.8 $ 38.6 $ 66.0 $ 58.7
Depreciation.......................................... 8.1 5.2 19.1 19.6 19.4 16.0 16.2
Amortization.......................................... 1.7 1.2 5.3 5.7 4.4 3.9 3.5
Capital expenditures.................................. 10.3 3.9 15.1 20.4 19.4 26.7 41.0
Ratio of EBITDA to interest expense, net (9).......... 2.46x 2.95x 3.22x 5.09x 2.30x 3.73x 5.93x
BALANCE SHEET DATA (AT PERIOD END):
Working capital....................................... $123.1 $207.0 $ 119.4 $182.2 $195.1 $260.7 $186.1
Property, plant and equipment, net.................... 198.4 115.4 198.1 116.8 116.3 117.9 109.1
Total assets.......................................... 947.9 580.5 1,024.4 560.3 579.3 624.1 574.6
Long-term debt........................................ 338.5 179.4 336.2 160.3 199.7 226.2 152.7
Shareholders' equity.................................. 148.0 157.3 145.4 185.5 180.7 210.6 202.1
</TABLE>
(footnotes on next page)
8
<PAGE> 10
(footnotes for preceding page)
- ---------------
(1) In 1993, the Company recognized a $27.5 million ($18.5 million aftertax)
restructuring charge to combine its Bear Automotive operation with Allen
Testproducts. In 1991, an $18.2 million ($14.7 million aftertax) special
charge was recorded for organizational and facility consolidation of two
operating units, the write off of certain capitalized computer software
development costs, charges associated with further globalization of the
Company's original equipment components affiliated businesses with an
overseas partner, and charges for losses associated with certain project
development investments and notes receivable related to previous sales of
certain business units.
(2) Fiscal years 1989 through 1992 were restated to record the Company's
previous 49% share of SPT's income or losses, the effect of amortizing the
difference between its investment balance and its share of SPT's initial
partnership capital deficit and an adjustment required to record the
Company's previous investment in SPT at historical cost. Previously,
because SPT indebtedness was non-recourse to the Company, the Company
properly did not reflect its share of equity losses of SPT and did not
amortize the difference between its investment balance and its share of
SPT's initial partnership capital deficit. The cumulative effect of this
1989 through 1992 restatement was a pretax charge of $15.9 million (or
a $10.1 million aftertax reduction) to previously reported shareholders'
equity.
(3) Until December 31, 1993, the Company reported that it held a 50% interest in
SP Europe. As of December 31, 1993, Riken's pending participation in SP
Europe reverted to the Company in connection with the transaction to
acquire Riken's 49% interest in SPT. SP Europe had not been previously
consolidated due to the Company's deemed temporary control and because
non-recourse (to the partners) financing was being pursued. Up to December
31, 1993, the Company carried its investment in SP Europe at zero. Due to
the resulting 70% ownership, the Company is recording its share of
cumulative losses since the partnership formation in mid-1991 of $21.5
million.
(4) During 1993, the Company divested its aftermarket parts distribution and
window and door hardware manufacturing businesses. See "Business--Business
Strategy." During 1989, the Company divested five small businesses.
(5) In the first quarter of 1993, the Company adopted new accounting methodology
for its employee stock ownership plan ("ESOP") and reflected its 49% share
of SPT's 1993 adoption of SFAS No. 106 regarding accounting for
postretirement benefits other than pensions. In 1992, the Company adopted
new accounting methodology for postretirement benefits other than pensions,
and income taxes.
(6) Reflects costs associated with prepayment of certain Company and SPT
indebtedness.
(7) For purposes of determining the ratio of earnings to fixed charges, earnings
consist of income (loss) before income taxes and cumulative effect of
change in accounting methods and extraordinary loss, plus SPT equity
losses, SP Europe equity losses and fixed charges. Fixed charges consist of
interest expense, net (including amortization of deferred financing costs),
and that portion of rental expense estimated to be representative of the
interest factor. Earnings were insufficient to cover fixed charges by $20.2
million in 1991.
(8) EBITDA represents operating income (loss) before restructuring and special
charges, SPT equity losses, SP Europe equity losses, depreciation and
amortization. EBITDA is not presented herein as an alternative measure of
operating results, cash flow (as defined by generally accepted accounting
principles) or liquidity and does not necessarily represent the cash
available to fund cash requirements of the Company. EBITDA is instead
included because it is one measure used by certain investors as an
indicator of a company's operating performance and its ability to service
its indebtedness.
(9) For purposes of determining the ratio of EBITDA to interest expense, net,
amortization of deferred financing costs was excluded from interest
expense, net.
9
<PAGE> 11
SUMMARY PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following table presents unaudited summary pro forma consolidated
financial data for the periods indicated. The pro forma financial data are
derived from the Consolidated Financial Statements included elsewhere in this
Prospectus. The following pro forma information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and related notes thereto
included elsewhere or incorporated by reference in this Prospectus. The
unaudited pro forma operating data and financial ratios assume that (i) the
Refinancing and the 1993 Transactions occurred as of April 1, 1993 and January
1, 1993 for the last twelve months ended March 31, 1994 and the year ended
December 31, 1993, respectively, and (ii) the Refinancing occurred as of January
1, 1994 for the three months ended March 31, 1994. The unaudited pro forma
balance sheet data assume that the Refinancing occurred as of the balance sheet
dates. The unaudited pro forma information does not purport to represent what
the results of operations or financial position of the Company would actually
have been if the Refinancing and the 1993 Transactions had in fact occurred on
such dates. For additional information, see "Pro Forma Consolidated Financial
Statements."
<TABLE>
<CAPTION>
LAST TWELVE THREE MONTHS YEAR ENDED
MONTHS ENDED ENDED DEC. 31,
MARCH 31, 1994 MARCH 31, 1994 1993
-------------- -------------- ----------
(dollars in millions)
<S> <C> <C> <C>
OPERATING DATA:
Revenues............................................... $1,031.0 $277.5 $1,003.7
Costs and expenses:
Cost of products sold................................ 774.4 207.4 752.7
Selling, general and administrative.................. 210.4 54.2 210.7
Other, net........................................... 4.5 0.6 4.2
Restructuring and special charges (1)................ 27.5 - 27.5
-------------- ------- ----------
Operating income (loss)................................ 14.2 15.3 8.6
Interest expense, net................................ 39.5 9.9 39.0
-------------- ------- ----------
Income (loss) before income taxes and cumulative effect
of change in accounting methods and extraordinary
loss................................................. (25.3) 5.4 (30.4)
Provision (benefit) for income taxes................... (4.2) 2.1 (5.3)
-------------- ------- ----------
Net income (loss) (2).................................. $ (21.1) $ 3.3 $ (25.1)
-------------- ------- ----------
-------------- ------- ----------
Ratio of earnings to fixed charges (3)................. - 1.50x -
FINANCIAL RATIOS AND OTHER DATA:
EBITDA (4)............................................. $ 82.7 $ 25.6 $ 77.1
Depreciation........................................... 32.5 8.1 32.5
Amortization........................................... 8.5 2.2 8.5
Capital expenditures................................... 33.8 10.3 30.6
Ratio of EBITDA to interest expense, net (5)........... 2.21x 2.72x 2.08x
BALANCE SHEET DATA (AT PERIOD END):
Working capital........................................ $ 192.0 $192.0 $ 180.3
Property, plant and equipment, net..................... 198.4 198.4 198.1
Total assets........................................... 954.6 954.6 932.4
Long-term debt......................................... 416.4 416.4 410.2
Shareholders' equity................................... 148.0 148.0 145.4
</TABLE>
(footnotes on next page)
10
<PAGE> 12
(footnotes for preceding page)
- ---------------
(1) In 1993, the Company recognized a $27.5 million ($18.5 million aftertax)
restructuring charge to combine its Bear Automotive operation with Allen
Testproducts.
(2) Net income excludes a $31.8 million charge for the cumulative effect of
change in accounting methods, net of taxes recorded in the first quarter of
1993 and a $24 million extraordinary loss, net of taxes recorded in the
fourth quarter of 1993.
(3) For purposes of determining the ratio of earnings to fixed charges, earnings
consist of income (loss) before income taxes and cumulative effect of
change in accounting methods and extraordinary loss, plus SPT equity
losses, SP Europe equity losses and fixed charges. Fixed charges consist of
interest expense, net (including amortization of deferred financing costs)
and that portion of rental expense estimated to be representative of the
interest factor. Earnings were insufficient to cover fixed charges by $25.3
million in pro forma last twelve months ended March 31, 1994 and by $30.4
million in pro forma year ended December 31, 1993. If the 1993
restructuring charge is excluded from pro forma last twelve months ended
March 31, 1994 earnings, the pro forma ratio of earnings to fixed charges
would have been 1.05x.
(4) EBITDA represents operating income (loss) before restructuring and special
charges, SPT equity losses, SP Europe equity losses, depreciation and
amortization. EBITDA is not presented herein as an alternative measure of
operating results, cash flow (as defined by generally accepted accounting
principles) or liquidity and does not necessarily represent the cash
available to fund cash requirements of the Company. EBITDA is instead
included because it is one measure used by certain investors as an
indicator of a company's operating performance and its ability to service
its indebtedness.
(5) For purposes of determining the ratio of EBITDA to interest expense, net,
amortization of deferred financing costs was excluded from interest
expense, net. The amount of amortization of deferred financing costs
included in interest expense, net was $2.0 million in the last twelve
months ended March 31, 1994, $0.5 million in the three months ended March
31, 1994 and $2.0 million in the year ended December 31, 1993.
11
<PAGE> 13
INVESTMENT CONSIDERATIONS
Prospective purchasers of the Notes should consider carefully the
investment considerations set forth below as well as the other information
contained in this Prospectus before purchasing the Notes.
SUBSTANTIAL INDEBTEDNESS
The Company will have significant debt service obligations after completion
of the Refinancing. On a pro forma basis, assuming that the Refinancing had
occurred on March 31, 1994, the Company would have had total outstanding
long-term indebtedness (including the current portion thereof) and total
shareholders' equity of approximately $416 million and $148 million,
respectively. See "Capitalization." The Company would have had, subject to
certain conditions, up to $84 million of additional borrowing capacity under the
Bank Credit Agreement as of that date.
The Company's indebtedness could have important consequences to holders of
the Notes, including the following: (i) the Company's ability to obtain
additional financing in the future for working capital, capital expenditures,
acquisitions, general corporate purposes or other purposes may be impaired, (ii)
a portion of the Company's cash flow from operations will be dedicated to the
payment of principal and interest on its indebtedness, thereby reducing the
funds available to the Company for its operations and future business
opportunities, (iii) a portion of the Company's borrowings under the Bank Credit
Agreement will be at floating rates of interest, which could result in higher
interest expense in the event of an increase in interest rates, (iv) such
indebtedness contains financial and restrictive covenants which, if violated,
may result in an event of default which, if not cured or waived, could have a
material adverse effect on the Company, (v) the Company may be more vulnerable
to general economic and industry downturns, (vi) the Company's ability to
purchase the Notes upon a Change of Control may be impaired and (vii) all of the
indebtedness under the Bank Credit Agreement will become due prior to the
maturity of the Notes. In addition, the Bank Credit Agreement contains certain
covenants which could limit the Company's operating and financial flexibility.
See "Description of the Bank Credit Agreement" and "Description of the Notes."
SUBORDINATION OF THE NOTES
The payment of principal of, premium, if any, and interest on, and any
other amounts owing in respect of, the Notes will be subordinated to the prior
payment in full of all existing and future Senior Indebtedness, which includes
indebtedness under the Bank Credit Agreement. As of March 31, 1994, on a pro
forma basis, the aggregate principal amount of Senior Indebtedness outstanding
of the Company and indebtedness and trade payables of the Company's subsidiaries
that effectively rank senior to the Notes would have been approximately $200
million. In the event of the bankruptcy, liquidation, dissolution,
reorganization or other winding up of the Company, the assets of the Company
will be available to pay obligations in respect of the Notes only after all
Senior Indebtedness has been paid in full, and there may not be sufficient
assets remaining to pay amounts due on any or all of the Notes. In addition, the
Company may not pay the principal of, premium, if any, or interest on, and any
other amounts owing in respect of, the Notes, or purchase, redeem or otherwise
retire the Notes, if a default in payment exists with respect to Senior
Indebtedness. Under certain circumstances, no payments may be made for a
specific period with respect to the principal of, premium, if any, or interest
on, and any other amounts owing in respect of, the Notes if a nonpayment default
exists with respect to certain Senior Indebtedness, including indebtedness under
the Bank Credit Agreement. See "Description of the Notes--Subordination."
The Company conducts a substantial portion of its operations through its
subsidiaries, including SPT, and depends, in significant part, on the earnings
and cash flow of, and dividends from, such subsidiaries to pay its obligations,
including payments of principal of, premium, if any, and interest on the Notes.
Any right of the Company and its creditors (including the holders of the Notes)
to participate in the assets of any of the Company's subsidiaries upon any
liquidation or reorganization of any such subsidiary will be subject to the
prior claims of that subsidiary's creditors (except the Company, to the extent
it may itself be a creditor of such subsidiary), including trade creditors.
Accordingly, the Notes will be effectively subordinated to the claims of
creditors of the Company's subsidiaries. Upon completion of the Refinancing,
including the prepayment of
12
<PAGE> 14
SPT's bank indebtedness and the SPT Debentures, the subsidiaries of the Company
will not be contractually restricted from paying dividends to the Company,
although the Bank Credit Agreement imposes certain limitations on such
subsidiaries' ability to make advances to the Company in the form of loans.
The indebtedness under the Revolving Credit Facility is unsecured, and the
Bank Credit Agreement contains a negative covenant limiting the Company's right
to grant security interests in its assets. The Notes will not be secured by any
assets of the Company, and the Company will have the right under the Indenture
to grant security interests in substantially all of its assets to secure Senior
Indebtedness. See "Description of the Bank Credit Agreement" and "Description of
the Notes."
RECENT LOSSES; FIXED CHARGE COVERAGE
The Company reported a net loss in fiscal year 1993 of approximately $41
million. Included in this loss was a restructuring charge, and equity losses in
SPT and SP Europe aggregating approximately $57 million aftertax, changes in
accounting methods of approximately $32 million aftertax and an extraordinary
loss of approximately $24 million (which includes costs related to the early
retirement of the Company's indebtedness), offset by an aftertax gain of
approximately $64 million on the sale of two businesses. On a pro forma basis,
the Company would have had a net loss of approximately $25 million in 1993.
There can be no assurance that the Company will not continue to have net losses
in the future. The Company believes, however, that such losses will not continue
and that net income and cash available to it from future operations will be
sufficient to enable it to meet debt service requirements of the Notes and other
indebtedness. In the quarter ended March 31, 1994, net income of the Company was
$3.1 million. Operating income before restructuring and special charges, SPT
equity losses, SP Europe equity losses and depreciation and amortization for the
fiscal years ended December 31, 1991, 1992 and 1993 was approximately $39
million, $77 million and $57 million, respectively, and for the quarter ended
March 31, 1994 was approximately $25 million. If the Company does experience
additional net losses for a sustained period, it may be unable to meet such
obligations while attempting to withstand competitive pressures or adverse
economic conditions.
On a pro forma basis, the Company's earnings before fixed charges would
have been inadequate to cover its fixed charges by approximately $25 million in
the twelve month period ended March 31, 1994. If the 1993 restructuring charge
of approximately $28 million is excluded from pro forma earnings in the twelve
month period ended March 31, 1994, the pro forma ratio of earnings to fixed
charges would have been 1.05x. However, there can be no assurance that the
Company will have earnings before fixed charges sufficient to cover fixed
charges in the future, including interest payments on the Notes.
MOTOR VEHICLE INDUSTRY CYCLICALITY
Approximately one-third of the Company's operations are directly related to
domestic and foreign motor vehicle production, which is cyclical and dependent
on general economic conditions and other factors. Any significant reduction in
motor vehicle production would have an adverse effect on the level of the
Company's sales to OEMs and the Company's business and financial results. In
addition, there is substantial and continuing pressure from the major OEMs to
reduce sourcing costs, including costs associated with outside suppliers such as
the Company.
RELIANCE ON MAJOR CUSTOMERS
The Company's worldwide sales in 1993 to General Motors, Ford and Chrysler
would have constituted approximately 17%, 10% and 8%, respectively, of its
consolidated sales on a pro forma basis. No other customers accounted for more
than 5% of the Company's consolidated sales in 1993. See "Business--Significant
Customers."
Although the Company has had long-standing relationships with General
Motors, Ford and Chrysler and sells a variety of products to various divisions
of each company, if the Company lost any significant portion of its sales to any
of these customers, such loss would have a material adverse effect on the
financial condition and results of operations of the Company.
13
<PAGE> 15
COMPETITION
The Company competes globally with a number of other manufacturers and
distributors. Quality, technological innovation and price are the primary
elements of competition. These competitors include vertically integrated units
of the Company's major OEM customers, as well as a large number of independent
domestic and international suppliers. A number of these companies are larger and
have greater resources than the Company. A number of the Company's major OEM
customers manufacture for their own use products that compete with certain of
the Company's products. Although these OEM customers have indicated that they
will continue to rely on outside suppliers, the OEMs could elect to manufacture
such products to meet their own requirements or to compete with the Company.
There can be no assurance that the Company will not be adversely affected by
increased competition in the markets in which it operates. The competitive
environment also has changed dramatically over the past few years as the
Company's traditional U.S. OEM customers, faced with intense international
competition, have expanded their worldwide sourcing of components with the
stated objective of better competing with lower-cost imports. As a result, the
Company has experienced competition from suppliers in other parts of the world
which enjoy certain competitive advantages such as lower labor costs, lower
health care costs and, in some cases, export or raw material subsidies.
ABSENCE OF PUBLIC MARKET
There is no public market for the Notes and the Company does not intend to
apply for listing of the Notes on any national securities exchange or for
quotation of the Notes on Nasdaq. The Company has been advised by the
Underwriters that, following the completion of the initial offering of the
Notes, the Underwriters presently intend to make a market in the Notes; however,
the Underwriters are under no obligation to do so and may discontinue such
market-making activities at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Notes or that an active public
market for the Notes will develop. If an active public market does not develop,
the market price and liquidity of the Notes may be adversely affected.
CHANGE OF CONTROL
In the event of a Change of Control, subject to certain conditions, each
holder of Notes will be entitled to require the Company to repurchase any or all
of the Notes held by such holder at the prices stated herein. Prepayment of the
Notes pursuant to a Change of Control, however, will constitute a default under
the Bank Credit Agreement and, therefore, the lenders will have the right to
require repayment in full of the borrowings under the Bank Credit Agreement. The
Company's obligations under the Bank Credit Agreement are senior in right of
payment to the Notes and the Bank Credit Agreement will not permit the purchase
of the Notes in the event of a Change of Control absent consent of the lenders.
In addition, even if the Company is permitted by such lenders to purchase the
Notes in the event of a Change of Control, there can be no assurance that the
Company will have available funds sufficient to purchase all of the Notes that
might be delivered by holders of Notes seeking to accept the Company's offer to
repurchase the Notes. See "Description of the Notes--Certain Covenants--Purchase
of Notes upon Change of Control."
14
<PAGE> 16
RECENT DEVELOPMENTS
On March 17, 1994, SPX consummated the SPT Purchase by acquiring the 49%
ownership interest in SPT owned by Riken for $39 million. The SPT Purchase was
effective as of December 31, 1993. SPT constitutes substantially all of the
Company's original equipment components segment.
USE OF PROCEEDS
The proceeds to the Company from the sale of the Notes, net of the
estimated discount to the Underwriters and expenses related to the Offering, are
estimated to be approximately $251 million and will be used to: (i) reduce the
outstanding borrowings under the Revolving Credit Facility from
approximately $174 million to approximately $141 million, (ii) repay all
outstanding indebtedness under SPT's existing credit facilities, aggregating
approximately $107 million, and certain other indebtedness of SPT, aggregating
approximately $1 million, (iii) redeem $100 million aggregate principal amount
of the SPT Debentures and (iv) pay approximately $11 million of certain
prepayment fees related to these transactions.
Borrowings under the Revolving Credit Facility mature on March 15, 1999,
and bear interest, at the Company's option, either at (i) the greater of (x) the
rate announced as the corporate base rate of the agent bank and (y) the
applicable federal funds rate plus 0.5% or (ii) a Eurodollar rate plus 1%. On
March 31, 1994, the interest rate under this facility was 4.69%. The Revolving
Credit Facility obligates the Company to enter into hedging arrangements which
fix the interest rate of approximately $75 million of borrowings thereunder at
8% for an average weighted maturity of at least two years. As of March 31, 1994,
borrowings under the Revolving Credit Facility aggregating approximately $35
million and available cash were used by the Company to repay approximately $80
million of the existing indebtedness of the Company (excluding indebtedness of
SPT). In the second quarter of 1994, borrowings under the Revolving Credit
Facility will be used to repay the remaining $125 million of existing
indebtedness of the Company (excluding indebtedness of SPT). The indebtedness of
SPT will be repaid from the proceeds of the Offering.
The existing credit facilities of SPT being repaid consist of a term loan
facility, under which approximately $74 million was outstanding as of March 31,
1994, and a revolving loan facility, under which approximately $33 million was
outstanding as of such date. Both credit facilities mature on September 30, 1996
and bear interest at a rate equal to, at the option of SPT, either LIBOR
(adjusted for statutory reserves) plus 2 1/4% or an alternate base rate (which
approximates the prime lending rate) plus 1 1/4%, which interest rate as of
March 31, 1994, was 6.0%. However, SPT has entered into hedging arrangements
that fix the interest rate on approximately $70 million of these facilities, as
of March 31, 1994, at 11 1/4%.
The SPT Debentures bear interest at the rate of 14 1/2% per annum and
mature on May 15, 1999. Upon consummation of the Offering, the Company will
deposit sufficient funds in trust with the trustee for the SPT Debentures to
redeem the SPT Debentures. Upon such deposit, the indenture relating to the SPT
Debentures will be discharged.
The Bank Credit Agreement allows the Company to borrow up to $225 million
under the Revolving Credit Facility upon consummation of the Offering. At such
time, the Company expects to have approximately $84 million of remaining
borrowing capacity under the Revolving Credit Facility.
15
<PAGE> 17
CAPITALIZATION
In connection with the SPT Purchase, the Company entered into the Bank
Credit Agreement. The Revolving Credit Facility made available under this
agreement provided the Company with borrowing availability of $250 million, the
primary purpose of which was to make additional working capital available and to
permit the repayment of certain indebtedness of the Company, which, as a result
of the SPT Purchase, could otherwise have been accelerated by the lenders
thereof. In the first quarter of 1994, the Company borrowed approximately $35
million under the Revolving Credit Facility which, together with $45 million in
cash, the Company used to repay approximately $80 million of its outstanding
indebtedness. In addition, the Company used approximately $49 million of cash to
(i) consummate the SPT Purchase for $39 million and (ii) pay prepayment and
other fees and expenses relating to these transactions amounting to
approximately $10 million. The foregoing transactions are sometimes referred to
as the "First Quarter Initial Transactions." In the second quarter of 1994, the
Company will borrow approximately $139 million under the Revolving Credit
Facility which, together with approximately $2 million of cash, the Company will
use to repay approximately $125 million of its outstanding indebtedness and to
pay related prepayment fees and expenses amounting to approximately $16 million.
The foregoing transactions are sometimes referred to as the "Second Quarter
Initial Transactions" and, together with the First Quarter Initial Transactions,
are sometimes referred to collectively as the "Initial Transactions."
The Company will use the net proceeds from the Offering to: (i) reduce the
outstanding borrowings under the Revolving Credit Facility from $174 million to
$141 million, (ii) repay all outstanding indebtedness of SPT, aggregating
approximately $208 million and (iii) pay approximately $11 million of certain
prepayment and other fees and expenses related to these transactions. See "Use
of Proceeds." The foregoing transactions are sometimes referred to as the "Final
Transactions." The Initial Transactions and the Final Transactions collectively
constitute the Refinancing.
The following table sets forth the historical consolidated capitalization
of the Company and as adjusted to give effect to the Second Quarter Initial
Transactions as though such transactions were consummated on March 31, 1994, and
as further adjusted for the Final Transactions. The table should be read in
conjunction with the Consolidated Financial Statements and the notes thereto and
"Selected Historical Consolidated Financial Information" included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1994
--------------------------------------------------------------
SECOND QUARTER
INITIAL AS FINAL PRO
HISTORICAL TRANSACTIONS ADJUSTED TRANSACTIONS FORMA
---------- -------------- -------- ------------ ------
(in millions)
<S> <C> <C> <C> <C> <C>
NOTES PAYABLE AND CURRENT MATURITIES OF LONG-TERM DEBT:
SPX
Senior notes, 9.72%.............................................. $ 5.0 $ (5.0) $ - $ -
Note to Allen Group, 8.0%........................................ 6.6 (6.6) - -
ESOP guarantee................................................... 0.7 (0.7) - -
Other debt....................................................... 3.9 (3.9) - -
---------- -------- ------
Total SPX...................................................... 16.2 - -
---------- -------- ------
SPT
Term bank loan................................................... 26.7 26.7 $ (26.7) -
Mortgage note, 9.625%............................................ 1.3 1.3 (1.3) -
---------- -------- ------
Total SPT...................................................... 28.0 28.0 -
---------- -------- ------
Total notes payable and current maturities of long-term debt....... 44.2 28.0
---------- -------- ------
LONG-TERM DEBT:
SPX
Bank Credit Agreement............................................ 35.0 138.9 173.9 (32.7) 141.2
Senior notes, 9.72% and 9.58%.................................... 70.0 (70.0) - -
Industrial revenue bonds......................................... 15.2 15.2 15.2
Note to Allen Group, 8.0%........................................ 13.1 (13.1) - -
ESOP guarantee................................................... 11.9 (11.9) - -
Other debt....................................................... 13.5 (13.5) - -
Notes offered hereby............................................. - - 260.0 260.0
---------- -------- ------
Total SPX...................................................... 158.7 189.1 416.4
---------- -------- ------
SPT
Senior subordinated debentures, 14.5%............................ 100.0 100.0 (100.0) -
Term bank loan................................................... 46.8 46.8 (46.8) -
Revolving credit loans........................................... 33.0 33.0 (33.0) -
---------- -------- ------
Total SPT...................................................... 179.8 179.8 -
---------- -------- ------
Total long-term debt............................................... 338.5 368.9 416.4
---------- -------- ------
Total debt......................................................... 382.7 396.9 416.4
---------- -------- ------
SHAREHOLDERS' EQUITY:
Common stock, par value $10 per share, 50,000,000 shares
authorized; 15,555,835 shares issued........................... 155.8 155.8 155.8
Paid-in capital.................................................. 58.6 58.6 58.6
Retained earnings................................................ 22.1 22.1 22.1
Other............................................................ (88.5) (88.5) (88.5 )
---------- -------- ------
Total shareholders' equity......................................... 148.0 148.0 148.0
---------- -------- ------
Total capitalization............................................... $530.7 $544.9 $564.4
---------- -------- ------
---------- -------- ------
</TABLE>
16
<PAGE> 18
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following Pro Forma Consolidated Financial Statements of the Company
are unaudited and are derived from the Consolidated Financial Statements
included elsewhere in this Prospectus.
The Unaudited Condensed Pro Forma Consolidated Statements of Operations (i)
for the three months ended March 31, 1994 have been adjusted to give effect to
the Refinancing as if the Refinancing had occurred on January 1, 1994 and (ii)
for the year ended December 31, 1993 have been adjusted to give effect to the
Refinancing and the 1993 Transactions as if such transactions had occurred on
January 1, 1993. The Unaudited Condensed Pro Forma Consolidated Balance Sheet at
March 31, 1994 has been adjusted to give effect to the Refinancing as if the
Refinancing had occurred on March 31, 1994. The pro forma adjustments are based
upon available information and certain assumptions that the management of the
Company believes are reasonable. The Pro Forma Consolidated Financial Statements
do not purport to represent what the Company's financial position or results of
operations would actually have been if the transactions had occurred on the
dates specified or to project the Company's financial position or results of
operations for any future period.
The Pro Forma Consolidated Financial Statements should be read in
conjunction with the Consolidated Financial Statements of the Company and
related notes thereto, and other information pertaining to the Company,
including "Management's Discussion and Analysis of Financial Condition and
Results of Operations," included elsewhere or incorporated by reference in this
Prospectus.
17
<PAGE> 19
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1994
--------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(in millions)
<S> <C> <C> <C>
Revenues...................................................... $277.5 $ - $ 277.5
Costs and expenses:
Cost of products sold....................................... 207.4 - 207.4
Selling, general and administrative......................... 54.2 - 54.2
Other, net.................................................. 0.6 - 0.6
---------- ----------- ---------
Operating income.............................................. 15.3 - 15.3
Interest expense, net....................................... 10.2 (0.3)(1) 9.9
---------- ----------- ---------
Income before income taxes.................................... 5.1 0.3 5.4
Provision (benefit) for income taxes.......................... 2.0 0.1(2) 2.1
---------- ----------- ---------
Net income.................................................... $ 3.1 $ 0.2 $ 3.3
---------- ----------- ---------
---------- ----------- ---------
</TABLE>
- ---------------
(1) Adjustment to interest expense, net, to reflect estimated interest expense
assuming that the Revolving Credit Facility and the Notes were outstanding
on January 1, 1994. Pro forma adjustments also reflect amortization of
deferred financing fees.
(2) Adjustment to income tax expense to reflect a consolidated effective rate of
39%.
18
<PAGE> 20
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
----------------------------------------------------------------------------------------
ATP & PRO FORMA
HISTORICAL AGL (1) SPR (2) TRUTH (3) SP EUROPE (4) SPT (5) ADJUSTMENTS PRO FORMA
---------- ------- ------- --------- ------------- ------- ----------- ---------
(in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................... $ 756.1 $32.4 $(137.9) $ (79.1) $ 40.6 $391.6 $ - $1,003.7
Costs and expenses:
Cost of products sold.... 508.0 14.1 (89.5) (57.5) 44.6 337.8 (6.8)(1) 752.7
2.0 (5)
Selling, general and
administrative......... 207.6 20.5 (37.2) (7.3) 9.1 28.2 (10.2)(1) 210.7
Other, net............... 7.5 - .2 (.4) .5 (2.0) .3 (1) 4.2
(4.3)(4)
2.4 (5)
Restructuring charge..... 27.5 - - - - - - 27.5
SPT equity losses........ 26.9 - - - - - (26.9)(5) -
SP Europe equity
losses................. 21.5 - - - - - (21.5)(4) -
---------- ------- ------- --------- ------------- ------- ----------- ---------
Operating income (loss).... (42.9) (2.2) (11.4) (13.9) (13.6) 27.6 65.0 8.6
Interest expense, net.... 17.8 1.6 - - .9 27.1 (8.4)(6) 39.0
(Gain) on sale of
businesses............. (105.4) - - - - - 105.4(7) -
---------- ------- ------- --------- ------------- ------- ----------- ---------
Income (loss) before income
taxes.................... 44.7 (3.8) (11.4) (13.9) (14.5) .5 (32.0) (30.4)
Provision (benefit) for
income taxes............. 29.5 - - - - - (34.8)(8) (5.3)
---------- ------- ------- --------- ------------- ------- ----------- ---------
Net income (loss) (9)...... $ 15.2 $(3.8) $ (11.4) $ (13.9) $ (14.5) $ .5 $ 2.8 $ (25.1)
---------- ------- ------- --------- ------------- ------- ----------- ---------
---------- ------- ------- --------- ------------- ------- ----------- ---------
</TABLE>
- ---------------
(1) Historical results of Allen Testproducts ("ATP") and its related leasing
company, Allen Group Leasing ("AGL"), through June 10, 1993, the date of
acquisition. Pro forma adjustments include a $6.8 million reduction in cost
of products sold resulting primarily from work force reductions; a $10.2
million reduction in selling, general and administrative resulting primarily
from work force reductions; and $.3 million additional goodwill
amortization.
(2) Results of the Company's aftermarket parts distribution business, Sealed
Power Replacement ("SPR"), through October 22, 1993, the date of
divestiture.
(3) Results of the Company's window and door hardware manufacturing business,
Truth Hardware ("Truth"), through November 5, 1993, the date of divestiture.
(4) SP Europe was consolidated as of December 31, 1993. This pro forma adds the
results of operations for the full year. Pro forma adjustments include the
minority owner's share of losses, $4.3 million, and $21.5 million to reverse
the Company's share of equity losses as SP Europe is consolidated in the pro
forma.
(5) SPT was consolidated as of December 31, 1993. This pro forma adds the
results of operations for the full year. Pro forma adjustments include $2.0
million of additional depreciation expense resulting from purchase
accounting; $2.4 million to reflect goodwill amortization resulting from
purchase accounting; and $26.9 million to reverse the Company's share of
equity losses as SPT is consolidated in the pro forma.
(6) Adjustment to interest expense, net, to reflect estimated interest expense
assuming that the Revolving Credit Facility and the Notes were outstanding
on January 1, 1993. Pro forma adjustments also reflect amortization of
deferred financing fees.
(7) Reversal of gain on the sale of SPR and Truth.
(8) Adjustment to income tax expense to reflect a consolidated effective rate of
39% which was then adjusted for the inability to derive tax benefits from SP
Europe losses and the effect of the change in the U.S. federal income tax
rate to 35% from 34% on deferred tax assets and liabilities.
(9) Income (loss) excludes the cumulative effect of changes in accounting
methods for ESOP accounting, SPT's 1993 SFAS No. 106 adoption and the 1993
extraordinary loss recorded for the early retirement of indebtedness.
19
<PAGE> 21
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, 1994
-----------------------------------------------------------------------
SECOND QUARTER
INITIAL AS FINAL PRO
HISTORICAL(1) TRANSACTIONS ADJUSTED TRANSACTIONS FORMA
------------- -------------- -------- ------------ ------
(in millions)
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash and temporary cash
investments....................... $ 15.0 $ (2.3)(2) $ 12.7 $ 12.7
Receivables......................... 148.4 148.4 148.4
Inventories......................... 161.1 161.1 161.1
Other current assets................ 114.7 114.7 114.7
------------- -------- ------
Current assets.................... 439.2 436.9 436.9
Property, plant and equipment,
net............................... 198.4 198.4 198.4
Other long-term assets.............. 310.3 310.3 $ 9.0 (3) 319.3
------------- -------- ------
$ 947.9 $945.6 $954.6
------------- -------- ------
------------- -------- ------
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Notes payable and current maturities
of
long-term debt.................... $ 44.2 $ (16.2)(2) $ 28.0 $ (28.0)(4) $ 0.0
Accounts payable.................... 80.1 80.1 80.1
Accrued liabilities................. 179.2 (16.5)(2) 162.7 (10.5)(3) 152.2
Income taxes payable................ 12.6 12.6 12.6
------------- -------- ------
Current liabilities................. 316.1 283.4 244.9
Long-term liabilities............... 124.0 124.0 124.0
Deferred income taxes............... 21.3 21.3 21.3
Long-term debt:
Existing debt..................... 303.5 (108.5)(2) 195.0 (179.8)(4) 15.2
Bank Credit Agreement............. 35.0 138.9 (2) 173.9 (32.7)(4) 141.2
Notes offered hereby.............. 0.0 0.0 260.0 (4) 260.0
------------- -------- ------
Total long-term debt................ 338.5 368.9 416.4
Shareholders' equity:
Common stock...................... 155.8 155.8 155.8
Paid-in capital................... 58.6 58.6 58.6
Retained earnings................. 22.1 22.1 22.1
Other............................. (88.5) (88.5) (88.5)
------------- -------- ------
Total shareholders' equity.......... 148.0 148.0 148.0
------------- -------- ------
$ 947.9 $945.6 $954.6
------------- -------- ------
------------- -------- ------
</TABLE>
- ---------------
(1) The effects of the First Quarter Initial Transactions are included in the
historical data. See "Capitalization."
(2) Borrowings under the Revolving Credit Facility and use of cash to pay
remaining debt extinguishment fees, bank financing fees and organizational
fees and to pay existing indebtedness of the Company. As of March 31, 1994,
approximately $10 million of debt extinguishment fees and bank financing
fees and approximately $80 million of existing indebtedness had been paid.
(3) Payment of fees and expenses related to the Refinancing (including issuance
of the Notes).
(4) Includes issuance of the Notes, payment of existing SPT indebtedness and
reduction of amount outstanding under the Revolving Credit Facility.
20
<PAGE> 22
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following table presents selected historical consolidated financial
data for the periods indicated. The financial data for the five years ended
December 31, 1993 have been derived from the audited Consolidated Financial
Statements of the Company for such periods. The financial data for the three
months ended March 31, 1994 and March 31, 1993 are unaudited, but in the opinion
of the Company reflect all adjustments necessary for a fair presentation of such
data. The data for the three months ended March 31, 1994 and March 31, 1993 are
not necessarily indicative of results of operations for the fiscal year. The
following selected financial information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Company and related
notes thereto included elsewhere or incorporated by reference in this
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31 YEAR ENDED DECEMBER 31
---------------- ------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
------ ------ -------- ------ ------ ------ ------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues...................................... $277.5 $179.2 $ 756.1 $801.2 $673.5 $708.2 $632.0
Costs and expenses:
Cost of products sold....................... 207.4 121.8 508.0 533.2 461.6 466.7 419.1
Selling, general, and administrative........ 54.2 50.8 207.6 209.9 194.0 193.9 172.1
Other, net.................................. 0.6 1.5 7.5 6.6 3.1 1.5 1.8
Restructuring and special charges (1)....... - - 27.5 - 18.2 - -
SPT equity losses (2)....................... - 0.6 26.9 2.4 8.5 5.3 4.7
SP Europe equity losses (3)................. - - 21.5 - - - -
------ ------ -------- ------ ------ ------ ------
Operating income (loss)....................... 15.3 4.5 (42.9) 49.1 (11.9) 40.8 34.3
Interest expense, net....................... 10.2 3.9 17.8 15.1 16.8 17.7 9.9
(Gain) on sale of businesses (4)............ - - (105.4) - - - (8.9)
------ ------ -------- ------ ------ ------ ------
Income (loss) before income taxes and
cumulative effect of change in accounting
methods and extraordinary loss.............. 5.1 0.6 44.7 34.0 (28.7) 23.1 33.3
Provision (benefit) for income taxes.......... 2.0 0.2 29.5 13.4 (7.1) 8.8 12.7
------ ------ -------- ------ ------ ------ ------
Income (loss) before cumulative effect of
change in accounting methods and
extraordinary loss.......................... 3.1 0.4 15.2 20.6 (21.6) 14.3 20.6
Cumulative effect of change in accounting
methods, net of taxes (5)................... - (31.8) (31.8) (5.7) - - -
Extraordinary loss, net of taxes (6).......... - - (24.0) - - - -
Discontinued operations, net of taxes......... - - - - - - 57.7
------ ------ -------- ------ ------ ------ ------
Net income (loss)............................. $ 3.1 $(31.4) $ (40.6) $ 14.9 $(21.6) $ 14.3 $ 78.3
------ ------ -------- ------ ------ ------ ------
------ ------ -------- ------ ------ ------ ------
Ratio of earnings to fixed charges (7)........ 1.46x 1.24x 5.15x 2.98x - 2.30x 4.05x
FINANCIAL RATIOS AND OTHER DATA:
EBITDA (8).................................... $ 25.1 $ 11.5 $ 57.4 $ 76.8 $ 38.6 $ 66.0 $ 58.7
Depreciation.................................. 8.1 5.2 19.1 19.6 19.4 16.0 16.2
Amortization.................................. 1.7 1.2 5.3 5.7 4.4 3.9 3.5
Capital expenditures.......................... 10.3 3.9 15.1 20.4 19.4 26.7 41.0
Ratio of EBITDA to interest expense, net
(9)......................................... 2.46x 2.95x 3.22x 5.09x 2.30x 3.73x 5.93x
BALANCE SHEET DATA (AT PERIOD END):
Working capital............................... $123.1 $207.0 $ 119.4 $182.2 $195.1 $260.7 $186.1
Property, plant and equipment, net............ 198.4 115.4 198.1 116.8 116.3 117.9 109.1
Total assets.................................. 947.9 580.5 1,024.4 560.3 579.3 624.1 574.6
Long-term debt................................ 338.5 179.4 336.2 160.3 199.7 226.2 152.7
Shareholders' equity.......................... 148.0 157.3 145.4 185.5 180.7 210.6 202.1
</TABLE>
(footnotes on the next page)
21
<PAGE> 23
(footnotes for preceding page)
- ---------------
(1) In 1993, the Company recognized a $27.5 million ($18.5 million aftertax)
restructuring charge to combine its Bear Automotive operation with Allen
Testproducts. In 1991, an $18.2 million ($14.7 million aftertax) special
charge was recorded for organizational and facility consolidation of two
operating units, the write off of certain capitalized computer software
development costs, charges associated with further globalization of the
Company's original equipment components affiliated businesses with an
overseas partner, and charges for possible losses associated with certain
project development investments and notes receivable related to previous
sales of certain business units.
(2) Fiscal years 1989 through 1992 were restated to record the Company's
previous 49% share of SPT's income or losses, the effect of amortizing the
difference between its investment balance and its share of SPT's initial
partnership capital deficit and an adjustment required to record the
Company's previous investment in SPT at historical cost. Previously,
because SPT indebtedness was non-recourse to the Company, the Company
properly did not reflect its share of equity losses of SPT and did not
amortize the difference between its investment balance and its share of
SPT's initial partnership capital deficit. The cumulative effect of this
1989 through 1992 restatement was a pretax charge of $15.9 million (or a
$10.1 million aftertax reduction) to previously reported shareholders'
equity.
(3) Until December 31, 1993, the Company reported that it held a 50% interest in
SP Europe. As of December 31, 1993, Riken's pending participation in SP
Europe reverted to the Company in connection with the transaction to
acquire Riken's 49% interest in SPT. SP Europe had not been previously
consolidated due to the Company's deemed temporary control and because
non-recourse (to the partners) financing was being pursued. Up to December
31, 1993, the Company carried its investment in SP Europe at zero. Due to
the resulting 70% ownership, the Company is recording its share of
cumulative losses since the partnership formation in mid-1991 of $21.5
million.
(4) During 1993, the Company divested its aftermarket parts distribution and
window and door hardware manufacturing businesses. See "Business--Business
Strategy." During 1989, the Company divested five small businesses.
(5) In the first quarter of 1993, the Company adopted new accounting methodology
for its ESOP and reflected its 49% share of SPT's 1993 adoption of SFAS No.
106 regarding accounting for postretirement benefits other than pensions.
In 1992, the Company adopted new accounting methodology for postretirement
benefits other than pensions, and income taxes.
(6) Reflects costs associated with prepayment of certain Company and SPT
indebtedness.
(7) For purposes of determining the ratio of earnings to fixed charges, earnings
consist of income (loss) before income taxes and cumulative effect of
change in accounting methods and extraordinary loss, plus SPT equity
losses, SP Europe equity losses and fixed charges. Fixed charges consist of
interest expense, net (including amortization of deferred financing costs),
and that portion of rental expense estimated to be representative of the
interest factor. Earnings were insufficient to cover fixed charges by $20.2
million in 1991.
(8) EBITDA represents operating income (loss) before restructuring and special
charges, SPT equity losses, SP Europe equity losses, depreciation and
amortization. EBITDA is not presented herein as an alternative measure of
operating results, cash flow (as defined by generally accepted accounting
principles) or liquidity and does not necessarily represent the cash
available to fund cash requirements of the Company. EBITDA is instead
included because it is one measure used by certain investors as an
indicator of a company's operating performance and its ability to service
its indebtedness.
(9) For purposes of determining the ratio of EBITDA to interest expense, net,
amortization of deferred financing costs was excluded from interest
expense, net.
22
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1994 AS COMPARED TO THREE MONTHS ENDED MARCH 31,
1993
Revenues
The following are revenues by business segment:
<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS ENDED MARCH 31
-------------------------------
HISTORICAL PRO FORMA
----------------- ---------
1994 1993 1993
------ ------ ---------
(in millions)
<S> <C> <C> <C>
Specialty service tools......................................... $139.7 $111.4 $ 126.4
Original equipment components................................... 134.4 6.1 119.6
SPX Credit Corporation.......................................... 3.4 0.5 4.2
Businesses sold in 1993......................................... - 61.2 -
------ ------ ---------
Total...................................................... $277.5 $179.2 $ 250.2
------ ------ ---------
------ ------ ---------
</TABLE>
Total revenues for the first quarter of 1994 were up significantly over the
first quarter of 1993 due to the inclusion of SPT and SP Europe revenues in 1994
(SPT and SP Europe were consolidated as of December 31, 1993). Also affecting
first quarter 1994 revenues was the inclusion of the revenues of ATP and SPX
Credit Corporation (formerly AGL), whereas in 1993 the revenues of ATP and SPX
Credit Corporation were not included until the June 1993 acquisition. Offsetting
these increases in revenues was the loss of revenues of the Sealed Power
Replacement and Truth divisions, which were sold in the fourth quarter of 1993.
Revenues of the specialty service tools segment for the first quarter of
1994 include ATP. If ATP revenues were included in the first quarter of 1993,
pro forma first quarter 1993 revenues would have been $126.4 million. The
remaining increase in 1994 revenues over pro forma 1993 revenues, approximately
$13 million, was attributable to improved general aftermarket tool sales, strong
hand-held diagnostic equipment sales, improved high pressure hydraulic sales and
higher automotive related refrigerant recovery and recycling equipment sales.
As stated above, first quarter 1994 revenues of the original equipment
components segment were up significantly due to the inclusion of SPT. Pro forma
first quarter 1993 revenues including SPT and SP Europe would have been $119.6
million. The remaining increase in 1994 over pro forma 1993 revenues,
approximately $15 million, was attributable to strong increases in all product
line sales to OEMs as production of new vehicles was up from last year. The
segment's aftermarket revenues also increased.
Revenues of SPX Credit Corporation, which was formed in June 1993, were
down from pro forma 1993. SPX Credit Corporation's revenues and lease portfolio
were comparable to the levels of the last half of 1993 after SPX merged its
existing leasing activities with AGL in connection with the formation of SPX
Credit Corporation.
Gross Profit
Gross profit was $70.1 million, or 25.3% of revenues, in the first quarter
of 1994 compared to $57.4 million, or 32.0% of revenues, in the first quarter of
1993. Due to the significant acquisition and divestiture activity in 1993, these
figures are not comparable. Pro forma first quarter 1993 gross profit would have
been $64.5 million, or 25.8% of revenues.
Selling, General and Administrative Expense
Selling, general and administrative expense ("SG&A") was $54.2 million, or
19.5% of revenues, in the first quarter of 1994 compared to $50.8 million, or
28.3% of revenues, in the first quarter of 1993. Due to the significant
acquisition and divestiture activity in 1993, these figures are not comparable.
Pro forma first quarter 1993 SG&A would have been $54.5 million, or 21.8% of
revenues.
23
<PAGE> 25
Operating Income (Loss)
The following is operating income (loss) by business segment:
<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS ENDED MARCH 31
-----------------------------
HISTORICAL PRO FORMA
--------------- ---------
1994 1993 1993
----- ----- ---------
(in millions)
<S> <C> <C> <C>
Specialty service tools........................................... $ 6.3 $ 4.2 $ 6.6
Original equipment components..................................... 11.7 (0.5) 5.1
SPX Credit Corporation............................................ 2.2 0.1 2.5
Businesses sold in 1993........................................... - 4.6 -
General corporate expenses........................................ (4.9) (3.9) (4.5)
----- ----- ---------
Total........................................................ $15.3 $ 4.5 $ 9.7
----- ----- ---------
----- ----- ---------
</TABLE>
Total operating income for the first quarter of 1994 was up significantly
over the first quarter of 1993 due to the inclusion of SPT in 1994 (SPT and SP
Europe were consolidated as of December 31, 1993). Also affecting first quarter
1994 operating income was the inclusion of the operating income of ATP and SPX
Credit Corporation, whereas in 1993 the operating income of ATP and SPX Credit
Corporation was not included until the June 1993 acquisition. Offsetting these
increases in operating income was the loss of operating income of the SPR and
Truth divisions, which were sold in the fourth quarter of 1993.
First quarter 1994 operating income of the specialty service tools segment
includes the results of ATP which are now included in the results of the
Automotive Diagnostics division. Pro forma first quarter 1993 operating income
would have been $6.6 million had it included ATP and had certain cost reductions
been realized through the combination with the Bear Automotive division. While
comparative first quarter revenues are up in the specialty service tools
segment, the small reduction in comparative operating income reflects the
continued operating loss at the Automotive Diagnostics division. Also
contributing to the reduced operating income were lower margins on the
refrigerant recovery and recycling systems.
Operating income of the original equipment components segment was up
significantly due to the inclusion of SPT. The increase in 1994 first quarter
operating income over 1993 pro forma was attributable to continued increases in
customer demand as a result of the effect of increased U.S. domestic light
vehicle production, combined with an increase in demand for parts in the vehicle
aftermarket.
Operating income of SPX Credit Corporation was down from pro forma 1993.
SPX Credit Corporation operating income was comparable with levels achieved in
the last half of 1993 after SPX merged its existing leasing activities with AGL
in connection with the formation of SPX Credit Corporation.
Interest Expense, Net
First quarter 1994 interest expense, net was $10.2 million compared to $3.9
million in the first quarter of 1993. The increase was attributable to higher
debt levels associated with the purchase of SPT and Allen Testproducts which
were partially offset by proceeds from the divestitures of the Sealed Power
Replacement and Truth divisions. Additionally, the debt existing during the
first quarter of 1994 was at relatively higher interest rates which contributed
to the increase in interest expense.
Provision for Income Taxes
The first quarter 1994 effective income tax rate was approximately 39%,
which reflects the Company's current estimated rate for the year.
24
<PAGE> 26
Cumulative Effect of Change in Accounting Methods, Net of Tax
In the first quarter of 1993, the Company adopted new accounting for its
Employee Stock Ownership Plan and adopted SFAS No. 106--"Employers' Accounting
for Postretirement Benefits Other Than Pensions" for its then existing 49% share
of SPT, resulting in a $31.8 million aftertax charge.
FISCAL YEAR ENDED DECEMBER 31, 1993 AS COMPARED TO FISCAL YEAR ENDED DECEMBER
31, 1992
Revenues
The following are revenues by business segment:
<TABLE>
<CAPTION>
INCREASE
YEAR (DECREASE)
----------------- -----------------
1993 1992 AMOUNT PERCENT
------ ------ ------ ------
(dollars in millions)
<S> <C> <C> <C> <C>
Specialty service tools............................. $503.6 $539.6 $(36.0) (6.7)%
Original equipment components....................... 26.6 15.2 11.4 75.0
SPX Credit Corporation.............................. 9.0 - 9.0 -
Businesses sold in 1993............................. 216.9 246.4 (29.5) (12.0)
------ ------ ------
Total............................................. $756.1 $801.2 $(45.1) (5.6)
------ ------ ------
------ ------ ------
</TABLE>
Total revenues for 1993 were lower than 1992 due primarily to lower
specialty service tools segment revenues and reduced revenues from businesses
which were sold in the fourth quarter of 1993. These declines in revenues were
offset by increased revenues in the original equipment components segment and
the inclusion of lease financing revenues since June 1993 when the SPX Credit
Corporation was formed.
Revenues of the specialty service tools segment were down $36.0 million
principally from reduced sales of refrigerant recovery and recycling systems. In
1992, revenues benefited from $60.0 million of incremental sales of HFC134a
refrigerant recovery and recycling systems to franchised vehicle dealers as many
OEMs required their dealers to purchase this equipment. The balance of the
specialty service tools segment revenues was up in 1993 due to higher essential
tool programs, improved general U.S. economic conditions, increased sales of
electronic hand-held diagnostic equipment and the June 1993 acquisition of ATP.
Revenues of the original equipment components segment were up significantly
from 1992 as more automatic transmissions incorporated the Company's electronic
solenoid valve. Management believes that revenues from these valves will
continue to increase as more automatic transmissions begin to incorporate these
valves. Beginning in 1994, revenues of SPT and SP Europe will be included in
this segment. In 1993 and 1992, aggregate revenues for SPT and SP Europe were
$432.1 million and $404.9 million, respectively.
Gross Profit
Gross profit was $248.1 million, or 32.8% of revenues, in 1993 compared to
$268.0 million, or 33.5% of revenues, in 1992. The decrease in gross margin in
1993 relates to the reduction in higher margin refrigerant recovery and
recycling equipment sales and the related higher manufacturing volumes, certain
costs and redundancies incurred during the integration of Bear Automotive and
ATP and increased sales of solenoid valves which carry a lower gross margin.
Inclusion of lease financing revenues increased the gross margin in 1993, as
such revenues do not have a related cost of sales. In 1992, the effect of
inventory reductions resulted in a $1.8 million decrease in costs related to
LIFO inventory liquidations compared to $0.5 million in 1993.
Selling, General and Administrative Expense
SG&A was $207.6 million, or 27.5% of revenues, in 1993 compared to $209.9
million, or 26.2% of revenues, in 1992. In 1993, expense was down from 1992
primarily due to the divestitures of SPR and Truth in the fourth quarter and the
impact of the new ESOP accounting method. In 1993, interest on ESOP debt was
classified as "interest expense, net" ($3.9 million), whereas, in 1992, the
majority of this amount was included
25
<PAGE> 27
in SG&A. Offsetting these reductions was the acquisition of ATP in June, a
business with relatively high SG&A as a percentage of revenues.
Operating Income (Loss)
The following is operating income (loss) by business segment:
<TABLE>
<CAPTION>
YEAR
-----------------
1993 1992 INCREASE (DECREASE)
------ ------ -------------------
(in millions)
<S> <C> <C> <C>
Specialty service tools.................................. $(11.7) $ 51.7 $ (63.4)
Original equipment components............................ (46.5) (7.0) (39.5)
SPX Credit Corporation................................... 5.5 - 5.5
Businesses sold in 1993.................................. 25.2 21.5 3.7
General corporate expenses............................... (15.4) (17.1) 1.7
------ ------ -------
Total.................................................. $(42.9) $ 49.1 $ (92.0)
------ ------ -------
------ ------ -------
</TABLE>
Overall operating income (loss) was significantly reduced by the $27.5
million restructuring charge recorded in 1993. Excluding this restructuring
charge, 1993 operating loss would have been $15.4 million compared to $49.1
million of income in 1992. This decrease is associated with lower sales of
refrigerant recovery and recycling systems and integration costs at Automotive
Diagnostics and SPT and SP Europe equity losses.
The specialty service tools segment incurred an $11.7 million loss in 1993,
which includes a $27.5 million restructuring charge for the combination of Bear
Automotive and ATP into the new Automotive Diagnostics division (see the
following paragraph). Excluding the restructuring charge, 1993 operating income
would have been $15.8 million compared to $51.7 million of income in 1992. This
decrease is associated with lower sales of refrigerant recovery and recycling
systems and other integration costs at Automotive Diagnostics.
The $27.5 million restructuring charge to combine the businesses into the
Automotive Diagnostics division was recorded in the third quarter of 1993. Of
the $27.5 million restructuring charge, approximately $16.0 million relates to
work force reductions and associated costs. The combined businesses started with
approximately 2,200 employees. That number was reduced to 1,800 at December 31,
1993 and will be at approximately 1,700 by the end of the second quarter of
1994. The charge also included $9.3 million of facility duplication and shutdown
costs, including the write down of excess assets of $4.2 million (non-cash). The
balance of the reserves at December 31, 1993 was approximately $14.5 million,
which is principally required for remaining work force reduction and facility
closing costs.
The original equipment components segment's 1993 operating loss includes
SPT equity losses of $26.9 million and SP Europe equity losses of $21.5 million.
Offsetting these losses, to some extent, were the improved results of the
Company's electronic solenoid valve operation.
Interest Expense, Net
Interest expense, net, was $17.8 million in 1993 compared to $15.1 million
in 1992. Interest costs have been decreasing since 1991 due to favorable
interest rates and overall lower average borrowing levels. In 1993, interest
expense increased by $3.9 million when compared to 1992 and 1991 levels as new
accounting for the Company's ESOP now recognizes the interest element on the
ESOP debt. Prior to 1993, this expense was classified as administrative expense.
The interest element on ESOP debt in 1992 and 1991, which was included in
administrative expense, was $4.1 million and $4.0 million, respectively.
Gain on Sale of Businesses
A $105.4 million pretax gain on the sale of SPR ($52.4 million) and Truth
($53 million) was recorded during the fourth quarter. The operating results of
these units were included through their dates of divestiture, October 22, 1993
for SPR, and November 5, 1993 for Truth. The combined aftertax gain was $64.2
million.
26
<PAGE> 28
Provision (Benefit) for Income Taxes
The Company's 1993 effective income tax rate for 1993 was 66.0% compared to
39.5% in 1992. The primary item affecting the 1993 rate was the inability to tax
benefit the $21.5 million of SP Europe's equity losses as its foreign
subsidiaries are in net operating loss carryforward positions. Also affecting
the 1993 rate were certain items within the Automotive Diagnostics restructuring
charge not being tax benefited and the cumulative effect of adjusting net
deferred tax liabilities for the 1993 change in the U.S. federal income tax rate
from 34% to 35%. The 1992 rate reflects a normal effective income tax rate.
Cumulative Effect of Change in Accounting Methods, Net of Taxes
In 1993 and 1992, the Company adopted three new accounting methods relating
to its ESOP, postretirement benefits other than pensions, and income taxes. See
Note 2 to the Consolidated Financial Statements for a detailed explanation of
these changes.
Extraordinary Loss, Net of Taxes
During the fourth quarter of 1993, the Company determined to refinance both
SPX and SPT indebtedness. As a result, the Company recorded an extraordinary
charge of $37.0 million ($24.0 million aftertax) for costs associated with the
early retirement of $415.0 million (principal amount) of indebtedness expected
to be refinanced. The aggregate amount to retire this indebtedness, including
existing unamortized debt placement fees, will be $452.0 million.
FISCAL YEAR ENDED DECEMBER 31, 1992 AS COMPARED TO FISCAL YEAR ENDED DECEMBER
31, 1991
Revenues
The following are revenues by business segment:
<TABLE>
<CAPTION>
INCREASE
YEAR (DECREASE)
---------------- -----------------
1992 1991 AMOUNT PERCENT
------ ------ ------ -------
(dollars in millions)
<S> <C> <C> <C> <C>
Specialty service tools................................ $539.6 $430.1 $109.5 25.5%
Original equipment components.......................... 15.2 7.8 7.4 94.9
Businesses sold in 1993................................ 246.4 235.6 10.8 4.6
------ ------ ------
Total................................................ $801.2 $673.5 $127.7 19.0
------ ------ ------
------ ------ ------
</TABLE>
Overall revenues increased principally from increases within the specialty
service tools segment.
Revenues of specialty service tools increased over 1991 due to an increase
of approximately $100 million in sales of refrigerant recovery and recycling
systems. The segment also benefited from higher sales to franchised vehicle
dealers, the result of new model vehicle introductions and improved general
economic conditions.
Revenues of original equipment components were up significantly from 1991
as more automatic transmissions incorporated the Company's electronic solenoid
valve.
Gross Profit
Gross profit was $268.0 million, or 33.5% of revenues, in 1992 compared to
$211.8 million, or 31.5% of revenues, in 1991. This improvement as a percentage
of revenues was primarily attributable to higher production activity and related
cost absorption, previous cost reduction programs (including the closure of a
plant in Arkansas), and a general sales mix shift toward higher margin products
than in 1991. In 1992, the effect of inventory reductions resulted in a $1.8
million decrease in costs related to LIFO inventory liquidation.
Selling, General and Administrative Expense
Selling, general and administrative expense was $209.9 million, or 26.2% of
revenues, in 1992 compared to $194.0 million, or 28.8% of revenues, in 1991. The
primary reason for the increase was the variable selling costs associated with
the higher revenues. However, several other factors also contributed to the
increase, including increases in health care costs, costs associated with an
unsuccessful acquisition effort and the higher
27
<PAGE> 29
current year costs associated with adoption of SFAS No. 106 -- "Employers'
Accounting for Postretirement Benefits Other than Pensions."
Operating Income (Loss)
The following is operating income (loss) by business segment:
<TABLE>
<CAPTION>
YEAR
-----------------
1992 1991 INCREASE
------ ------ --------
(in millions)
<S> <C> <C> <C>
Specialty service tools.......................................... $ 51.7 $ 3.3 $ 48.4
Original equipment components.................................... (7.0) (15.0) 8.0
Businesses sold in 1993.......................................... 21.5 20.0 1.5
General corporate expenses....................................... (17.1) (20.2) 3.1
------ ------ --------
Total.......................................................... $ 49.1 $(11.9) $ 61.0
------ ------ --------
------ ------ --------
</TABLE>
Operating losses in 1991 were impacted by an $18.2 million special charge
(discussed below). Excluding this special charge, 1991 operating income would
have been $6.3 million compared to $49.1 million in 1992. The significant
increase was principally due to income related to the incremental sales of
refrigerant recovery and recycling systems as well as generally improved sales
of specialty service tools.
The specialty service tools segment's 1991 operating income was impacted by
a special charge of $12.5 million related to organizational and facility
consolidation of two operating units and the write off of certain capitalized
computer software development costs due to conceptual changes in future product
offerings. Without the special charge, 1991 operating income would have been
$15.9 million compared to $51.7 million in 1992. In 1992, operating income
increased primarily from approximately $100 million of incremental sales of
refrigerant recovery and recycling systems as well as generally improved sales
of specialty service tools.
The original equipment components segment's operating losses decreased due
to improvements at the Company's electronic solenoid valve operation and due to
reduced SPT equity losses (a $2.4 million loss in 1992 compared to an $8.5
million loss in 1991). In addition, 1991 operating losses included a $2.6
million special charge for the start-up related reduced value of RSV, a joint
venture with Riken, which produces solenoid valves for the Asia Pacific Rim
market.
General corporate expenses in 1991 included a $3.0 million special charge
related to losses on certain project development investments and notes
receivable related to previous business unit sales.
Interest Expense, Net
Interest expense, net, was $15.1 million in 1992 and $16.8 million in 1991
due primarily to lower short-term interest rates.
Provision (Benefit) for Income Taxes
The Company's 1992 effective income tax rate was 39.5% compared to a 25.0%
benefit in 1991. The 1992 rate represents a normal effective income tax rate.
The 1991 rate of benefit was the result of the Company not recognizing a
deferred tax benefit on some cost elements included in the special charge
recorded that year, as future tax realization was uncertain.
Cumulative Effect of Change in Accounting Methods, Net of Taxes
In 1992, the Company adopted two new accounting methods relating to
postretirement benefits other than pensions, and income taxes. See Note 2 to the
Consolidated Financial Statements for a detailed explanation of these changes.
28
<PAGE> 30
LIQUIDITY AND FINANCIAL CONDITION
The Company's liquidity needs arise primarily from making capital
investment in new equipment, funding working capital requirements and meeting
interest costs.
As a result of the Company's acquisition activity in 1993, the Company will
be more leveraged than in the past. This financial leverage will require
management to focus on cash flows to meet increased interest costs and to
maintain dividends. Management believes that operations and the credit
arrangements established will be sufficient to supply the future funds needed by
the Company.
Management also believes that improvements in operations accomplished in
1993, coupled with completion of other cost reduction activities begun in 1993,
will improve the cash flows of the Company.
Cash Flow
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, --------------------------------------------
1994 1993 1992 1991
------------ ------------ ------------ ------------
(in millions)
<S> <C> <C> <C> <C>
Cash flows from operating activities.................... $ 5.2 $ 25.3 $ 67.5 $ 67.4
Cash flows from investing activities.................... (10.3) 44.3 (24.9) (34.9)
Cash flows from financing activities.................... (97.8) 38.5 (44.0) (33.9)
------------ ------------ ------------ ------------
Net cash flow......................................... $ (102.9) $ 108.1 $ (1.4) $ (1.4)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
Operating cash flow was significantly lower in 1993 than in 1992 due to
lower operating earnings, the cash utilization of the Automotive Diagnostics
division restructuring reserve, higher tax payments and increases in the amount
of lease receivables. First quarter 1994 operating cash flows reflects
significantly increased accounts receivable from higher revenue levels, reduced
accrued liabilities primarily due to the continued utilization of the Automotive
Diagnostics restructuring reserve. At March 31, 1994, the restructuring reserve
was $8.9 million.
Cash flows from investing activities in 1993 reflected the net proceeds
from the divestiture of SPR and Truth of approximately $189 million and the
purchase of ATP and AGL for approximately $102 million. In addition, 1993
included $19.9 million of advances to SP Europe prior to its being consolidated
into the Company's balance sheet compared to $3.1 million in 1992. In 1991, the
$12.1 million purchase of Miller Special Tools and $5.0 million invested in SPT
are included. First quarter 1994 cash flows from investing activities represent
capital expenditures reflecting the significant capital expenditure plan for
1994.
Cash flows from financing activities reflected $37.7 million of reduction
in indebtedness in 1992 compared to $44.0 million of additional borrowings in
1993. In 1991, a $24.2 million reduction in indebtedness was achieved. First
quarter 1994 cash flows from financing activities reflect the $39 million
payment to Riken to consummate the SPT Purchase, payment of approximately $6.0
million of debt extinguishment costs related to the partial payment of the ESOP
trust's note, payment of $4.1 million of debt acquisition costs related to the
Revolving Credit Facility and to pay down $47.6 million on SPX's total
indebtedness.
The resulting $108.1 million in 1993 cash flow was reflected in the year
end cash and temporary cash investment balance. A significant portion of this
cash balance was utilized during the first quarter of 1994 to complete the SPT
Purchase and to refinance certain SPX indebtedness, as reflected in the first
quarter 1994 cash flows from financing activities.
29
<PAGE> 31
Capitalization
<TABLE>
<CAPTION>
UNAUDITED
MARCH 31, DECEMBER 31
--------- -----------------------
1994 1993 1992
--------- --------- ---------
(in millions)
<S> <C> <C> <C>
Notes payable and current maturities of long-term debt.......... $ 44.2 $ 94.0 $ 14.0
Long-term debt.................................................. 338.5 336.2 160.3
--------- --------- ---------
Total debt.................................................... $ 382.7 $ 430.2 $ 174.3
Shareholders' equity............................................ 148.0 145.4 185.5
--------- --------- ---------
Total capitalization............................................ $ 530.7 $ 575.6 $ 359.8
--------- --------- ---------
--------- --------- ---------
Total debt to capitalization ratio.............................. 72.1% 74.7% 48.4%
</TABLE>
In March 1994, the Company extinguished approximately $80 million of SPX
debt by utilizing its existing cash balance and $35 million of the Revolving
Credit Facility. At March 31, 1994, the Company's total debt was composed of
existing SPX debt of $174.9 million and of SPT debt of $207.8 million.
In March 1994, the Company initiated the process to issue $260 million of
the Notes. The outstanding SPT debt will be extinguished from the proceeds from
this Offering. The following is a reconciliation of actual cash and debt at
March 31, 1994 to the unaudited pro forma balances at March 31, 1994 assuming
completion of the Refinancing.
<TABLE>
<CAPTION>
CASH DEBT
------ -------
(in millions)
<S> <C> <C>
Actual at March 31, 1994................................................... $ 15.0 $ 382.7
Transaction and early extinguishment fees (cash and Revolving Credit
Facility)............................................................. (2.3) 14.2
Payment of SPX debt with Revolving Credit Facility....................... - (124.7)
Borrowings under Revolving Credit Facility to pay SPX debt............... - 124.7
------ -------
Pro forma March 31, 1994 before Final Transactions......................... $ 12.7 $ 396.9
Transaction and early extinguishment fees paid using Revolving Credit
Facility.............................................................. - 19.5
Payment of SPT debt...................................................... - (207.8)
Reduction of Revolving Credit Facility................................... - (52.2)
Proceeds from sale of Notes.............................................. - 260.0
------ -------
Pro forma March 31, 1994 after Refinancing................................. $ 12.7 $ 416.4
------ -------
------ -------
</TABLE>
On an unaudited pro forma basis, the following summarizes the debt
outstanding and revolving credit availability as of March 31, 1994 after the
Refinancing:
<TABLE>
<CAPTION>
REVOLVING
TOTAL AMOUNT CREDIT
COMMITMENT OUTSTANDING AVAILABILITY
---------- ----------- ------------
(in millions)
<S> <C> <C> <C>
Revolving Credit Facility................................... $225.0 $ 141.2 $ 83.8
The Notes................................................... 260.0 260.0 -
Industrial Revenue Bonds.................................... 15.2 15.2 -
---------- ----------- ------
Total..................................................... $500.2 $ 416.4 $ 83.8
---------- ----------- ------
---------- ----------- ------
</TABLE>
After completion of the Refinancing, management believes that the
additional availability of borrowings is sufficient to meet operational cash
requirements, working capital requirements and capital expenditures planned for
1994. The Company has no material debt amortization requirements in the next
five years.
On a pro forma basis, the Company's earnings before fixed charges would
have been inadequate to cover its fixed charges by $25 million in the twelve
month period ending March 31, 1994. If the 1993 restructuring charge of $28
million is excluded from pro forma earnings in the twelve month period ending
March 31, 1994, the pro forma ratio of earnings to fixed charges in the twelve
month period ending March 31, 1994 would have been 1.05x. In the first quarter
of 1994, the actual ratio of earnings to fixed charges was 1.46x. However, there
30
<PAGE> 32
can be no assurance that the Company will have earnings before fixed charges
sufficient to cover fixed charges in the future, including interest payments on
the Notes.
Capital Expenditures
Capital expenditures were $10.3 million in the first quarter of 1994, $15.1
million in 1993, $20.4 million in 1992 and $19.4 million in 1991. Management
expects to continue to incur incremental capital expenditures to develop new
products, improve product and service quality, and expand the business. With the
consummation of the SPT Purchase, capital expenditures will increase due to
SPT's capital intensity. SPT's capital expenditures, net, were $17.8 million in
1993, $12.9 million in 1992 and $13.1 million in 1991. Capital expenditures
planned in 1994 for the Company (including SPT) are approximately $45 million.
Significant projects include expanded cylinder sleeve manufacturing
capabilities, an additional solenoid valve production line and a facility
expansion at a major manufacturing plant. Management estimates that annual
capital expenditures of approximately $15 million are required to maintain the
Company's (including SPT's) current operations.
Acquisitions and Divestitures
After the acquisition and divestiture activity in 1993, management does not
foresee any significant acquisitions or divestitures. Flexibility is available
under the Bank Credit Agreement and Notes to allow for strategically oriented
acquisitions that directly complement the Company's existing businesses.
SEASONALITY, WORKING CAPITAL AND CYCLICALITY
The majority of the Company's revenues is not subject to seasonal
variation. Revenues of the original equipment components segment are
predominantly dependent upon domestic and foreign vehicle production, which is
cyclical, and on general economic conditions and other factors. Revenues of the
specialty service tools segment are dependent upon the frequency of new vehicle
introductions and the general economic status of vehicle dealers and aftermarket
maintenance facilities. These factors can, therefore, affect the Company's
working capital requirements. However, because the Company receives production
forecasts and new vehicle introduction information from OEMs, the Company is
better able to anticipate and manage these requirements. See "Investment
Considerations--Motor Vehicle Industry Cyclicality."
IMPACT OF INFLATION
The Company believes that inflation has not had a significant impact on
operations during the period of 1991 through 1993 in any of the countries in
which the Company operates.
OTHER MATTERS
Accounting Pronouncements. As of the beginning of 1994, the Company must
adopt Statement of Financial Accounting Standards, No. 112, "Employers'
Accounting for Postemployment Benefits." This standard requires that the cost of
benefits provided to former or inactive employees be recognized on the accrual
basis of accounting. The Company believes that the provisions of this statement
are not material to its financial position or results of operations.
Automotive Diagnostics. At March 31, 1994, $73 million of goodwill relates
to the Automotive Diagnostics division (composed of Bear Automotive and ATP,
which was acquired in 1993). Automotive Diagnostics has incurred significant
operating losses in 1993 and in prior years. The Company projects that, in the
near future, the cost savings, market synergies and other factors which, in
part, will be realized from the Bear Automotive and ATP combination will result
in non-discounted operating income sufficient to exceed goodwill amortization.
However, should such projections require downward revision based on changed
events or circumstances, the Automotive Diagnostics division's goodwill may
require write down. Although having no cash flow impact, the resulting charge,
if any, could materially reduce the Company's future reported results of
operations and shareholders' equity. At this time, based upon present
information, projections and strategic plans, the Company has concluded that
there has been no permanent impairment of the Automotive Diagnostics division's
tangible or intangible assets.
Tax Settlement. During the fourth quarter of 1993, the Company settled a
dispute with the Internal Revenue Service regarding the Company's tax deferred
treatment of the 1989 transaction in which several
31
<PAGE> 33
operating units of the Company were contributed to SPT. The settlement of
approximately $5 million in tax eliminates the IRS contention that one-half of
the 1989 transaction was currently taxable. The settlement and interest were
paid during the second quarter of 1994.
Actuarial Discount Rate. At year-end 1993, the Company (and SPT) reduced
the discount rate used for computation of pension and postretirement benefits to
7.5% from the previous 8.25%. This assumption change had no effect on 1993
results of operations, but will increase expense in the future. The Company does
not expect the increase to be material as certain other actuarial assumptions,
including salary growth and medical trend rates, were also modified to reflect
current experience. The future discount rate is subject to change as long-term
interest rates and other such factors warrant.
Environmental. The Company's operations and products are subject to
federal, state and local regulatory requirements relating to environmental
protection. It is the Company's policy to comply fully with all such applicable
requirements. As part of its effort to comply, management has established an
ongoing internal compliance auditing program which has been in place since 1989.
Based on current information, management believes that the Company's operations
are in substantial compliance with applicable environmental laws and regulations
and the Company is not aware of any violation that could have a material adverse
effect on the business, financial condition or results of operations of the
Company. There can be no assurance, however, that currently unknown matters, new
laws and regulations, or stricter interpretations of existing laws and
regulations will not materially affect the Company's business or operations in
the future. See Note 18 to the Consolidated Financial Statements for a more
detailed discussion.
Foreign Net Operating Loss Carryforwards. The Company has foreign net
operating loss carryforwards ("NOLs") of approximately $32.5 million as of
December 31, 1993. These NOLs are available to offset applicable future foreign
taxable income and, for the most part, expire in years after 1996. These NOLs
have been fully reserved through the valuation allowance due to uncertainty
regarding the ability to realize these tax assets.
32
<PAGE> 34
BUSINESS
GENERAL
The Company is a global leader in the design, manufacture and marketing of
specialty service tools for the franchised dealers of vehicle manufacturers and
of piston rings and automatic transmission filters for OEMs. The Company also is
a designer, manufacturer and marketer of electronic engine diagnostic equipment,
emission testing equipment, wheel service equipment and other specialty service
tools for independent vehicle aftermarket users in North America and Europe. The
Company also provides numerous other original equipment components, including
cylinder sleeves, die cast parts, valve train components and solenoid valves, to
OEMs, and specialty service tools to other non-vehicle markets.
The Company was organized in 1911 and was known as The Piston Ring Company
until 1931, when it changed its name to Sealed Power Corporation. The name was
again changed in 1988 to SPX Corporation. The Company's principal executive
offices are located at 700 Terrace Point Drive, Muskegon, Michigan 49443, and
its telephone number is (616) 724-5000.
INDUSTRY OVERVIEW
The Company serves two broad markets in the vehicle industry. The Company's
specialty service tools are sold to the vehicle maintenance and repair market
and are used primarily by the OEMs' franchised dealers and other independent
service technicians to diagnose and service a wide range of vehicle systems and
equipment. As OEMs develop and manufacture new products, corresponding specialty
mechanical, electronic and hydraulic tools must be developed to diagnose and
service specific problems and aid in the improvement of performance. In the past
decade, the vehicle maintenance and repair market increased its demand for
specialty service tools as a result of several trends: (i) the increase in the
frequency of new model introductions by OEMs, (ii) the advance in the
engineering, computerization and technological complexity of these new
introductions and (iii) the increase in service dollars spent at franchise
dealers as a result of extended new vehicle warranty periods. Sales of specialty
service tools which are essential to franchised dealers, the Company's largest
group of customers for these products, tend to vary with changes in vehicle
design and the number of dealers and are not directly dependent on the volume of
vehicles that are produced by OEMs. In addition, environmental and safety
regulations have become more stringent and require specially designed diagnostic
and other tools to comply with such regulations.
The other broad market served by the Company is the OEM and replacement
parts market, to which the Company's original equipment components are sold. The
U.S., Canadian and European OEM market is primarily composed of four classes of
customers: (i) U.S. manufacturers, principally consisting of General Motors,
Ford and Chrysler, but also including other vehicle manufacturers such as
Navistar International and Mack Trucks, (ii) foreign companies producing
vehicles in North America ("transplants"), (iii) European vehicle manufacturers
sourcing the Company's products through integrated assemblies and (iv) vehicle
manufacturers producing vehicles outside the United States and Canada
("imports"). OEMs are continuing to reduce the lead-time required to bring new
vehicle models to the market and to reduce perceived high internal costs created
by their traditional vertically integrated structures by, among other things,
turning to independent suppliers for design assistance and production of parts
and components. In addition, in order to improve their quality, efficiency and
ability to manage their supplier network, OEMs have decreased the number of
their suppliers to include those which have consistent product quality,
technological expertise and competitive pricing, and are responsive to changes
in the marketplace. OEMs additionally assign Tier 1 status to certain of these
suppliers in order to transfer responsibility for an entire product program to a
supplier. A Tier 1 supplier will often design, engineer, manufacture and conduct
quality control procedures for a product or product assembly. The replacement
parts market primarily consists of the service organizations of the OEMs, as
well as other vehicle parts manufacturers and distributors.
Sales of original equipment components to OEMs are affected, to a large
extent, by vehicle production volume which, in turn, is dependent on general
economic conditions. Vehicle production has historically been cyclical, and
sales of the Company's original equipment components have increased or decreased
depending on the existing economic cycle prevailing at the time. Vehicle
production increased substantially in 1993 and had a favorable impact on sales
of the Company's original equipment components. Replacement parts sales,
33
<PAGE> 35
on the other hand, depend on the age of vehicles in service and the need for
replacement parts. Sales of original equipment components to the replacement
parts market historically have been less adversely affected by general business
conditions since vehicle owners are more likely to repair vehicles than purchase
new ones during recessionary periods. In 1993, the Company sold approximately
three-fourths of its original equipment components to OEMs and the remaining
one-fourth of such components to the replacement parts market.
BUSINESS STRATEGY
The Company believes that the markets it serves offer significant growth
opportunities for its businesses. The Company's business strategy is to focus on
and invest in the core markets for specialty service tools and original
equipment components and to expand its leading market positions. The key
elements of this strategy include: (i) implementation of structural changes to
operations, (ii) operational improvements, (iii) increased specialty service
tool offerings and (iv) leveraging of long-term relationships with existing
customers.
Implementation of Structural Changes to Operations. In 1993, the Company
completed several transactions which increased the Company's revenues by
approximately 25% from approximately $801 million in 1992 to $1.0 billion on a
pro forma basis in 1993. These transactions, described below, were completed in
order to increase the Company's product offerings, strengthen its sales and
service capabilities and better position the Company to capitalize on prevailing
market and industry trends and opportunities.
- Created the Automotive Diagnostics division through the acquisition of
ATP and its combination with the Company's Bear Automotive business. This
new division will enhance the Company's electronic engine diagnostics,
emission testing and wheel service equipment capabilities and is expected
to result in annualized cost savings to the Company through consolidation
of operations and work force reductions in excess of $20 million.
- Created SPX Credit Corporation through the acquisition of the leasing
company affiliated with Allen Testproducts and its combination with the
Company's existing leasing operations. This business supports the
Automotive Diagnostics division by providing customers with a leasing
option when purchasing the division's products.
- Divested the Company's aftermarket parts distribution business and the
Company's window and door hardware manufacturing business. These
divestitures generated approximately $189 million in net cash proceeds
which the Company used to reduce indebtedness and to further invest in
its core businesses.
- Acquired the 49% interest in SPT held by Riken. SPT represents
substantially all of the Company's original equipment components segment.
Operational Improvements. The Company continually explores ways to
increase its operational efficiency while maintaining its reputation as a
manufacturer of high-quality products. Ongoing programs to meet this objective
involve the addition of new machinery, consolidation of facilities and other
productivity improvements. Examples of recent productivity improvements include
the addition of a $25 million automated cylinder sleeve production system which
will enable the Company to meet the increasing demand for cast iron sleeves for
aluminum block engine programs, which are part of the trend toward lighter
weight vehicles. In addition, the Company is consolidating its European casting
facilities at a single location which employs improved casting technology. The
Company expects this consolidation to enable the Company to increase production
with less scrap and maintain better inventory control without any increase in
the work force. Both segments of the Company's businesses have received numerous
quality awards and certifications from General Motors, Ford, Chrysler and other
OEM customers. Most parts supplied by the original equipment components segment
to General Motors are supplier-certified, six of SPT's plants which serve Ford
have achieved Ford's Q-1 rating and an SPT filter production plant is one of
only seven plants worldwide to have achieved Chrysler's Pentastar ratings in
every year since the award's establishment. The rating systems of General
Motors, Ford and Chrysler are based on evaluations by teams of quality auditors
who personally visit the manufacturing facilities in order to determine whether
they meet certain standards developed by these OEMs. The standards generally
involve the evaluation of quality systems control, delivery, technology,
management and price.
Increased Specialty Service Tool Offerings. The market for the Company's
specialty service tools has increased as a result of several recent trends: (i)
the increase in the frequency of new model introductions by
34
<PAGE> 36
OEMs, (ii) the advance in the engineering, computerization and technological
complexity of these new introductions and (iii) the increase in service dollars
spent at franchise dealers as a result of extended new vehicle warranty periods.
The Company considers franchised dealers and professional technicians, who
benefit most from these trends, to constitute the strongest part of its customer
base for specialty service tools. By continuing to strengthen its involvement in
the design phase of OEM product development and identifying applications for new
and existing specialty service tools, the Company believes it can capitalize on
these trends. In addition, the growing number of environmental laws and
regulations have created a demand for new technologies and products, including
the Company's refrigerant recycling systems and vehicle exhaust emission testing
equipment. The Company will continue to aggressively pursue this market by
continuing to develop new products and technologies.
Leveraging of Long-Term Relationships with Existing Customers. The trend
of OEMs to contract sourcing of components to fewer outside suppliers favors
larger, more efficient suppliers with high-quality products. The Company
historically has had strong relationships, some of which date back 80 years,
with major OEMs, including General Motors, Ford and Chrysler. In addition,
because of the long lead time and the high degree of engineering interaction
between the OEMs and the Company associated with the development of certain new
designs and products, particularly in those cases where the Company is a Tier 1
supplier, the Company at times is the sole source to certain OEMs for engine and
transmission parts for particular vehicle models. The Company is capitalizing on
these relationships to become more involved in the design, engineering,
manufacturing and quality control phases of product and product assembly
programs of OEMs. The Company believes its Tier I status will enable it to
continue to offer products to its customers at a lower cost and afford itself a
competitive advantage in securing new business for both of its business
segments.
BUSINESS SEGMENTS
The Company operates in two primary business segments, specialty service
tools and original equipment components for the global vehicle industry. It also
operates a lease financing business for customers of its electronic engine
diagnostic, emission testing and wheel service equipment. The following
unaudited pro forma information (except information relating to the three months
ended March 31, 1994, which is actual) summarizes the Company's revenues by
business segment as if the 1993 Transactions had occurred as of January 1, 1991.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31 YEAR ENDED DECEMBER 31
------------------------------- -------------------------------------------------
1994 1993 1993 1992 1991
------------- -------------- -------------- -------------- -------------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Specialty Service
Tools................. $139.7 51% $126.4 50% $ 529.2 52% $ 606.2 58% $ 525.3 58%
Original Equipment
Components............ 134.4 48 119.6 48 458.8 46 420.0 40 366.1 40
SPX Credit
Corporation........... 3.4 1 4.2 2 15.7 2 16.7 2 15.2 2
------ ---- ------ ---- ------- --- ------- --- ------- ---
Total.......... $277.5 100% $250.2 100% $1,003.7 100% $1,042.9 100% $ 906.6 100%
------ ---- ------ ---- ------- --- ------- --- ------- ---
------ ---- ------ ---- ------- --- ------- --- ------- ---
</TABLE>
Specialty Service Tools
The Company's specialty service tools segment designs, manufactures and
markets a wide range of specialty service tools and diagnostic equipment
primarily for the global vehicle industry and, to some extent, to industries
outside of the vehicle industry. The Company markets these products as solutions
to service problems and as aids to performance improvements. The design of
specialty service tools is critical to their functionality and generally
requires close coordination with either the OEM or the ultimate user of the
tools or instruments. A tool specially developed for a specific model vehicle
often will be suitable for use with that model only, and will require
modification for other or subsequently developed models. Therefore, although
many of the specialty service tools designed, manufactured and marketed by the
Company may perform similar tasks, the Company often redesigns each of these
products as new model vehicles are introduced.
The Company's operations which design, manufacture and market specialty
service tools are oriented primarily to serve certain customer groups with which
these operations have developed strong relationships. Thus, while two or more of
the Company's operations may market a substantially similar specialty service
tool, each operation will focus its marketing efforts on different customers. In
certain circumstances, after the
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<PAGE> 37
design of a product has been completed and a market established, the Company may
outsource all or a portion of the manufacture or assembly of these products. The
Company also sells a broad line of equipment of other manufacturers through
franchised dealer equipment programs coordinated with certain vehicle OEMs.
The table below identifies certain of the Company's principal specialty
service tool categories, as well as the brand names under which they are
marketed. Each such category, however, includes numerous variations and
configurations of similar products, since the design thereof depends on customer
needs and specific applications. The table does not include all of the Company's
specialty service tools, and the Company is continually developing new products
for specialty applications.
<TABLE>
<CAPTION>
PRODUCT CATEGORY BRAND NAME
- ---------------- -----------
<S> <C>
Mechanical specialty service tools........... Kent-Moore, OTC, Robinair, Miller Special
Tools, Lowener, V.L. Churchill
Electronic specialty service tools........... Allen Testproducts, Bear, Kent-Moore, OTC,
Robinair, V.L. Churchill
Hydraulic specialty service tools, pumps,
valves and shop equipment................ OTC, Power Team
Electronic diagnostic equipment.............. Allen Testproducts, Bear, Kent-Moore, OTC,
V.L. Churchill
Emission testing equipment................... Allen Testproducts, Bear, Kent-Moore, OTC,
V.L. Churchill
Engine coolant recovery and recycling
equipment.................................. Robinair
Refrigerant recovery and recycling
equipment.................................. Bear, Kent-Moore, OTC, Robinair
Wheel service equipment...................... Bear
Dealer equipment programs.................... Dealer Equipment & Services, Euroline
</TABLE>
The Company's specialty service tools segment also is increasing its
emphasis on the service aspect of the specialty service tools market. The
Company's Dealer Equipment and Services division administers dealer equipment
programs in North America and Europe for 14 motor vehicle manufacturers,
including General Motors, Hyundai, Mazda, Nissan, Opel, Saab, Saturn, Toyota and
Volvo. Under the vehicle manufacturer's identity, the division supplies service
equipment and technical support to franchised dealers, develops and distributes
equipment catalogs and promotional materials, and helps franchised dealers
design, assess and meet their service equipment needs.
The Company markets its specialty service tools to franchised vehicle
dealers and other aftermarket service and maintenance organizations or
individual professional technicians. Products are sold to franchised dealers
under both essential and general programs. Essential programs are those in which
the OEM requires its franchised dealers to purchase and maintain the tools for
warranty and service work. A portion of the Company's specialty service tools
sales is to the stationary, or non-transportation, market, which includes the
appliance, refrigeration and air conditioning markets. Sales of specialty
service tools are made through direct sales forces and through independent
distributorships (which are typically supported by the Company's technical
support staff). The specialty service tools segment has manufacturing facilities
in the United States and Spain, and sales and marketing operations in Australia,
Brazil, Canada, France, Italy, Spain, Switzerland, The Netherlands, the United
Kingdom and the United States.
Original Equipment Components
The Company's original equipment components segment designs, manufactures
and markets component parts for vehicles. These parts primarily fall into five
product lines: (i) piston and transmission rings, cylinder sleeves and other
castings, (ii) precision die castings, (iii) tappets, valve guides and roller
rocker arms, (iv) automatic transmission fluid filters and other filter products
and (v) solenoid valves. Because of the nature of these products and the market
in which they are sold, the reputation of the manufacturer and the quality and
price of the products are considered significant to their marketing success.
Rings and Sleeves. The Company is the world's largest manufacturer of
piston rings. The Company also is among the largest U.S. independent producers
of cylinder sleeves for vehicle engines. This product line has
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<PAGE> 38
benefited from the trend in the vehicle industry to reduce the weight of
vehicles in order to increase gas mileage. This trend has resulted in the
development of aluminum engine blocks which require cast iron cylinder sleeves.
Vehicle engine blocks made of cast iron do not require a cylinder sleeve. The
Company has been successful in obtaining contracts with OEMs for these high
volume vehicle cylinder sleeve applications.
Through SP Europe, in which the Company has a 70% interest, the Company
offers the European market a fully integrated supplier of vehicle piston rings
and cylinder sleeves, with engineering design and testing capabilities and fully
integrated manufacturing processes. SP Europe's primary European customers are
VW, Federal Mogul, Mahle, Kolbenschmidt, Alcan, Audi, Volvo and Mercedes Benz.
SP Europe was created by the Company in 1991 to acquire the European piston ring
and cylinder sleeve manufacturing business of TRW. In October 1992, Mahle, a
leading European manufacturer of pistons, contributed its Spanish piston ring
operation to SP Europe in exchange for a 30% ownership interest.
Die Castings. The Company produces precision aluminum, magnesium and zinc
die cast parts for vehicle steering, air conditioning and other systems. The
primary products in this line include steering column parts, rack-and-pinion
housings and other castings such as components for air conditioning compressors,
fuel systems, clutches and transmissions. Sales of the Company's die cast
products also have benefited from the trend to decrease the weight of vehicles.
The Company's magnesium steering column components, which are lighter and have a
higher strength-to-weight ratio than cast iron, are used by many OEMs to
accommodate air bag requirements in vehicles. In addition, through a new
proprietary die casting method called "Process 2000," which increases the
strength of aluminum, the Company has been successful in competing against
suppliers of components, such as suspension system components, manufactured from
heavier materials.
Valve Train Products. The Company is a domestic supplier of a variety of
valve train components, including tappets, lash adjusters and roller rocker
arms. In addition to producing high-quality valve train products, the Company is
focusing on providing higher-margin, value-added products to vehicle
manufacturers, such as integrated valve train assemblies and subassemblies which
reduce engine development time and improve manufacturing efficiency.
Transmission Filters. The Company is the largest global producer of
automatic transmission fluid filters. The Company believes its market position
and leading automatic transmission filter technology will enable it to
capitalize on the growth opportunities in the widespread use of automatic
transmissions in North America and the growing acceptance of automatic
transmissions in Europe and the Asia Pacific Rim Market.
Solenoid Valves. The Company produces solenoid valves and related
assemblies for major vehicle transmission manufacturers around the world. Its
proprietary solenoid valve products are devices that interface between the
electronic signals of a vehicle's on-board computer and the vehicle's hydraulic
systems. The Company is using this technology in designing and manufacturing
solenoid valves for electronically controlled automatic transmissions and
believes that sales of these products will increase as OEMs increase their
applications for these devices.
The Company sells its original equipment components to the OEMs directly
and to the replacement parts market primarily through a technical sales force.
In order to gain entrance to certain foreign markets, the Company participates
in several joint ventures located outside the United States. See
"--International Operations" below. The Company also participates with Riken in
a joint venture located in the United States to serve Japanese transplants. In
1993, on a pro forma basis, approximately three-fourths of the Company's
original equipment components were sold to the OEMs and the remaining one-fourth
was sold to the replacement parts market. The Company's original equipment
components are manufactured in the United States, Germany, France and Spain.
International Operations
In 1993, the Company's total export sales to both affiliated and
unaffiliated customers, from the United States, were approximately $35 million
and $74 million, respectively. SPT's export sales historically have been less
than 10% of its total sales. The Company has wholly owned operations located in
Australia, Brazil, Canada, France, Germany, Italy, The Netherlands, Singapore,
Spain, Switzerland and the United Kingdom. The Company also has a 70% ownership
in SP Europe, which is headquartered in Germany.
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<PAGE> 39
Additionally, the Company has the following joint venture equity
investments:
- - JATEK (50%) -- A Japanese company that sells various products in the Asia
Pacific Rim market, including many of the Company's specialty service tools.
- - RSV (50%) -- A Japanese company that utilizes the Company's technology to
develop and manufacture solenoid valves for the Asia Pacific Rim market.
- - PROMEC (40%) -- A Mexican company that manufactures and distributes ring and
sleeve products in Mexico.
- - IBS Filtran (50%) -- A German company that manufactures and distributes
automatic transmission filters to the European market.
The Company also licenses its piston ring technology to a Brazilian vehicle
parts manufacturer and has a cross-licensing agreement for piston rings with
Riken.
SPX Credit Corporation
SPX Credit Corporation was created through the acquisition of the leasing
company affiliated with ATP and its combination with the Company's existing
leasing operations. This business provides U.S. and Canadian customers of the
Company's Automotive Diagnostics division with a leasing option when purchasing
electronic diagnostic, emission testing and wheel service equipment. Essentially
all of the direct financing leases, which are five years in length or less, are
with companies or individuals operating within the vehicle repair industry.
RESEARCH AND DEVELOPMENT
The Company is actively engaged in research and development programs
designed to improve existing products and manufacturing methods and to develop
new products. These engineering efforts encompass all of the Company's products
with divisional engineering teams coordinating their resources.
Particular emphasis has been placed on the development of new products that
are compatible with, and build upon, the manufacturing and marketing
capabilities of the Company. To assist the Company in meeting customer
requirements, computer aided design (CAD) systems that provide rapid integration
of computers in mechanical design, model testing and manufacturing control are
used extensively.
The Company (excluding SPT) expended $17.6 million on research activities
relating to the development and improvement of its products in 1993, $14.7
million in 1992 and $13.1 million in 1991. There was no customer-sponsored
research activity in these years. After the SPT Purchase, the Company's research
and development expenditures will increase. SPT's research and development
expenditures were $3.4 million in 1993, $3.8 million in 1992 and $3.6 million in
1991.
EMPLOYEES
As of December 31, 1993, the Company employed approximately 8,600 persons.
Approximately one-third of the Company's production and maintenance employees,
who compose approximately 60% of the Company's work force, are covered by
collective bargaining agreements with various unions. Management believes the
Company has generally enjoyed good relations with its employees.
SIGNIFICANT CUSTOMERS
Sales to General Motors, Ford and Chrysler and their various divisions,
dealers and distributors would have accounted for approximately 17%, 10% and 8%,
respectively, of the Company's 1993 consolidated net revenues (after giving pro
forma effect to the 1993 Transactions). No other customer or group of customers
under common control accounted for more than 5% of consolidated sales of the
Company in 1993. See "Investment Considerations--Motor Vehicle Industry
Cyclicality."
PROPERTIES
United States. The principal properties used by the Company for
manufacturing, administration and warehousing consist of 42 separate facilities
totaling approximately 3.8 million square feet. These facilities are
38
<PAGE> 40
located in Georgia, Illinois, Indiana, Kentucky, Michigan, Minnesota, Missouri,
Ohio and Pennsylvania. All facilities are owned, except for 11 leased
non-manufacturing facilities.
The Company also has 33 distribution and service centers located throughout
the United States for distribution and servicing of its specialty service tools.
These distribution and service centers aggregate 190,000 square feet and are all
leased. No single distribution and service center is material to the Company's
business.
International. The Company owns approximately 150,000 square feet and
leases approximately 600,000 square feet of manufacturing, administration and
distribution facilities in Australia, Brazil, Canada, France, Germany, Italy,
The Netherlands, Singapore, Spain, Switzerland and the United Kingdom.
COMPETITION
The Company competes globally with a number of other manufacturers and
distributors which produce and sell similar products. Quality, technological
innovation and price are the primary elements of competition. These competitors
include vertically integrated units of the Company's major OEM customers, as
well as a large number of independent domestic and international suppliers.
Certain of these companies are larger and have greater resources than the
Company.
A number of the Company's major OEM customers manufacture for their own use
products that compete with certain of the Company's products. Although these OEM
customers have indicated that they will continue to rely on outside suppliers,
the OEMs could elect to manufacture such products to meet their own requirements
or to compete with the Company. There can be no assurance that the Company will
not be adversely affected by increased competition in the markets in which it
operates. The competitive environment also has changed dramatically over the
past few years as the Company's traditional U.S. OEM customers, faced with
intense international competition, have expanded their worldwide sourcing of
components with the stated objective of better competing with lower-cost
imports. As a result, the Company has experienced competition from suppliers in
other parts of the world which enjoy certain competitive advantages such as
lower labor costs, lower health care costs and, in some cases, export or raw
material subsidies.
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<PAGE> 41
DESCRIPTION OF THE BANK CREDIT AGREEMENT
The principal terms of the Bank Credit Agreement are summarized below. This
summary does not purport to be complete, and is qualified in its entirety by
reference to the Bank Credit Agreement, a copy of which has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
On March 24, 1994, the Company entered into the Bank Credit Agreement with
The First National Bank of Chicago, as agent (the "Agent") for the banks named
therein, which provides for the unsecured Revolving Credit Facility and an
unsecured letter of credit facility, both of which mature on March 15, 1999. The
Revolving Credit Facility initially permitted the Company to borrow up to $250
million, approximately $174 million of which the Company borrowed, together with
available cash, to consummate the Initial Transactions. See "Capitalization" and
"Pro Forma Consolidated Financial Statements."
Upon the consummation of the Offering, the available credit under the
Revolving Credit Facility will be reduced to $225 million, which includes up
to $20 million under the letter of credit facility. The amount available under
the Revolving Credit Facility is reduced further by $12.5 million on each June
15 and December 15 in 1997 and 1998, as well as by the stated amount of all
outstanding letters of credit issued under the letter of credit facility. In
addition, the Bank Credit Agreement provides that the credit commitment
available under the Revolving Credit Facility is automatically and permanently
reduced by the following amounts: (i) 100% of net cash proceeds from sales or
dispositions of any property or business that exceeds $1 million on an annual
basis, (ii) 50% of the Company's excess cash flow (but in no event reducing the
amount available to less than $150 million) and (iii) 100% of the proceeds from
the sale by the Company of equity securities in excess of $25 million (but in no
event reducing the amount available to less than $150 million). The Company may,
at its election and at any time, permanently reduce the amount available under
the Revolving Credit Facility in whole or in part and without penalty in
increments of $5 million.
At the Company's option, interest on amounts borrowed under the Revolving
Credit Facility will be payable either at (i) the greater of (x) the rate
announced as the corporate base rate of the Agent and (y) the applicable federal
funds rate plus 0.5% or (ii) the Eurodollar rate plus 1%. The annual rate of
interest under this facility on March 31, 1994 was 4.69%. The Revolving Credit
Facility obligates the Company to enter into hedging arrangements which fix the
interest rate of approximately $75 million of borrowings thereunder at 8% for an
average weighted maturity of at least two years. In addition, the Company is
required to pay a commitment fee of 3/8% per annum on the average daily unused
portion of the Revolving Credit Facility, as well as certain other customary
fees and commissions.
The Bank Credit Agreement contains certain customary covenants, including
without limitation reporting and other affirmative covenants of and restrictions
(subject to certain exceptions) on the Company (and in most cases the Company's
subsidiaries) with respect to: (i) liens and encumbrances, (ii) guarantees,
(iii) sale and leaseback transactions, (iv) certain sales of assets, (v)
consolidations and mergers, (vi) investments (including investments in
subsidiaries), (vii) capital expenditures, (viii) loans and advances, (ix)
indebtedness and additional indebtedness, (x) compliance with pension,
environmental and other laws, (xi) operating leases, (xii) transactions with
subsidiaries and affiliates, (xiii) changes in lines of business, (xiv) hedging
of interest rates and (xv) prepayment of other debt. The Bank Credit Agreement
also provides that the payment of dividends and certain other restricted
payments may be made only if the Company is not in default under the Bank Credit
Agreement and, until the Company has received a credit rating of BBB or better
by Standard & Poor's Corporation, such payments may not exceed 10% of the
Company's consolidated EBITDA during any consecutive 12-month period; provided,
however, that irrespective of such limitations, the Company may make dividend
payments aggregating up to $8 million on or before June 30, 1995, and may
repurchase the partnership interests of certain SPT managers in an amount not in
excess of $3.0 million. Subject to satisfaction of certain conditions (including
obtaining accounts receivable securitization financing and/or non-recourse
financing with respect to SPX Credit Corporation in an aggregate amount of $50
million), the Company may expend up to $50 million in the aggregate for
acquisitions and additional investments during the term of the Bank Credit
Agreement, which $50 million amount may be replenished on a dollar-for-dollar
basis in an amount equal to 50% from a portion of the Company's excess cash
flow.
The Bank Credit Agreement requires the Company to comply with certain
financial covenants and contains certain customary events of default and
representations and warranties.
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<PAGE> 42
DESCRIPTION OF THE NOTES
The Notes will be issued under an indenture to be dated as of
, 1994 (the "Indenture"), between the Company and The Bank of New
York, as trustee (the "Trustee"). The following summary of the material
provisions of the Indenture does not purport to be complete and is subject to,
and qualified in its entirety by, reference to the provisions of the Indenture,
including the definitions of certain terms contained therein and those terms
made part of the Indenture by reference to the Trustee Indenture Act of 1939, as
amended, as in effect on the date of the Indenture. The definitions of certain
capitalized terms used in the following summary are set forth below under
"--Certain Definitions."
GENERAL
The Notes will be unsecured senior subordinated obligations of the Company
limited to $260,000,000 aggregate principal amount. The Notes will be issued
only in registered form without coupons, in denominations of $1,000 and integral
multiples thereof. (Section 302) Principal of, premium, if any, and interest on
the Notes will be payable, and the Notes will be transferable, at the corporate
trust office or agency of the Trustee in The City of New York maintained for
such purposes initially at 48 Wall Street, New York, New York 10286. (Section
305) In addition, interest may be paid at the option of the Company by check
mailed to the person entitled thereto as shown on the security register.
(Section 307) No service charge will be made for any transfer, exchange or
redemption of Notes, except in certain circumstances for any tax or other
governmental charge that may be imposed in connection therewith. (Section 305)
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on , 2002. Interest on the Notes will
accrue at the rate of % per annum and will be payable semi-annually on each
and , commencing , 1994, to the
holders of record of the Notes at the close of business on the and
immediately preceding such interest payment date. Interest on the
Notes will accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from the original date of issuance (the "Issue
Date"). Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months. The Notes are not subject to the benefit of any sinking
fund.
OPTIONAL REDEMPTION
Optional Redemption. The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after , 1998, at
the redemption prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest, if any, to the redemption date, if
redeemed during the 12-month period beginning of the years
indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
----- ----------------
<S> <C>
1998................................................. %
1999................................................. %
2000 and thereafter.................................. 100.00%
</TABLE>
Upon the occurrence of a Change of Control prior to , 1998,
the Notes will be redeemable, in whole or in part, at the option of the Company,
upon not less than 30 nor more than 60 days' prior notice to each holder of
Notes to be redeemed, at a redemption price equal to the sum of (i) the then
outstanding principal amount thereof, plus (ii) accrued and unpaid interest, if
any, to the redemption date plus (iii) the Applicable Premium.
In addition, up to 30% of the aggregate principal amount of the Notes
outstanding on the Issue Date will be redeemable prior to , 1996,
at the option of the Company, within 45 days of the sale of Capital Stock in a
Public Equity Offering from the net proceeds of such sale at a redemption price
equal to % of the principal amount to be redeemed, together with accrued and
unpaid interest, if any, thereon to the date of redemption. (Section 1101)
Selection and Notice. In the event that less than all of the Notes are to
be redeemed at any time, selection of such Notes for redemption will be made by
the Trustee in compliance with the requirements
41
<PAGE> 43
of the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not then listed on a national securities exchange,
on a pro rata basis, by lot or by such method as the Trustee shall deem fair and
appropriate; provided, however, that no Notes of a principal amount of $1,000 or
less shall be redeemed in part. Notice of redemption shall be mailed by first
class mail at least 30 but not more than 60 days before the redemption date to
each holder of Notes to be redeemed at its registered address. If any Note is to
be redeemed in part only, the notice of redemption that relates to such Note
shall state the portion of the principal amount thereof to be redeemed. A new
Note in a principal amount equal to the unredeemed portion thereof will be
issued in the name of the holder thereof upon surrender for cancellation of the
original Note. On and after the redemption date, interest will cease to accrue
on Notes or portions thereof called for redemption unless the Company defaults
in the payment of the redemption price. (Sections 1104, 1105, 1107 and 1108)
SUBORDINATION
The payment of the principal of, premium, if any, and interest on the Notes
will be subordinated, to the extent set forth in the Indenture, in right of
payment to the prior payment in full in cash, Cash Equivalents or other form of
payment acceptable to the holders of Senior Indebtedness of all existing and
future Senior Indebtedness of the Company, which includes, without limitation,
all obligations under the Bank Credit Agreement. The Notes will be unsecured
senior subordinated indebtedness of the Company, ranking pari passu with all
other existing and future senior subordinated indebtedness of the Company and
senior to all future Subordinated Indebtedness of the Company. (Section 1301)
The payment of the principal of, premium, if any, and interest on the Notes will
be effectively subordinate to the claims of general creditors of the Company's
Subsidiaries, including SPT, which are not Guarantors. See "Investment
Considerations --Subordination of the Notes." On the date the Notes are issued,
none of the Company's Subsidiaries will be Guarantors.
The Indenture will provide that in the event of (a) any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith, relating to the
Company or its assets, or (b) any liquidation, dissolution or other winding-up
of the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
other marshalling of assets or liabilities of the Company, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy (except a
distribution in connection with a consolidation of the Company with, or the
merger of the Company into, another corporation or the liquidation or
dissolution of the Company following conveyance, transfer or lease of its
properties and assets substantially as an entirety to another corporation upon
the terms and conditions described below under "--Merger, Sale of Assets,
Etc."), holders of all Senior Indebtedness of the Company shall be entitled to
receive payment in full in cash, Cash Equivalents or other form of payment
acceptable to the holders of Senior Indebtedness of all amounts due on or in
respect of all Senior Indebtedness, or provision shall be made for such payment
in accordance with the instrument governing such Senior Indebtedness, before the
holders of the Notes are entitled to receive any payment or distribution (except
for certain permitted equity or subordinated debt securities (the "Permitted
Junior Securities") or payments made pursuant to the provisions described under
"--Defeasance or Covenant Defeasance of Indenture") on account of the principal
of, premium, if any, and interest on the Notes. In the event that,
notwithstanding the foregoing, after an event described in clause (a), (b) or
(c), the Trustee or any holder of the Notes shall have received payment or
distribution of assets of the Company of any kind or character (excluding
Permitted Junior Securities or payments made pursuant to the provisions
described under "--Defeasance or Covenant Defeasance of Indenture"), before all
Senior Indebtedness is paid in full or payment thereof provided for in cash,
Cash Equivalents or other form of payment acceptable to the holders of the
Senior Indebtedness, then such payment or distribution will be paid over or
delivered to the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or other person making payment or distribution of
assets of the Company for application to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay all Senior Indebtedness in full
in cash, Cash Equivalents or other form of payment acceptable to the holders of
the Senior Indebtedness. (Section 1302)
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<PAGE> 44
During the continuance of any default in the payment of principal of,
premium, if any, or interest on any Designated Senior Indebtedness when due
(whether at final maturity, upon scheduled installment, acceleration or
otherwise) (a "Payment Default"), no payment or distribution of any assets of
the Company of any kind or character (other than Permitted Junior Securities or
payments made pursuant to the provisions described under "--Defeasance or
Covenant Defeasance of Indenture") shall be made on account of the principal of,
premium, if any, and interest on the Notes unless and until such Payment Default
has been cured or waived or has ceased to exist or such Designated Senior
Indebtedness shall have been discharged or paid in full in cash, Cash
Equivalents or other form of payment acceptable to the holders of the Senior
Indebtedness. (Section 1303)
In addition, during the continuance of any other default with respect to
any Designated Senior Indebtedness pursuant to which the maturity thereof may be
accelerated (a "Non-payment Default"), after receipt by the Trustee from a
representative of holders of such Designated Senior Indebtedness of a written
notice of such Non-payment Default, no payment or distribution of any assets of
the Company of any kind or character (other than Permitted Junior Securities or
payments made pursuant to the provisions described under "--Defeasance or
Covenant Defeasance of Indenture") may be made by the Company on account of the
principal of, premium, if any, and interest on the Notes, including for the
redemption, purchase or other acquisition of Notes for the period specified
below (the "Payment Blockage Period").
The Payment Blockage Period shall commence upon the receipt of notice of a
Non-payment Default by the Trustee from a representative of holders of
Designated Senior Indebtedness stating that such notice is a payment blockage
notice pursuant to the Indenture and shall end on the earliest to occur of the
following events: (i) 179 days shall have elapsed since the receipt of such
notice (provided such Designated Senior Indebtedness as to which notice was
given shall not theretofore have been accelerated), (ii) the date on which such
default is cured or waived or ceases to exist (provided that no other Payment
Default or Non-payment Default has occurred and is then continuing after giving
effect to such cure or waiver), (iii) the date on which such Designated Senior
Indebtedness is discharged or paid in full in cash, Cash Equivalents or other
form of payment acceptable to holders of the Designated Senior Indebtedness or
(iv) the date on which such Payment Blockage Period shall have been terminated
by written notice to the Company or the Trustee from the representative of
holders of Designated Senior Indebtedness initiating such Payment Blockage
Period, after which, in the case of clause (i), (ii), (iii) or (iv), whichever
was earlier, the Company shall promptly resume making any and all required
payments in respect of the Notes, including any missed payments. Only one
Payment Blockage Period with respect to the Notes may be commenced within any
360 consecutive day period. No Non-payment Default that existed or was
continuing on the date of the commencement of any Payment Blockage Period with
respect to the Designated Senior Indebtedness initiating such Payment Blockage
Period will be, or can be, made the basis for the commencement of a subsequent
Payment Blockage Period, whether or not within a period of 360 consecutive days,
unless such default has been cured or waived for a period of not less than 90
consecutive days. In no event will a Payment Blockage Period extend beyond 179
days from the date of the receipt by the Trustee of the notice and there must be
at least a 181 consecutive day period in any 360-day period during which no
Payment Blockage Period is in effect. (Section 1303)
If the Company fails to make any payment on the Notes when due or within
any applicable grace period, whether or not on account of the payment blockage
provisions referred to above, such failure would constitute an Event of Default
under the Indenture and would enable the holders of the Notes to accelerate the
maturity thereof. See "--Events of Default."
By reason of such subordination, in the event of liquidation, receivership,
reorganization or insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the holders of the Notes, and funds
which would be otherwise payable to the holders of the Notes will be paid to the
holders of the Senior Indebtedness to the extent necessary to pay the Senior
Indebtedness in full, and the Company may be unable to meet its obligations in
full with respect to the Notes.
As of March 31, 1994, on a pro forma basis, after giving effect to the
Refinancing (including the issuance of the Notes and the application of the
estimated net proceeds therefrom), the amount of outstanding Senior Indebtedness
of the Company would have been approximately $156 million. Because the Company
conducts a substantial portion of its operations through its subsidiaries,
including SPT, the claims of creditors of such
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subsidiaries will have priority with respect to the assets and earnings of such
subsidiaries over the claims of creditors of the Company, including holders of
the Notes, even though such obligations do not constitute Senior Indebtedness.
On a pro forma basis, the Company's subsidiaries had indebtedness for borrowed
money and trade payables of approximately $44 million as of March 31, 1994. See
"Description of the Bank Credit Agreement" and "Use of Proceeds." The Indenture
will limit, but not prohibit, the incurrence by the Company of additional
Indebtedness which is senior or pari passu in right of payment to the Notes and
will prohibit the incurrence by the Company of Indebtedness which is
contractually subordinated in right of payment to any Senior Indebtedness of the
Company and senior in right of payment to the Notes.
CERTAIN COVENANTS
The Indenture will contain the following covenants, among others:
Limitation on Indebtedness. The Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or in any other manner become directly or indirectly liable
(in each case, to "incur") for the payment of any Indebtedness (including any
Acquired Indebtedness but excluding Permitted Indebtedness); provided, however,
that (i) the Company will be permitted to incur Indebtedness (including Acquired
Indebtedness), contingently or otherwise, if at the time of such incurrence, and
after giving pro forma effect thereto, the Consolidated Fixed Charge Coverage
Ratio of the Company and its Restricted Subsidiaries is at least equal to 2.0 to
1.0 through , 1996 and 2.25 to 1 thereafter and (ii) in the case of
Subordinated Indebtedness, such Indebtedness has no scheduled principal payment
on or prior to the Stated Maturity for the final scheduled principal payment of
the Notes.
Limitation on Restricted Payments. (a) 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 distribution or payment
on or in respect of Capital Stock of the Company or any payment made to the
direct or indirect holders (in their capacities as such) of Capital Stock of the
Company (other than dividends or distributions payable solely in Capital Stock
(other than Redeemable Capital Stock) or rights to purchase Capital Stock of the
Company (other than Redeemable Capital Stock));
(ii) purchase, redeem, defease or otherwise acquire or retire for value,
directly or indirectly, any Capital Stock of the Company or any Affiliate of the
Company (other than any such Capital Stock of any Wholly Owned Restricted
Subsidiary of the Company);
(iii) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled maturity
(unless within one year of maturity), scheduled repayment, scheduled sinking
fund payment or other Stated Maturity, any Subordinated Indebtedness;
(iv) make any Investment (other than any Permitted Investment) in any
person, including any Unrestricted Subsidiary (other than in the Company, a
Wholly Owned Restricted Subsidiary of the Company or a person that becomes a
Wholly Owned Restricted Subsidiary as a result of such Investment); or
(v) declare or pay any dividend or make any other distribution on or in
respect of any Capital Stock of any Subsidiary to the direct or indirect holders
(in their capacities as such) of Capital Stock of the Subsidiary (other than
with respect to Capital Stock held by the Company or any of its Wholly Owned
Restricted Subsidiaries) or any purchase, redemption or other acquisition or
retirement for value, of any Capital Stock of any Restricted Subsidiary (other
than any such Capital Stock held by the Company or any Wholly Owned Restricted
Subsidiary);
(such payments, dividends, distributions, purchases, defeasances, repurchases,
redemptions, acquisitions, retirements or Investments described in the preceding
clauses (i) through (v) are collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to the proposed Restricted
Payment (the amount of any such Restricted Payment, if other than in cash, being
as determined by the Board of Directors of the Company, whose determination
shall be conclusive and evidenced by a board resolution), (A) no Default or
Event of Default shall have occurred and be continuing, (B) the aggregate amount
of all Restricted Payments declared or made from and after the date immediately
following the Issue Date would
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not exceed the sum of (1) 50% of the aggregate Consolidated Net Income of the
Company accrued on a cumulative basis during the period (treated as one
accounting period) beginning on December 31, 1993 and ending on the last day of
the fiscal quarter of the Company immediately preceding the date of such
proposed Restricted Payment (or, if such aggregate cumulative Consolidated Net
Income of the Company for such period shall be a deficit, minus 100% of such
deficit) plus (2) the aggregate net cash proceeds received by the Company after
the Issue Date from the issuance or sale (other than to any of its Restricted
Subsidiaries) of Capital Stock (excluding Redeemable Capital Stock but including
Capital Stock issued upon the conversion of convertible Indebtedness or in
exchange for outstanding Indebtedness (to the extent such Indebtedness is
originally sold for cash) or from the exercise of options, warrants or rights to
purchase Capital Stock (other than Redeemable Capital Stock)) of the Company to
any person (other than to a Restricted Subsidiary of the Company) (except, in
each case, to the extent such proceeds are used to purchase, redeem or otherwise
retire Capital Stock or Subordinated Indebtedness as set forth below), plus (3)
in the case of the disposition or repayment of any Investment constituting a
Restricted Payment made after the Issue Date (excluding any Investment made
pursuant to clause (v) of the following paragraph), an amount equal to the
lesser of the return of capital with respect to such Investment and the cost of
such Investment, in either case, less the cost of the disposition of such
Investment and (C) the Company could incur $1.00 of additional Indebtedness
under the first paragraph of the "Limitation on Indebtedness" covenant described
above. For purposes of the preceding clause (B)(2), the value of the aggregate
net proceeds received by the Company upon the issuance of Capital Stock, either
upon the conversion of convertible Indebtedness or in exchange for outstanding
Indebtedness or upon the exercise of options, warrants or rights will be the net
cash proceeds received upon the issuance of such Indebtedness, options, warrants
or rights plus the incremental amount received by the Company upon the
conversion, exchange or exercise thereof.
(b) None of the foregoing provisions will prohibit: (i) the payment of any
dividend within 90 days after the date of its declaration, if at the date of
declaration such payment would be permitted by the foregoing paragraph (a); (ii)
the redemption, repurchase or other acquisition or retirement of any shares of
any class of Capital Stock of the Company or any Restricted Subsidiary of the
Company in exchange for (including any such exchange pursuant to a conversion
right or privilege in connection with which cash is paid in lieu of fractional
shares or scrip), or out of the net cash proceeds of, a substantially concurrent
issue and sale of other shares of Capital Stock (other than Redeemable Capital
Stock) of the Company to any person (other than to a Restricted Subsidiary of
the Company); provided, however, that such net cash proceeds are excluded from
clause (B)(2) of the preceding paragraph (a); (iii) any redemption, defeasance,
repurchase or other acquisition or retirement for value (each for purposes of
this clause, a "refinancing") of Pari Passu Indebtedness or Subordinated
Indebtedness by exchange for, or out of the net cash proceeds of, a
substantially concurrent issue and sale of (1) Capital Stock (other than
Redeemable Capital Stock) of the Company; provided, however, that any such net
cash proceeds are excluded from clause (B)(2) of the preceding paragraph (a); or
(2) new Indebtedness of the Company so long as such Indebtedness (A) is pari
passu with or expressly subordinated in right of payment to the Notes in the
same manner and at least to the same extent as the Notes are subordinated to
Senior Indebtedness, (B) has a principal amount that does not exceed the
principal amount so refinanced plus the amount of any premium required to be
paid in connection with such refinancing pursuant to the terms of the
Indebtedness refinanced or the amount of any premium reasonably determined by
the Company as necessary to accomplish such refinancing, plus the amount of fees
and expenses of the Company incurred in connection with such refinancing;
provided that for purposes of this clause, the principal amount of any
Indebtedness shall be deemed to mean the principal amount thereof or if such
Indebtedness provides for an amount less than the principal amount thereof upon
a declaration of acceleration thereof, such lesser amount as of the date of
determination, (C) has a Stated Maturity for the final scheduled principal
payment of such Indebtedness on or later than the Stated Maturity for the final
scheduled principal payment of the Notes and (D) has an Average Life to Stated
Maturity that equals or exceeds the Average Life to Stated Maturity of the
Notes; (iv) the redemption or repurchase of the limited partnership interests of
SPT owned by certain employees of SPT on the Issue Date for an aggregate amount
not to exceed $3,000,000; (v) so long as no Default or Event of Default shall
have occurred and be continuing, the making of (x) Investments constituting
Restricted Payments and (y) other Restricted Payments such that, after giving
effect thereto, the sum of the aggregate outstanding amount of such Investments
(valued at
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their cost) referred to in clause (x) made after the Issue Date and the
aggregate amount of such other Restricted Payments referred to in clause (y)
made after the Issue Date would not exceed $10,000,000; or (vi) Investments
constituting Restricted Payments made as a result of the receipt of non-cash
consideration from any Asset Sale made pursuant to and in compliance with the
covenant "--Disposition of Proceeds of Asset Sales." In computing the amount of
Restricted Payments for the purposes of clause (B) of the preceding paragraph,
Restricted Payments made under (i) and (vi) shall be included. (Section 1011)
Limitation on Liens. The Company will not and will not permit any
Restricted Subsidiary to create, incur, assume or suffer to exist any Lien of
any kind upon any of its property or assets, now owned or hereafter acquired, to
secure any Pari Passu Indebtedness or Subordinated Indebtedness unless prior to
or contemporaneously therewith the Notes are secured equally and ratably;
provided that (1) if such secured Indebtedness is Pari Passu Indebtedness, the
Lien securing such Pari Passu Indebtedness shall rank equally and ratably with
the Lien securing the Notes and (2) if such secured Indebtedness is Subordinated
Indebtedness, the Lien securing such Subordinated Indebtedness shall be
subordinate and junior to the Lien securing the Notes at least to the same
extent as such Subordinated Indebtedness is subordinated to the Notes. The
foregoing shall not apply to any Lien securing Acquired Indebtedness of the
Company; provided that any such Lien only extends to the assets that were
subject to such Lien prior to the related acquisition by the Company and was not
created, incurred or assumed in contemplation of such transaction. The foregoing
shall not apply to the incurrence of Indebtedness pursuant to clause (9), (12),
(13) or (14) of the definition of "Permitted Indebtedness."
Purchase of Notes upon Change of Control. Upon the occurrence of a Change
of Control, the Company shall be obligated to make an Offer to purchase (a
"Change of Control Offer") and shall, subject to the provisions described below,
purchase, on a business day (the "Change of Control Purchase Date") not more
than 60 nor less than 30 days following the occurrence of the Change of Control,
all of the then outstanding Notes at a purchase price (the "Change of Control
Purchase Price") equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the Change of Control Purchase Date; provided,
however, that notwithstanding the occurrence of a Change of Control, the Company
shall not be obligated to make a Change of Control Offer in the event that it
has exercised its right to redeem all of the Notes as described under
"--Optional Redemption" within 30 days after the occurrence of such Change of
Control. The Company shall, subject to the provisions described below, be
required to purchase all Notes properly tendered into the Change of Control
Offer and not withdrawn. Prior to the mailing of the notice to holders provided
for below, the Company shall have (x) terminated all commitments and repaid in
full all Indebtedness under the Bank Credit Agreement, or offered to terminate
such commitments and repay in full such Indebtedness and have in fact terminated
the commitments of and repaid all Indebtedness of any lender under the Bank
Credit Agreement who accepts such offer or (y) obtained the requisite consents
under the Bank Credit Agreement to permit the purchase of the Notes as provided
for under this covenant. If a notice has been mailed when such condition
precedent has not been satisfied, the Company shall have no obligation to (and
shall not) effect the purchase of Notes until such time as such condition
precedent is satisfied. Failure to mail the notice on the date specified below
or to have satisfied the foregoing condition precedent by the date that the
notice is required to be mailed shall in any event constitute a covenant Default
under clause (iii) of "--Events of Default" herein. The Change of Control Offer
is required to remain open for at least 20 business days and until the close of
business on the business day immediately prior to the Change of Control Purchase
Date. (Section 1013)
In order to effect such Change of Control Offer, the Company shall, not
later than the 30th day after the Change of Control, mail to each holder of
Notes notice of the Change of Control Offer, which notice shall govern the terms
of the Change of Control Offer and shall state, among other things, the
procedures that holders of Notes must follow to accept the Change of Control
Offer.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Notes that might be delivered by holders of Notes
seeking to accept the Change of Control Offer. The Company shall not be required
to make a Change of Control Offer upon a Change of Control if a third party
makes the Change of Control Offer in the manner, at the times and otherwise in
compliance with the requirements applicable to a Change of Control
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Offer made by the Company and purchases all Notes validly tendered and not
withdrawn under such Change of Control Offer.
The occurrence of the events constituting a Change of Control under the
Indenture will result in an event of default under the Bank Credit Agreement
and, thereafter, the lenders will have the right to require repayment of the
borrowing thereunder in full. The Company's obligations under the Bank Credit
Agreement represent obligations senior in right of payment to the Notes and the
Bank Credit Agreement will not permit the purchase of the Notes absent consent
of the lenders thereunder in the event of a Change of Control (although the
failure by the Company to comply with its obligations hereunder in the event of
a Change of Control would constitute a Default under the Notes).
The Company will comply with 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 the event that a Change of Control occurs and the
Company is required to purchase Notes as described above. The obligation of the
Company to make a Change of Control Offer may deter a third party from acquiring
the Company in a transaction which constitutes a Change of Control. (Section
1013)
The use of the term "all or substantially all" in Indenture provisions such
as clause (b) of the definition of "Change of Control" and under "--Merger, Sale
of Assets, Etc." has no clearly established meaning under New York law (which
governs the Indenture) and has been the subject of limited judicial
interpretation in few jurisdictions. Accordingly, there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of a person, which
uncertainty should be considered by prospective purchasers of the Notes.
Disposition of Proceeds of Asset Sales. The Company will not, and will not
permit any of its Restricted Subsidiaries to, make any 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, as determined in good faith by the Board of Directors of the Company, of
the shares or assets sold or otherwise disposed of and (ii) at least 85% of such
consideration consists of cash and Cash Equivalents. To the extent that the Net
Cash Proceeds of any Asset Sale are not required to be applied to prepay Senior
Indebtedness and thereby permanently reduce the commitments or amounts available
to be reborrowed under such Senior Indebtedness as required by the terms
thereof, or are not so applied, the Company or a Restricted Subsidiary, as the
case may be, may apply the Net Cash Proceeds from such Asset Sale, within 360
days of such Asset Sale, to an investment in properties and assets other than
working capital that replace the properties and assets that were the subject of
such Asset Sale or in properties and assets other than working capital that will
be used in the business of the Company and its Restricted Subsidiaries existing
on the Issue Date or in businesses reasonably related thereto ("Replacement
Assets") so long as the Company or such Restricted Subsidiary has notified the
Trustee in writing within 270 days of such Asset Sale that it has determined to
apply the Net Cash Proceeds from such Asset Sale to an investment in such
Replacement Assets. Any Net Cash Proceeds from any Asset Sale not applied as
provided in the preceding two sentences within 360 days of such Asset Sale
constitute "Excess Proceeds" subject to disposition as provided below.
When the aggregate amount of Excess Proceeds equals $10,000,000 or more,
the Company shall apply the Excess Proceeds to the repayment of the Notes and
any Pari Passu Indebtedness required to be repurchased under the instrument
governing such Pari Passu Indebtedness as follows: (i) the Company shall make an
offer to purchase (an "Offer") to all holders of the Notes in accordance with
the procedures set forth in the Indenture in the maximum principal amount
(expressed as a multiple of $1,000) of Notes that may be purchased out of an
amount (the "Note Amount") equal to the product of such Excess Proceeds
multiplied by a fraction, the numerator of which is the outstanding principal
amount of the Notes, and the denominator of which is the sum of the outstanding
principal amount of the Notes and such Pari Passu Indebtedness (subject to
proration in the event such Note Amount is less than the aggregate Offered Price
(as defined herein) of all Notes tendered) and (ii) to the extent required by
such Pari Passu Indebtedness to permanently reduce the principal amount of such
Pari Passu Indebtedness, the Company shall make an offer to purchase or
otherwise repurchase or redeem Pari Passu Indebtedness (a "Pari Passu Offer") in
an amount (the "Pari Passu Debt Amount") equal to the excess of the Excess
Proceeds over the Note Amount; provided that in no event shall the Company be
required to make a Pari Passu Offer in a Pari Passu Debt Amount exceeding the
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<PAGE> 49
principal amount of such Pari Passu Indebtedness plus the amount of any premium
required to be paid to repurchase such Pari Passu Indebtedness. The offer price
shall be payable in cash in an amount equal to 100% of the principal amount of
the Notes plus accrued and unpaid interest, if any (the "Offered Price"), to the
date (the "Offer Date") such Offer is consummated, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate Offered
Price of the Notes tendered pursuant to the Offer is less than the Note Amount
relating thereto or the aggregate amount of Pari Passu Indebtedness that is
purchased is less than the Pari Passu Debt Amount (the amount of such shortfall,
if any, in either case constituting a "Deficiency"), the Company shall use such
Deficiency in any manner. Upon completion of the purchase of all the Notes
tendered pursuant to an Offer and repurchase of the Pari Passu Indebtedness
pursuant to a Pari Passu Offer, the amount of Excess Proceeds, if any, shall be
reset at zero.
Whenever the Excess Proceeds received by the Company exceed $5,000,000,
such Excess Proceeds shall, prior to the purchase of Notes or any Pari Passu
Indebtedness described in the preceding paragraph, be set aside by the Company
in a separate account pending (i) deposit with the depositary or a paying agent
of the amount required to purchase the Notes or Pari Passu Indebtedness tendered
in an Offer or a Pari Passu Offer, respectively, (ii) delivery by the Company of
the Offered Price to the holders of the Notes or Pari Passu Indebtedness
tendered in an Offer or a Pari Passu Offer, respectively and (iii) application,
as set forth in the preceding paragraphs, of Excess Proceeds in the business of
the Company and its Restricted Subsidiaries. Such Excess Proceeds may be
invested in Cash Equivalents; provided that the maturity date of any such
investment shall not be later than (A) in the event the amount of Excess
Proceeds equals $7,000,000 or more, the Offer Date, or (B) in any other event,
six months. The Company shall be entitled to any interest or dividends accrued,
earned or paid on such Cash Equivalents; provided that the Company shall not be
entitled to such interest, and shall not withdraw such interest from the
separate account, if an Event of Default has occurred and is continuing.
The Company will not, and will not permit any Restricted Subsidiary to,
create or permit to exist or become effective any restriction (other than
restrictions existing under (i) Indebtedness as in effect on the Issue Date as
such Indebtedness may be refinanced or replaced from time to time or (ii) any
Senior Indebtedness existing on the Issue Date or thereafter; provided that such
restrictions contained in such refinanced Indebtedness are no less favorable to
the holders of Notes than those existing on the date of the Indenture) that
would materially impair the ability of the Company to make an Offer to purchase
the Notes or, if such Offer is made, to pay for the Notes tendered for purchase.
The Company will comply with 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 the event that an Asset Sale occurs and the
Company is required to purchase Notes as described above. In the event that the
Company is prohibited by provisions of applicable law from purchasing Notes from
the holders thereof in an offer to purchase the Notes, the Company need not make
such offer so long as such prohibition is in effect. (Section 1014)
Restriction on Transfer of Assets. The Company will not sell, convey,
transfer or otherwise dispose of its assets or property to any of its
Subsidiaries, except for transactions permitted under the "Limitation on
Restricted Payments" covenant and sales, conveyances, transfers or other
dispositions (a) made in the ordinary course of business or (b) made to any
Wholly Owned Restricted Subsidiary, if such Wholly Owned Restricted Subsidiary
(x) simultaneously with such sale, conveyance, transfer or disposal executes and
delivers a supplemental indenture to the Indenture providing for the guarantee
of payment of the Notes by such Wholly Owned Restricted Subsidiary and setting
forth the terms and conditions pursuant to which the Trustee shall seek payment
under such a guarantee (such a guarantee shall be unconditional and shall be
subordinated to any guarantee of such Wholly Owned Restricted Subsidiary of
Senior Indebtedness of the Company and shall be subordinated to any other
Indebtedness of such Wholly Owned Restricted Subsidiary (which is not
subordinated to any other Indebtedness of such Wholly Owned Restricted
Subsidiary or which is designated by such Wholly Owned Restricted Subsidiary as
being senior in right of payment to such guarantee), in each case to the same
extent as the Notes are subordinated to the Senior Indebtedness of the Company
under the Indenture) and (y) waives, and will not in any manner whatsoever claim
or take the benefit or advantage of, any rights of reimbursement, indemnity or
subrogation or any rights against the
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Company or any other Subsidiary as a result of any payment by such Wholly Owned
Restricted Subsidiary under its Guarantee. (Section 1019)
Limitation on Issuance and Sale of Capital Stock by Restricted
Subsidiaries. The Company (i) will not permit any of its Restricted
Subsidiaries to issue any Capital Stock (other than to the Company or a Wholly
Owned Restricted Subsidiary of the Company) and (ii) will not permit any person
(other than the Company or a Wholly Owned Restricted Subsidiary of the Company)
to own any Capital Stock of any Restricted Subsidiary of the Company other than
with respect to (A) the limited partnership interests of SPT owned by certain
employees of SPT on the Issue Date and (B) the general and limited partnership
interests of SP Europe, so long as the Company shall be a general partner and
own at least 51% of the combined general and limited partnership interests
thereof. (Section 1015)
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into or suffer to exist any transaction or series of related transactions
(including, without limitation, the sale, transfer, disposition, purchase,
exchange or lease of assets, property or services) with, or for the benefit of,
any Affiliate of the Company (other than a Wholly Owned Restricted Subsidiary of
the Company) or any "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act) of 10% or more of the Company's Common Stock at any time
outstanding ("Interested Persons") except (i) on terms that are no less
favorable to the Company, or its Restricted Subsidiary, as the case may be, than
those which could have been obtained in a comparable transaction or transactions
on an arm's-length basis at such time from persons who are not Affiliates of the
Company or Interested Persons, (ii) with respect to a transaction or series of
transactions involving aggregate payments or value equal to or greater than
$10,000,000, (A) such transaction or series of transactions has been approved by
a majority of the disinterested members of the Board of Directors or the Company
has obtained a written opinion from a nationally recognized investment banking
firm stating that the terms of such transactions or series of transactions are
fair to the Company or its Restricted Subsidiary, as the case may be, from a
financial point of view, and (B) the Company shall have delivered an officer's
certificate to the Trustee certifying that such transaction or series of
transactions comply with the preceding clause (i), and (iii) with respect to any
transaction or series of transactions involving aggregate payments or value
equal to or greater than $1,000,000 and less than $10,000,000, the Company shall
have complied with the condition set forth in clause (ii)(B) above. This
covenant will not restrict the Company from (i) paying reasonable and customary
regular fees to directors of the Company who are not employees of the Company,
(ii) making loans or advances to employees and officers of the Company and its
Restricted Subsidiaries for bona fide business purposes of the Company in the
ordinary course of business consistent with past practice, (iii) the payment of
dividends in respect of the Company or any Restricted Subsidiary permitted under
the "--Limitation on Restricted Payments" covenant, or (iv) transactions
provided for under agreements in existence on the date of the Indenture and
listed on a schedule thereto. (Section 1016)
Limitation on 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 (a) pay dividends, in cash or otherwise,
or make any other distributions on or in respect of its Capital Stock or any
other interest or participation in, or measured by, its profits, (b) pay any
Indebtedness or other obligation owed to the Company or any other Restricted
Subsidiary of the Company, (c) make loans or advances to the Company or any
other Restricted Subsidiary of the Company, (d) transfer any of its properties
or assets to the Company or any other Restricted Subsidiary of the Company, or
(e) guarantee any Indebtedness of the Company or any other Restricted Subsidiary
of the Company, except for such encumbrances or restrictions existing under or
by reason of (i) any agreement or other instrument of a person acquired by the
Company or any Restricted Subsidiary of the Company in existence at the time of
such acquisition (but not created in contemplation thereof), 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, (ii) any encumbrance or restriction in the Bank Credit Agreement or
any other agreement as in effect on the date of the Indenture and listed on a
schedule thereto, and (iii) any encumbrance or restriction pursuant to any
agreement that extends, refinances, renews or replaces any agreement described
in clause (i) and (ii) above, which is not materially more restrictive or less
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favorable to the holders of Notes than those existing under the agreement being
extended, refinanced, renewed or replaced. (Section 1017)
Limitation on Guarantees by Restricted Subsidiaries. The Company will not
permit any Restricted Subsidiary, directly or indirectly, to assume, guarantee
or in any other manner become liable with respect to any Indebtedness of the
Company or any Guarantor, unless such Restricted Subsidiary is a Guarantor or
simultaneously executes and delivers a supplemental indenture providing for the
guarantee of payment of the Notes by such Restricted Subsidiary and waives, and
will not in any manner whatsoever claim or take the benefit or advantage of, any
rights of reimbursement, indemnity or subrogation or any other rights against
the Company or any other Restricted Subsidiary as a result of any payment by
such Restricted Subsidiary under its guarantee; provided, however, that in the
case of any guarantee of any Guarantor with respect to Senior Indebtedness, the
guarantee of the payment of the Notes by such Guarantor to be provided in
accordance herewith shall be subordinated to the guarantee with respect to such
Senior Indebtedness in the same manner and to the same extent as the Notes are
subordinated to such Senior Indebtedness. Each guarantee created pursuant to the
provisions described above is referred to as a "Guarantee" and the issuer of
each such Guarantee, so long as the Guarantee remains outstanding, is referred
to as a "Guarantor." (Sections 1018 and 1408)
Notwithstanding the foregoing, in the event that a Guarantor is released
from all obligations which pursuant to the first sentence of the preceding
paragraph obligate it to become a Guarantor, such Guarantor shall be released
from all obligations under its Guarantee (provided that the provisions of the
first sentence of the preceding paragraph shall apply anew in the event that
such Guarantor subsequent to being released incurs any obligations that pursuant
to such sentence obligate it to become a Guarantor). In addition, upon any sale
or disposition (by merger or otherwise) of any Guarantor by the Company or a
Restricted Subsidiary of the Company to any person that is not an Affiliate of
the Company or any of its Restricted Subsidiaries which is otherwise in
compliance with the terms of the Indenture, such Guarantor will be deemed to be
released from all obligations under its Guarantee; provided, however, that each
such Guarantor is sold or disposed of in accordance with the "--Disposition of
Proceeds of Asset Sales" covenant above; provided further that the foregoing
proviso shall not apply to the sale or disposition of a Guarantor in a
foreclosure to the extent that such proviso would be inconsistent with the
requirements of the Uniform Commercial Code. (Section 1018)
Limitation on Certain Other Subordinated Indebtedness. The Company will
not issue, directly or indirectly, any Indebtedness which is subordinated or
junior in ranking in any respect to Senior Indebtedness unless such Indebtedness
is expressly pari passu with or subordinated in right of payment to the Notes.
(Section 1020)
Reporting Requirements. The Company will file, to the extent permitted
under the Exchange Act, with the Commission the annual reports, quarterly
reports and other documents required to be filed with the Commission pursuant to
Sections 13 and 15 of the Exchange Act, whether or not the Company has a class
of securities registered under the Exchange Act. The Company will file with the
Trustee and provide to each holder of Notes copies of such reports and documents
within 15 days after it files them with the Commission or, if filing such
documents by the Company with the Commission is not permitted under the Exchange
Act, within 15 days after it would otherwise have been required to file such
reports and documents if permitted, in each case at the Company's cost. (Section
703)
MERGER, SALE OF ASSETS, ETC.
The Indenture will provide that the Company will not, in any transaction or
series of transactions, merge or consolidate with or into, or sell, assign,
convey, transfer, lease or otherwise dispose of all or substantially all of its
properties and assets as an entirety to, any person or persons, and that the
Company will not permit any of its Restricted Subsidiaries to enter into any
such transaction or series of transactions if such transaction or series of
transactions, in the aggregate, would result in a sale, assignment, conveyance,
transfer, lease or other disposition of all or substantially all of the
properties and assets of the Company or of the Company and its Restricted
Subsidiaries, taken as a whole, to any other person or persons, unless at the
time and after giving effect thereto (i) either (A) (1) if the transaction or
transactions is a merger or consolidation involving the Company, the Company
shall be the surviving person of such merger or consolidation or (2) if the
transaction
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or transactions is a merger or consolidation involving a Restricted Subsidiary
of the Company, such Restricted Subsidiary shall be the surviving person and
such surviving person shall be a Restricted Subsidiary of the Company or (B) (1)
the person formed by such consolidation or into which the Company or such
Restricted Subsidiary is merged or to which the properties and assets of the
Company or such Restricted Subsidiary, as the case may be, substantially as an
entirety, are transferred (any such surviving person or transferee person being
the "Surviving Entity") shall be a corporation organized and existing under the
laws of the United States of America, any state thereof or the District of
Columbia and (2) (x) in case of a transaction involving the Company, the
Surviving Entity shall expressly assume by a supplemental indenture executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Notes and the Indenture, and in each case,
the Indenture shall remain in full force and effect or (y) in the case of a
transaction involving a Restricted Subsidiary that is a Guarantor, the Surviving
Entity shall expressly assume by a supplemental indenture executed and delivered
to the Trustee, in form satisfactory to the Trustee, all of the obligations of
such Restricted Subsidiary under its Guarantee and related supplemental
indenture, and in each case, such Guarantee and supplemental indenture shall
remain in full force and effect; (ii) immediately before and immediately after
giving effect to such transaction or series of transactions on a pro forma basis
(including, without limitation, any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction or series of
transactions), no Default or Event of Default shall have occurred and be
continuing and the Company, or the Surviving Entity, as the case may be, after
giving effect to such transaction or series of transactions on a pro forma
basis, could incur $1.00 of additional Indebtedness under the "--Limitation on
Indebtedness" covenant described above (other than Permitted Indebtedness)
(assuming a market rate of interest with respect to such additional
Indebtedness); and (iii) immediately after giving effect to such transaction,
the Surviving Entity shall have a Consolidated Net Worth in an amount which is
not less than the Consolidated Net Worth of the Company or such Restricted
Subsidiary, as the case may be, immediately prior to such transaction; provided
that a Wholly Owned Restricted Subsidiary may consolidate with, or merge with or
into, or convey, transfer or lease all or substantially all its assets to, the
Company or another Wholly Owned Restricted Subsidiary. (Section 801)
In connection with any consolidation, merger, transfer, lease or other
disposition contemplated hereby, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance satisfactory to the Trustee, an
officers' certificate and an opinion of counsel, each stating that such
consolidation, merger, transfer, lease or other disposition and the supplemental
indenture, if any, in respect thereof comply with the requirements under the
Indenture. In addition, each Guarantor, if any, unless it is the other party to
the transaction or unless its Guarantee will be released and discharged in
accordance with its terms as a result of the transaction, will be required to
confirm, by supplemental indenture, that its Guarantee of the Notes will apply
to the obligations of the Company or the Surviving Entity under the Indenture.
(Section 801)
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of the Company in accordance with the foregoing, in which the
Company is not the continuing corporation, the successor corporation formed by
such a consolidation or into which the Company is merged or to which such
transfer is made, shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Indenture with the same effect
as if such successor corporation had been named as the Company therein. (Section
802)
EVENTS OF DEFAULT
The following will be "Events of Default" under the Indenture:
(i) default in the payment of the principal of, or premium, if any, when
due and payable, on any of the Notes (at its Stated Maturity, upon optional
redemption, required purchase or otherwise);
(ii) default in the payment of an installment of interest on any of the
Notes, when due and payable, and such default continues for a period of 30 days;
(iii) failure by the Company to make or consummate an offer in accordance
with "Certain Covenants-- Purchase of Notes upon Change of Control" or
"--Disposition of Proceeds of Asset Sales" above;
(iv) failure by the Company to comply with its obligations under "--Merger,
Sale of Assets, Etc." above;
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(v) failure by the Company to perform or observe any other term, covenant
or agreement contained in the Notes or the Indenture (other than a default
specified in clause (i), (ii), (iii) or (iv) above) for a period of 30 days
after written notice of such failure requiring the Company to remedy the same
shall have been given (x) to the Company by the Trustee or (y) to the Company
and the Trustee by the holders of 25% in aggregate principal amount of the Notes
then outstanding;
(vi) (A) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under which the
Company or any Restricted Subsidiary of the Company then has outstanding
indebtedness in excess of $10,000,000, individually or in the aggregate, and
either (i) such Indebtedness is already due and payable in full or (ii) such
default or defaults have resulted in the acceleration of the maturity of such
Indebtedness, or (B) failure to pay such Indebtedness beyond any applicable
grace period when such Indebtedness has been required to be prepaid or
repurchased (other than scheduled required prepayment) prior to the stated
maturity of such Indebtedness;
(vii) one or more judgments, orders or decrees of any court or regulatory
or administrative agency of competent jurisdiction for the payment of money in
excess of $10,000,000, individually or in the aggregate, shall be entered
against the Company or any Restricted Subsidiary of the Company or any of their
respective properties and shall not have been discharged or fully bonded, and
either (1) any creditor shall have commenced an enforcement proceeding upon such
judgment (other than a judgment that is stayed by pending appeal or otherwise)
or (2) there shall have been a period of 60 days after the date on which any
period for appeal has expired and during which a stay of enforcement of such
judgment, order or decree, shall not be in effect;
(viii) any Guarantee ceases to be in full force and effect (other than as
provided in the second paragraph under the "--Limitation on Guarantees of
Restricted Subsidiaries" covenant above) or is declared null and void, or any
Guarantor denies that it has any further liability under any Guarantee, or gives
notice to such effect (other than by reason of the termination of the Indenture
or the release of any such Guarantee in accordance with the Indenture); or
(ix) certain events of bankruptcy, insolvency or reorganization with
respect to the Company or any Significant Subsidiary of the Company or one or
more Subsidiaries of the Company which, in the aggregate, would constitute a
Significant Subsidiary shall have occurred. (Section 501)
If an Event of Default (other than as specified in clause (ix) above with
respect to the Company or any Significant Subsidiary) shall occur and be
continuing, the Trustee, by notice to the Company, or the holders of at least
25% in aggregate principal amount of the Notes then outstanding, by notice to
the Trustee and the Company, may declare the principal of, premium, if any, and
accrued and unpaid interest, if any, on all of the outstanding Notes due and
payable immediately, upon which declaration all amounts payable in respect of
the Notes shall be immediately due and payable. If an Event of Default specified
in clause (ix) above with respect to the Company or any Significant Subsidiary
occurs and is continuing, then the principal of, premium, if any, and accrued
and unpaid interest, if any, on all of the outstanding Notes shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any holder of Notes. (Section 502)
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of money due has been obtained by the Trustee,
the holders of a majority in aggregate principal amount of the outstanding
Notes, by written notice to the Company and the Trustee, may rescind such
declaration and its consequences if: (a) the Company has paid or deposited with
the Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee
under the Indenture and the reasonable compensation, expenses, disbursements,
and advances of the Trustee, its agents and counsel, (ii) all overdue interest
on all Notes, (iii) the principal of and premium, if any, on any Notes which
have become due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Notes, and (iv) to the extent that payment of
such interest is lawful, interest upon overdue interest and overdue principal at
the rate borne by the Notes which have become due otherwise than by such
declaration of acceleration; (b) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction; and (c) all Events of
Default, other than the non-payment of principal of, premium, if any, and
interest on the Notes that have become due solely by such declaration of
acceleration, have been cured or waived. (Section 502)
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The holders of not less than a majority in aggregate principal amount of
the outstanding Notes may on behalf of the holders of all the Notes waive any
past defaults under the Indenture except a default in the payment of the
principal of, premium, if any, or interest on any Note, or in respect of a
covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each Note affected. (Section 513)
No holder of any of the Notes has any right to institute any proceeding
with respect to the Indenture or any remedy thereunder, unless the holders of at
least 25% in aggregate principal amount of the outstanding Notes have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding within 30 days after receipt of such notice and the Trustee,
within such 30-day period, has not received directions inconsistent with such
written request by holders of a majority in aggregate principal amount of the
outstanding Notes. Such limitations do not apply, however, to a suit instituted
by a holder of a Note for the enforcement of the payment of the principal of,
premium, if any, or interest on, such Note on or after the respective due dates
expressed in such Note. (Sections 507 and 508)
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, whether or not an Event of Default shall occur and be continuing, the
Trustee under the Indenture is not under any obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
holders of the Notes unless such holders shall have offered to the Trustee
reasonable security or indemnity. Subject to certain provisions concerning the
rights of the Trustee, the holders of a majority in aggregate principal amount
of the outstanding Notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee under the Indenture. (Sections 602
and 512)
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee shall mail to each holder of the Notes notice of the
Default or Event of Default within 60 days after such occurrence. Except in the
case of a Default or an Event of Default in payment of principal of, premium, if
any, or interest on any Notes, the Trustee may withhold the notice to the
holders of such Notes if a committee of its trust officers in good faith
determines that withholding the notice is in the interest of the holders of the
Notes. (Section 601)
The Company is required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company of its obligations under the
Indenture and as to any default in such performance. The Company is also
required to notify the Trustee within ten days of any event which is, or after
notice or lapse of time or both would become, an Event of Default. (Sections
1008 and 1009)
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the obligations
of the Company with respect to the outstanding Notes ("defeasance"). Such
defeasance means that the Company shall be deemed to have paid and discharged
the entire Indebtedness represented by the then outstanding Notes, except for
(i) the rights of holders of outstanding Notes to receive payment in respect of
the principal of, premium, if any, and interest on such Notes when such payments
are due, (ii) the Company's obligations to issue temporary Notes, register the
transfer or exchange of any Notes, replace mutilated, destroyed, lost or stolen
Notes and maintain an office or agency for receipt of payments in respect of the
Notes, (iii) the rights, powers, trusts, duties and immunities of the Trustee,
and (iv) the defeasance provisions of the Indenture. In addition, the Company
may, at its option and at any time, elect to terminate its obligations with
respect to certain covenants that are set forth in the Indenture, some of which
are described under "--Certain Covenants" above, and any subsequent failure to
comply with such obligations shall not constitute a Default or an Event of
Default with respect to the Notes ("covenant defeasance"). (Sections 1201, 1202
and 1203)
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust for the benefit of
the holders of the Notes, cash in United States dollars, U.S. Government
Obligations (as defined in the Indenture), or a combination thereof, in such
amounts as will
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be sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest on
the outstanding Notes to redemption or maturity, (ii) the Company shall have
delivered to the Trustee an opinion of counsel to the effect that the holders of
the outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such defeasance or covenant defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance or covenant defeasance
had not occurred (in the case of defeasance, such opinion must refer to and be
based upon a ruling of the Internal Revenue Service or a change in applicable
federal income tax laws), (iii) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit or, insofar as clause
(ix) under the first paragraph under "Events of Default" is concerned, at any
time during the period ending the 91st day after the date of deposit, (iv) such
defeasance or covenant defeasance shall not cause the Trustee to have a
conflicting interest with respect to any securities of the Company, (v) such
defeasance or covenant defeasance shall not result in a breach or violation of,
or constitute a default under, any material agreement or instrument to which the
Company is a party or by which the Company is bound, (vi) the Company shall have
delivered to the Trustee an opinion of counsel to the effect that (A) the trust
funds will not be subject to any rights of holders of other Indebtedness,
including, without limitation, those arising under the Indenture and (B) after
the 91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally, (vii) the Company shall have delivered to
the Trustee an officers' certificate and an opinion of counsel, each stating
that all conditions precedent under the Indenture to either defeasance or
covenant defeasance, as the case may be, have been complied with and that no
violations under agreements governing any other outstanding Indebtedness would
result, (viii) the Company shall have delivered to the Trustee an officers'
certificate stating that the deposit was not made by the Company with intent of
preferring the holders of the Notes or any Guarantor over the other creditors of
the Company or any Guarantor with the intent of defeating, hindering or delaying
or defrauding creditors of the Company, any Guarantor or others and (ix) if the
Bank Credit Agreement is in effect, the Company shall have delivered to the
Trustee any required consent of the lenders under the Bank Credit Agreement to
such defeasance or covenant defeasance, as the case may be. (Section 1204)
SATISFACTION AND DISCHARGE
The Indenture will upon Company Request (as defined in the Indenture) be
discharged and will cease to be of further effect (except as to surviving rights
of registration of transfer or exchange of the Notes, as expressly provided for
in the Indenture) as to all outstanding Notes when (i) either (a) all the Notes
theretofore authenticated and delivered (except lost, stolen or destroyed Notes
which have been replaced or paid and Notes for which payment has theretofore
been deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust) have been
delivered to the Trustee for cancellation or (b) all Notes not theretofore
delivered to the Trustee for cancellation have become due and payable, and the
Company has irrevocably deposited or caused to be deposited with the Trustee
funds in trust solely for the benefit of holders in an amount in U.S. dollars
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be, (ii)
the making of such Company Request does not constitute a default under the
Indenture or any other material agreement to which the Company is a party or by
which it is bound, (iii) the Company has paid all other sums payable under the
Indenture by the Company, and (iv) the Company has delivered to the Trustee an
officers' certificate and an opinion of counsel stating that all conditions
precedent under the Indenture relating to the satisfaction and discharge of the
Indenture have been complied with. (Section 401)
AMENDMENTS AND WAIVERS
From time to time, the Company, when authorized by a resolution of its
Board of Directors, and the Trustee may, without the consent of the holders of
any outstanding Notes, amend, waive or supplement the Indenture or the Notes for
certain specified purposes, including, among other things, curing ambiguities,
defects or inconsistencies, complying with the Trust Indenture Act of 1939,
adding any Subsidiary of the Company as a Guarantor or making any change that
does not adversely affect the rights of any holder;
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provided, however, that the Company has delivered to the Trustee an opinion of
counsel stating that such change does not adversely affect the rights of any
holder of the Notes. Other amendments and modifications of the Indenture or the
Notes may be made by the Company and the Trustee with the consent of the holders
of not less than a majority of the aggregate principal amount of the outstanding
Notes; provided, however, that no such modification or amendment may, without
the consent of the holder of each outstanding Note affected thereby, (i) reduce
the principal amount of, extend the fixed maturity of or alter the redemption
provisions of, the Notes, (ii) change the currency in which the Notes or any
premium or the interest thereon is payable, (iii) reduce the percentage in
principal amount of outstanding Notes that must consent to an amendment,
supplement or waiver or consent to take any action under the Indenture, the
Notes or any Guarantee, (iv) impair the right to institute suit for the
enforcement of any payment on or with respect to the Notes, (v) waive a default
in payment with respect to the Notes, (vi) amend, change or modify the
obligation of the Company to make and consummate a Change of Control Offer in
the event of a Change of Control or make and consummate the offer with respect
to any Asset Sale or modify any of the provisions or definitions with respect
thereto, (vii) reduce or change the rate or time for payment of interest on the
Notes, (viii) modify or change any provision of the Indenture affecting the
subordination of the Notes or any Guarantee in a manner adverse to the holders
of the Notes, or (ix) release any Guarantor from any of its obligations under
its Guarantee or the Indenture other than in compliance with other provisions of
the Indenture permitting such release. (Sections 901 and 902)
THE TRUSTEE
The Bank of New York is to be the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the Notes.
GOVERNING LAW
The Indenture, the Notes and any Guarantee will be governed by the laws of
the State of New York, without regard to the principles of conflicts of law.
(Section 112)
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a person (a) assumed in
connection with an Asset Acquisition from such person or (b) existing at the
time such person becomes a Restricted Subsidiary of any other person, other than
Indebtedness incurred in connection with, or in contemplation of, such person
becoming a Restricted Subsidiary or such acquisition, as the case may be.
"Affiliate" means, with respect to any specified person, 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" when used with respect to any person means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative of the foregoing.
"Applicable Premium" means, with respect to a Note, the greater of (i) 1.0%
of the then outstanding principal amount of such Note and (ii) the excess of (A)
the present value of the required interest and principal payments due on such
Note, computed using a discount rate equal to the Treasury Rate plus basis
points, over (B) the then outstanding principal amount of such Note; provided,
however, that in no event will the Applicable Premium exceed the amount of the
applicable redemption price upon an optional redemption less 100%, at any time
on or after , 1998.
"Asset Acquisition" means (a) an Investment by the Company or any
Subsidiary of the Company in any other person pursuant to which such person
shall become a Restricted Subsidiary of the Company, or shall be merged with or
into the Company or any Restricted Subsidiary of the Company, or (b) the
acquisition by the Company or any Restricted Subsidiary of the Company of the
assets of any person which constitute all or substantially all of the assets of
such person or any division or line of business of such person.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger or consolidation)
to any person other than the Company or a Wholly Owned Restricted Subsidiary of
the Company, in one or a series of related transactions of: (a) any Capital
Stock of
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any Restricted Subsidiary of the Company, (b) all or substantially all of the
properties and assets of any division or line of business of the Company or any
Restricted Subsidiary of the Company or (c) any other properties or assets of
the Company or a Restricted Subsidiary (including proprietary brand names,
whether registered or otherwise) other than in the ordinary course of business.
For the purposes of this definition, the term "Asset Sale" shall not include (i)
any sale, issuance, conveyance, transfer, lease or other disposition of
properties or assets that is governed by the provisions described under
"--Merger, Sale of Assets, Etc.," (ii) sales of assets consisting of obsolete
equipment or assets that in the Company's reasonable judgment are either (x) no
longer used or (y) no longer useful in the business of the Company or its
Restricted Subsidiaries, (iii) any sale, issuance, conveyance, transfer, lease
or other disposition of properties or assets, whether in one transaction or a
series of related transactions, involving assets with a fair market value
determined by the Company to be not in excess of $500,000, or (iv) any sales or
financings of accounts or lease receivables pursuant to clause (12), (13) or
(14) of the definition of "Permitted Indebtedness."
"Average Life to Stated Maturity" means, with respect to any Indebtedness,
as at any date of determination, the quotient obtained by dividing (a) the sum
of the products of (i) the number of years from such date to the date or dates
of each successive scheduled principal payment (including, without limitation,
any sinking fund requirements) of such Indebtedness multiplied by (ii) the
amount of each such principal payment by (b) the sum of all such principal
payments.
"Bank Credit Agreement" means (a) the Credit Agreement dated as of March
24, 1994 among the Company, the Banks and The First National Bank of Chicago, as
agent for the Banks, as in effect on the Issue Date and as such agreement may be
amended, supplemented or otherwise modified from time to time, and (b) any
credit agreement, loan agreement, note purchase agreement, indenture or other
agreement, document or instrument refinancing, refunding or otherwise replacing
such Agreement or any other agreement deemed a Bank Credit Agreement under
clause (a) or (b) hereof.
"Banks" means the lenders from time to time who are parties to the Bank
Credit Agreement.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations, rights in or other equivalents or interests in
(however designated) such person's capital stock or other equity interests or
participations, including general and limited partnership interests, and any
rights (other than debt securities convertible into capital stock), warrants or
options exchangeable for or convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be classified and
accounted for as a capital lease obligation under GAAP; and, for the purpose of
the Indenture, the amount of such obligation at any date shall be the
capitalized amount thereof on the balance sheet at such date, determined in
accordance with GAAP consistently applied.
"Cash Equivalents" means, at any time : (i) any evidence of Indebtedness
with a maturity of 180 days or less issued, or directly and fully guaranteed or
insured, by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of America
is pledged in support thereof); (ii) certificates of deposit, time deposits and
bankers' acceptances with a maturity of 180 days or less of any financial
institution that is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than $500,000,000; (iii)
commercial paper with a maturity of 90 days or less issued by a corporation that
is not an Affiliate of the Company or a Subsidiary organized under the laws of
any state of the United States or the District of Columbia and rated at least
A-1 by S&P or at least P-1 by Moody's or at least an equivalent rating category
of another nationally recognized securities rating agency; and (iv) any money
market or other deposit accounts issued or offered by any domestic institution
in the business of accepting money market accounts or any commercial banking
institution described in clause (ii) above.
"Change of Control" means an event as a result of which: (i) any "person"
or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of more than 50 % of the total
outstanding Voting Stock of the Company; (ii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of the Company (together with any new directors whose
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election to such Board or whose nomination for election by the shareholders of
the Company was approved by a vote of 66 2/3% of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of such Board of Directors then in office; (iii)
the Company consolidates with or merges with or into any person or conveys,
transfers or leases all or substantially all of its assets to any person, or any
corporation consolidates with or merges into or with the Company in any such
event pursuant to a transaction in which the outstanding Voting Stock of the
Company is changed into or exchanged for cash, securities or other property,
other than any such transaction where the outstanding Voting Stock of the
Company is not changed or exchanged at all (except to the extent necessary to
reflect a change in the jurisdiction of incorporation of the Company) or where
(A) the outstanding Voting Stock of the Company is changed into or exchanged for
(x) Voting Stock of the surviving corporation which is not Redeemable Capital
Stock or (y) cash, securities and other property (other than Capital Stock of
the surviving corporation) in an amount which could be paid by the Company as a
Restricted Payment as described under "--Certain Covenants--Limitation on
Restricted Payments" (and such amount shall be treated as a Restricted Payment
subject to the provisions in the Indenture described under "--Certain
Covenants--Limitation on Restricted Payments") and (B) no "person" or "group"
owns immediately after such transaction, directly or indirectly, more than 50 %
of the total outstanding Voting Stock of the surviving corporation; or (iv) the
Company is liquidated or dissolved or adopts a plan of liquidation or
dissolution other than in a transaction which complies with the provisions
described under "--Merger, Sale of Assets, Etc."
"Common Stock" means, with respect to any person, any and all shares,
interests or other participation in, and other equivalents (however designated
and whether voting or nonvoting) of, such person's common stock, whether
outstanding at the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Consolidated EBITDA" means, with respect to any person for any period, (i)
the sum of, without duplication, the amount for such period, taken as a single
accounting period, of (a) Consolidated Net Income, (b) Consolidated Non-cash
Charges, (c) Consolidated Interest Expense, (d) Consolidated Income Tax Expense
and (e) any increase in the Employee Liabilities of such person and its
Restricted Subsidiaries for such period less any decrease in the Employee
Liabilities of such period, which have been deducted to arrive at Consolidated
Net Income less (ii) non-cash items increasing Consolidated Net Income (other
than in the ordinary course of business); provided, however, that if, during
such period, such person or any of its Restricted Subsidiaries shall have
consummated any Asset Sale or Asset Acquisition, Consolidated EBITDA for such
person and its Restricted Subsidiaries for such period shall be adjusted (in the
manner set forth in the definition of the term "Consolidated Fixed Charge
Coverage Ratio") to give pro forma effect to the Consolidated EBITDA directly
attributable to the assets which are the subject of such Asset Sales or Asset
Acquisitions during such period.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
person, the ratio of the aggregate amount of Consolidated EBITDA of such person
for the four full fiscal quarters for which financial information in respect
thereof is available immediately preceding the date of the transaction (the
"Transaction Date") giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (such four full fiscal quarter period being referred to
herein as the "Four Quarter Period") to the aggregate amount of Consolidated
Fixed Charges of such person for the Four Quarter Period. In addition to and
without limitation of the foregoing, for purposes of this definition
"Consolidated EBITDA" and "Consolidated Fixed Charges" shall be calculated after
giving effect on a pro forma basis for the period of such calculation to,
without duplication, (a) the incurrence of any Indebtedness of such person or
any of its Restricted Subsidiaries during the period commencing on the first day
of the Four Quarter Period to and including the Transaction Date (the "Reference
Period"), including, without limitation, the incurrence of the Indebtedness
giving rise to the need to make such calculation, as if such incurrence occurred
on the first day of the Reference Period, and (b) any Asset Sales or Asset
Acquisitions (including, without limitation, any Asset Acquisition giving rise
to the need to make such calculation as a result of such person or one of its
Restricted Subsidiaries (including any person who becomes a Subsidiary as a
result of the Asset Acquisition) incurring, assuming or otherwise being liable
for Acquired Indebtedness) occurring during the Reference Period, as if such
Asset Sale or Asset Acquisition occurred on the first day of the Reference
Period. Furthermore, in calculating "Consolidated
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Fixed Charges" for purposes of determining the denominator (but not the
numerator) of this "Consolidated Fixed Charge Coverage Ratio," (i) interest on
outstanding Indebtedness determined on a fluctuating basis as of the Transaction
Date and which will continue to be so determined thereafter shall be deemed to
have accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date, (ii) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Reference Period; and (iii) notwithstanding clauses (i) and (ii) above, interest
on Indebtedness determined on a fluctuating basis, to the extent such interest
is covered by agreements relating to Interest Rate Protection Obligations, shall
be deemed to have accrued at the rate per annum resulting after giving effect to
the operation of such agreements. In calculating the Consolidated Fixed Charge
Coverage Ratio, and giving pro forma effect to any incurrence of Indebtedness
during a Reference Period, pro forma effect shall be given to the use of
proceeds thereof to permanently repay or retire Indebtedness. If such person or
any of its Restricted Subsidiaries directly or indirectly guaranteed
Indebtedness of a third person, the above clauses shall give effect to the
incurrence of such guaranteed Indebtedness as if such person or such Restricted
Subsidiary had directly incurred or otherwise assumed such guaranteed
Indebtedness.
"Consolidated Fixed Charges" means, with respect to any person for any
period, the sum of, without duplication, the amounts for such period of (i)
Consolidated Interest Expense and (ii) the aggregate amount of dividends and
other distributions paid or accrued during such period in respect of Redeemable
Capital Stock of such person and its Restricted Subsidiaries on a consolidated
basis; provided, however, that if, during such period, such person or any of its
Restricted Subsidiaries shall have made any Asset Sales or Asset Acquisitions,
Consolidated Fixed Charges for such person and its Restricted Subsidiaries for
such period shall be adjusted (in the manner set forth in the definition of the
term "Consolidated Fixed Charge Coverage Ratio") to give pro forma effect to the
Consolidated Fixed Charges directly attributable to the assets which are the
subject of such Asset Sales or Asset Acquisitions during such period.
"Consolidated Income Tax Expense" means, with respect to any person for any
period, the provision for federal, state, local and foreign income taxes of such
person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP consistently applied.
"Consolidated Interest Expense" means, with respect to any person for any
period, without duplication, the sum of (i) the interest expense of such person
and its Restricted Subsidiaries for Indebtedness for such period as determined
on a consolidated basis in accordance with GAAP consistently applied, including,
without limitation, (a) any amortization of debt discount, (b) the net cost
under Interest Rate Protection Obligations (including any amortization of
discounts), (c) the interest portion of any deferred payment obligation which in
accordance with GAAP is required to be reflected on an income statement, (d) all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, (e) all accrued interest and (f)
that portion of rental expense estimated to be representative of the interest
factor and (ii) the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by such person and its Restricted
Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP consistently applied.
"Consolidated Net Income" means, with respect to any person, for any
period, the consolidated net income (or loss) of such person and its Restricted
Subsidiaries for such period as determined in accordance with GAAP consistently
applied adjusted, to the extent included in calculating such net income, by
excluding, without duplication, (i) all extraordinary gains or losses (net of
fees and expenses relating to the transaction giving rise thereto) and the
non-recurring cumulative effect of accounting changes, (ii) the portion of net
income (or loss) of such person and its Restricted Subsidiaries allocable to
minority interests in unconsolidated persons to the extent that cash dividends
or distributions have not actually been received by such person or one of its
Restricted Subsidiaries, (iii) net income (or loss) of any person combined with
such person or one of its Restricted Subsidiaries on a "pooling of interests"
basis attributable to any period prior to the date of combination, (iv) gains or
losses in respect of any Asset Sales by such person or one of its Restricted
Subsidiaries (net of fees and expenses relating to the transaction giving rise
thereto), on an after-tax basis, (v) the net income of any Restricted Subsidiary
of such person to the extent that the declaration or payment
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of dividends or similar distributions by that Restricted Subsidiary of that
income is not at the time permitted, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulations applicable to that Restricted
Subsidiary or its stockholders, (vi) gains or losses realized upon the
termination of any employee pension benefit plan, on an after-tax basis and
(vii) a non-recurring charge relating to the write off of goodwill of the
Company's Automotive Diagnostics division, recorded on the Company's
consolidated balance sheet in accordance with GAAP, in an aggregate amount not
to exceed $75,000,000.
"Consolidated Net Worth" means, with respect to any person at any date, the
consolidated stockholders' equity of such person less the amount, if any, of
such stockholders' equity attributable to Redeemable Capital Stock or treasury
stock of such person and its Restricted Subsidiaries, as determined in
accordance with GAAP consistently applied.
"Consolidated Non-cash Charges" means, with respect to any person for any
period, the aggregate depreciation, amortization and other non-cash expenses
(including, without limitation, non-cash reserves and non-cash charges) of such
person and its Restricted Subsidiaries reducing Consolidated Net Income of such
person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP consistently applied (but only to the
extent such non-cash reserves, expenses and charges did not require an accrual
of a reserve for cash disbursements for any future periods).
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness under
the Bank Credit Agreement and (ii) any other Senior Indebtedness which, at the
time of determination, has an aggregate principal amount outstanding, together
with any commitments to lend additional amounts, of at least $25,000,000 and is
specifically designated by the Company, with the consent of the agent for the
Banks under the Bank Credit Agreement, in its sole discretion, if such agreement
is then in effect, in the instrument evidencing such Senior Indebtedness or the
agreement under which such Senior Indebtedness arises as "Designated Senior
Indebtedness."
"Employee Liabilities" means, with respect to any person, any liability in
respect of employee benefits that would be reflected on a consolidated balance
sheet of such person and its Restricted Subsidiaries prepared in accordance with
GAAP.
"Event of Default" has the meaning set forth under "--Events of Default"
herein.
"Existing Receivables Financing" means obligations of the Company incurred
or issued pursuant to the terms of those certain agreements, each dated as of
April 30, 1991, between the Company and each of The First National Bank of
Chicago and Falcon Asset Securitization Corporation.
"GAAP" means generally accepted accounting principles in the United States
set forth in the Statements of Financial Accounting Standards and
Interpretations, Accounting Principles Board Opinions and AICPA Accounting
Research Bulletins which are applicable as of the Issue Date.
"Guarantee" has the meaning set forth under "--Limitation on Guarantees by
Restricted Subsidiaries" herein.
"guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantor" means the issuer at any time of a Guarantee (so long as such
Guarantee remains outstanding).
"Incremental Receivables Financing" means obligations of the Company
incurred or issued pursuant to an increase in the Existing Receivables Financing
or pursuant to a separate securitized receivables facility
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incurred or issued on commercially reasonable terms and conditions for similar
financing transactions and negotiated on an arm's-length basis from an
unaffiliated lender.
"Indebtedness" means, with respect to any person, without duplication, (a)
all liabilities of such person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities incurred in the ordinary course of business, but including,
without limitation, all obligations, contingent or otherwise, of such person in
connection with any letters of credit, banker's acceptance or other similar
credit transaction, (b) all obligations of such person evidenced by bonds,
notes, debentures or other similar instruments, (c) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such person (even if 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), but excluding trade accounts payable
arising in the ordinary course of business, (d) all Capitalized Lease
Obligations of such person, (e) all Indebtedness referred to in the preceding
clauses of other persons and all dividends of other persons, the payment of
which is secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon
property (including, without limitation, accounts and contract rights) owned by
such person, even though such person has not assumed or become liable for the
payment of such Indebtedness (the amount of such obligations being deemed to be
the lesser of the value of such property or asset or the amount of the
obligation so secured), (f) all guarantees of Indebtedness referred to in this
definition by such person, (g) all Redeemable Capital Stock valued at the
greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued dividends, (h) all obligations under or in respect of currency exchange
contracts and Interest Rate Protection Obligations of such person (i) repurchase
obligations or liabilities of such person with respect to accounts receivable or
notes receivable sold by such person, (j) obligations incurred under or in
connection with the Existing Receivables Financing or any Incremental
Receivables Financing, notwithstanding the manner in which such obligations are
characterized on a balance sheet of the Company prepared in accordance with
GAAP, provided that, for purposes of calculating financial tests hereunder, such
obligations shall be included only to the extent such obligations are with
recourse to the Company or any of its Restricted Subsidiaries, and (k) with
respect to SPX Credit Corporation, obligations incurred under or in connection
with any SPX Credit Lease Financing, notwithstanding the manner in which such
obligations are characterized on a balance sheet of the Company and its
Restricted Subsidiaries prepared in accordance with GAAP, provided that, for
purposes of calculating financial tests hereunder, such obligations shall be
excluded as Indebtedness, and (l) any amendment, supplement, modification,
deferral, renewal, extension or refunding of any liability of the types referred
to in clauses (a) through (l) above. For purposes hereof, (x) the "maximum fixed
repurchase price" of any Redeemable Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on
any date on which Indebtedness shall be required to be determined pursuant to
the Indenture, and if such price is based upon, or measured by, the fair market
value of such Redeemable Capital stock, such fair market value shall be
determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock, and (y) Indebtedness is deemed to be incurred pursuant
to a revolving credit facility each time an advance is made thereunder.
"Interest Rate Protection Obligations" means the obligations of any person
pursuant to any arrangement with any other person whereby, directly or
indirectly, such person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Investment" means, with respect to any person, any direct or indirect loan
or other extension of credit, advance, guarantee or capital contribution to (by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase or
acquisition by such person of any Capital Stock, bonds, notes, debentures or
other securities or evidences of Indebtedness issued by, any other person. For
the purpose of making any calculations under the Indenture (i) Investment shall
include the person's proportionate share of the fair market value of the net
assets of any Restricted Subsidiary at the time that such Restricted Subsidiary
is designated an Unrestricted Subsidiary and shall exclude the
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person's proportionate share of the fair market value of the net assets of any
Unrestricted Subsidiary that is designated a Restricted Subsidiary and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
fair market value at the time of such transfer; provided that, in each case, the
fair market value of an asset or property shall be as determined by the Board of
Directors of the Company in good faith. For purposes of the Indenture, the
change in designation of a Restricted Subsidiary to an Unrestricted Subsidiary
shall be an Investment. "Investments" shall exclude extensions of trade credit
on commercially reasonable terms consistent with the normal course of business
of the Company and the Restricted Subsidiaries.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance upon or with respect to any property of any
kind. A person shall be deemed to own subject to a Lien any property which such
person has acquired or holds subject to the interest of a vendor or lessor under
any conditional sale agreement, capital lease or other title retention
agreement.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Restricted Subsidiary of the Company) net of
(i) brokerage commissions and other fees and expenses (including, without
limitation, fees and expenses of legal counsel and investment bankers) related
to such Asset Sale, (ii) provisions of all taxes payable as a result of such
Asset Sale, (iii) amounts required to be paid and which have been paid, or
amounts required to be pledged and which are pledged to repay or secure
Indebtedness owed to any person (other than the Company or any Restricted
Subsidiary of the Company) owning a beneficial interest in the assets subject to
the Asset Sale (which, in the case of a Lien, is being pledged to permanently
reduce Indebtedness secured by such Lien) and (iv) appropriate amounts to be
provided by the Company or any Restricted Subsidiary of the Company, as the case
may be, as a reserve required in accordance with GAAP consistently applied
against any liabilities associated with such Asset Sale and retained by the
Company or any Restricted Subsidiary of the Company, as the case may be, after
such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as reflected in an Officers' Certificate delivered to the
Trustee.
"Pari Passu Indebtedness" means any Indebtedness of the Company that is
pari passu in right of payment to the Notes.
"Permitted Indebtedness" means
(1) Indebtedness of the Company under the Bank Credit Agreement in an
aggregate principal amount at any one time outstanding not to exceed
$225,000,000;
(2) Indebtedness of the Company (including, without limitation,
Indebtedness under the Bank Credit Agreement in excess of the $225,000,000
permitted in clause (1) above) that is intended to provide working capital
financing or financing for general corporate purposes as long as the incurrence
of such Indebtedness would not result in the aggregate outstanding Indebtedness
incurred pursuant to this clause (2) being in excess of (i) the sum of (x) 60%
of the net aggregate book value of inventory and (y) 85% of the aggregate book
value of all accounts and lease receivables (net of bad debt expense) of the
Company and its Restricted Subsidiaries on a consolidated basis, at the time
such Indebtedness is incurred, as determined in accordance with GAAP minus (ii)
$225,000,000;
(3) Indebtedness of the Company pursuant to the Notes and Indebtedness of
any Subsidiary pursuant to a Guarantee;
(4) Indebtedness of the Company outstanding on the date of the Indenture
other than Indebtedness pursuant to clauses (1) and (12), (13) and (14) hereof;
(5) Interest Rate Protection Obligations of the Company covering
Indebtedness of the Company; provided, however, that (i) any Indebtedness to
which any such Interest Rate Protection Obligations relate bears interest at
fluctuating interest rates and is otherwise permitted to be incurred under this
covenant and
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(ii) the notional amount of any such Interest Rate Obligations does not exceed
the principal amount of the Indebtedness to which such Interest Rate Obligations
relates and which Indebtedness either is outstanding at the time the Interest
Rate Protection Obligation is incurred or such Indebtedness is incurred within
90 days thereafter;
(6) Indebtedness of a Wholly Owned Restricted Subsidiary of the Company
issued to and held by (x) the Company or (y) another Wholly Owned Restricted
Subsidiary of the Company; provided, however, that any Indebtedness of a
Guarantor owing to a Wholly Owned Restricted Subsidiary which is not a Guarantor
shall be subordinated in right of payment from and after such time as the
obligations under the Guarantee by such Wholly Owned Restricted Subsidiary shall
become due and payable (whether at Stated Maturity, by acceleration or
otherwise) to the payment and performance of such Wholly Owned Restricted
Subsidiary's obligations under its Guarantee; and provided, further, that (a)
any disposition, pledge or transfer of any such Indebtedness to a person (other
than the Company or a Wholly Owned Restricted Subsidiary) shall be deemed to be
an incurrence of such Indebtedness by the obligor not permitted by this clause;
and (b) any transaction pursuant to which a Wholly Owned Restricted Subsidiary,
which has Indebtedness owing to the Company or any other Wholly Owned
Subsidiary, ceases to be a Wholly Owned Subsidiary shall be deemed to be the
incurrence of Indebtedness by such Wholly Owned Restricted Subsidiary that is
not permitted by this clause;
(7) Indebtedness of the Company issued to and held by a Wholly Owned
Restricted Subsidiary of the Company which is unsecured and subordinated in
right of payment from and after such time as the Notes shall become due and
payable (whether at a Stated Maturity, by acceleration or otherwise) to the
payment and performance of the Company's obligations under the Indenture and the
Notes; provided, however, that any subsequent transfer of such Indebtedness
(other than to the Company or a Wholly Owned Restricted Subsidiary) will be
deemed, in each case, to constitute the issuance of such Indebtedness by the
Company or of such Indebtedness by such Wholly Owned Restricted Subsidiary that
is not permitted by this clause;
(8) Indebtedness of the Company or any Restricted Subsidiary incurred in
respect of performance bonds, surety bonds and bankers' acceptances provided in
the ordinary course of business;
(9) Indebtedness of the Company or any Restricted Subsidiary representing
Capitalized Lease Obligations or incurred in connection with the acquisition of
fixed assets useful and intended to be used in carrying on the business of the
Company or any such Restricted Subsidiary as long as the aggregate amount
outstanding of such Indebtedness incurred pursuant to this clause would not at
any time exceed $10,000,000;
(10) Indebtedness of the Company or any Restricted Subsidiary arising from
the honoring by a bank or other financial institution of a check, draft or
similar instrument inadvertently (except in the case of daylight overdrafts)
drawn against insufficient funds in the ordinary course of business; provided
that such Indebtedness is extinguished within five business days of incurrence;
(11) Indebtedness of the Company or any Restricted Subsidiary consisting of
guaranties, indemnities or obligations in respect of purchase price adjustments
in connection with the acquisition or disposition of assets permitted under the
Indenture;
(12) Indebtedness of the Company pursuant to the Existing Receivables
Financing;
(13) Indebtedness of the Company pursuant to an Incremental Receivables
Financing, so long as (i) at the time such Indebtedness is incurred and after
giving effect thereto, no Default or Event of Default has occurred and is
continuing, and (ii) the aggregate amount of such Indebtedness permitted under
this clause (13) shall not exceed at any one time outstanding an amount equal to
(x) $50,000,000 minus (y) the aggregate amount outstanding under the Existing
Receivables Financing minus (z) the aggregate amount outstanding of any
Indebtedness consisting of an SPX Credit Lease Financing incurred pursuant to
clause (14) below;
(14) Indebtedness of SPX Credit Corporation pursuant to an SPX Credit Lease
Financing, so long as (i) at the time such Indebtedness is incurred and after
giving effect thereto, no Default or Event of Default has occurred and is
continuing, and (ii) the aggregate amount of such Indebtedness permitted under
this clause (14) shall not exceed at any one time outstanding an amount equal to
(x) $50,000,000 minus (y) the aggregate amount outstanding under the Existing
Receivables Financing minus (z) the aggregate amount
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outstanding of any Indebtedness consisting of an Incremental Receivables
Financing incurred pursuant to clause (13) above;
(15) (i) Indebtedness of the Company, the proceeds of which are used solely
to refinance (whether by amendment, renewal, extension or refunding)
Indebtedness of the Company (including all or a portion of the Notes) or any of
its Restricted Subsidiaries and (ii) Indebtedness of any Restricted Subsidiary
of the Company the proceeds of which are used solely to refinance (whether by
amendment, renewal, extension or refunding) Indebtedness of such Restricted
Subsidiary, in each case outstanding on the Issue Date and other than the
Indebtedness to be refinanced, redeemed or retired as described under "Use of
Proceeds" herein; provided, however, that (A) the principal amount of
Indebtedness incurred pursuant to this clause (15) (or, if such Indebtedness
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the maturity thereof, the original
issue price of such Indebtedness) shall not exceed the sum of the principal
amount of Indebtedness so refinanced (or, if the Indebtedness so refinanced
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the maturity thereof, the original
issue price of such Indebtedness plus any accretion value attributable thereto
since the original issuance of such Indebtedness) plus the amount of any premium
required to be paid in connection with such refinancing pursuant to the terms of
such Indebtedness or the amount of any premium reasonably determined by the
Company as necessary to accomplish such refinancing by means of a tender offer
or privately negotiated purchase, plus the amount of expenses in connection
therewith and (B) in the case of any refinancing of Indebtedness that is not
Senior Indebtedness, (1) such new Indebtedness is made subordinated to the Notes
in the same manner and at least to the same extent as the Indebtedness being
refinanced and (2) such new Indebtedness has an Average Life to Stated Maturity
and final Stated Maturity of principal that equals or exceeds the Average Life
to Stated Maturity and final Stated Maturity of principal, respectively, of the
Indebtedness being refinanced;
(16) Indebtedness of the Company (including without limitation Indebtedness
under the Bank Credit Agreement in excess of the amount permitted by clauses (1)
and (2) above) in addition to that described in clauses (1) through (15) above
not to exceed $25,000,000 outstanding at any time in the aggregate; or
(17) Indebtedness of any Subsidiary of the Company pursuant to a guarantee
of the obligations of the Company under the Bank Credit Agreement.
Any accounts or lease receivables used for the purposes of computing the
amount of available Indebtedness under clause (2) above shall not be used or
pledged in connection with the incurrence of Indebtedness under clauses (12),
(13) and (14) above and vice versa.
"Permitted Investment" means any of the following: (i) Investments by the
Company or any Wholly Owned Restricted Subsidiary of the Company in another
person, if as a result of such Investment such other person is merged or
consolidated with or into, or transfers or conveys all or substantially all of
its assets to the Company or such Wholly Owned Restricted Subsidiary; (ii)
Investments in short-term obligations of, or fully guaranteed by, the United
States of America; (iii) Investments in commercial paper rated "P-1" or better
by Moody's or "A-1" or better by S&P; (iv) Investments in certificates of
deposit issued by and time deposits with commercial banks (whether domestic or
foreign) in excess of $100,000,000; (v) Investments in any mutual fund organized
under the Investment Company Act of 1940 or money market fund organized under
the laws of the United States of America or any state thereof which invests only
in instruments described in clause (ii), (iii) or (iv) above or (vii) below;
(vi) Investments representing Capital Stock or obligations issued to the Company
or any of its Restricted Subsidiaries in settlement of claims against any other
person by reason of a composition or readjustment of debt or a reorganization of
any debtor of the Company or of such Restricted Subsidiary; (vii) Investments in
Cash Equivalents; (viii) loans and advances to employees and officers of the
Company and its Restricted Subsidiaries made in compliance with clause (ii) of
the second sentence under the covenant "--Limitation on Transactions with
Affiliates" described above; (ix) Investments by the Company or a Wholly Owned
Restricted Subsidiary in the Capital Stock of a Wholly Owned Restricted
Subsidiary; (x) Investments in any of the Notes; (xi) receivables owing to the
Company or any Restricted Subsidiary created in the ordinary course of business;
and (xii) Investments in any person in addition to that described in clauses (i)
through (xi) of this definition of "Permitted Investments" not to exceed
$10,000,000 in the aggregate at any time outstanding.
63
<PAGE> 65
"person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock" means, with respect to any person, any and all shares,
interests, participation or other equivalents (however designated) of such
person's preferred or preference stock whether now outstanding or issued after
the Issue Date, and including, without limitation, all classes and series of
preferred or preference stock of such person.
"Public Equity Offering" means an underwritten public offering of Capital
Stock of the Company pursuant to a registration statement that has been declared
effective by the Commission pursuant to the Securities Act (other than a
registration statement on Form S-8 or any successor form thereto or otherwise
relating to equity securities issuable under any employee benefit plan of such
corporate entity); provided that the gross proceeds to the Company therefrom are
at least $50,000,000.
"Redeemable Capital Stock" means any class or series of Capital Stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise, is, or upon the happening of an
event or passage of time would be, required to be redeemed prior to any Stated
Maturity of the Notes or is redeemable at the option of the holder thereof at
any time prior to any Stated Maturity of the Notes, or, at the option of the
holder thereof, is convertible into or exchangeable for debt securities at any
time prior to any Stated Maturity of the Notes.
"Restricted Payment" has the meaning set forth under "--Limitation on
Restricted Payments" covenant above.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"SPX Credit Lease Financings" means secured or unsecured obligations of SPX
Credit Corporation which are in the nature of sales or pledges of undivided
interests in a pool of leases of SPX Credit Corporation (including any such
leases which have been transferred to SPX Credit Corporation by the Company or
any of its other Subsidiaries in the ordinary course of business consistent with
past practices) and which are (a) non-recourse to the Company and its other
Subsidiaries and (b) otherwise incurred on commercially reasonable terms and
conditions for similar financing transactions and are negotiated on an
arm's-length basis from an unaffiliated lender and (c) permitted under clause
(14) of the definition of Permitted Indebtedness.
"S&P" means Standard & Poor's Corporation and its successors.
"Senior Indebtedness" means the principal of, premium, if any, and interest
on any Indebtedness of the Company, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the generality
of the foregoing, "Senior Indebtedness" shall also include all obligations of
the Company, whether outstanding on the Issue Date or thereafter created,
incurred or assumed, under or in respect of the Bank Credit Agreement, whether
for principal, interest (including interest accruing after the filing of a
petition initiating any proceeding under any state, federal or foreign
bankruptcy laws whether or not allowable in such proceeding), reimbursement of
amounts drawn under letters of credit issued or arranged for pursuant thereto,
obligations owed to the Banks with respect to Interest Rate Protection
Obligations incurred to satisfy the requirements of the Bank Credit Agreement or
otherwise and reimbursement of other amounts, guarantees in respect thereof, and
all charges, fees, expenses and other amounts in respect of the Bank Credit
Agreement incurred by the Banks in respect of the Bank Credit Agreement.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include (a)
Indebtedness evidenced by the Notes, (b) Indebtedness that is expressly
subordinate or junior in right of payment to any Indebtedness of the Company,
(c) Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is by its terms without
recourse to the Company, (d) any repurchase, redemption or other obligation in
respect of Redeemable Capital Stock, (e) to the extent it might constitute
Indebtedness, amounts owing for goods, materials or services purchased in the
ordinary course of business or consisting of trade payables or other current
liabilities (other than any current liabilities owing under the Bank Credit
Agreement or the current portion of any long-term Indebtedness which would
constitute Senior
64
<PAGE> 66
Indebtedness but for the operation of this clause (e)), (f) to the extent it
might constitute Indebtedness, amounts owed by the Company for compensation to
employees or for services rendered to the Company, (g) to the extent it might
constitute Indebtedness, any liability for federal, state, local or other taxes
owed or owing by the Company, (h) Indebtedness of the Company to a Subsidiary of
the Company or any other Affiliate of the Company or any of such Affiliate's
Subsidiaries and (i) that portion of any Indebtedness which at the time of
issuance is issued in violation of the Indenture.
"Significant Subsidiary" shall have the same meaning as in Rule 1.02(v) of
Regulation S-X under the Securities Act, provided that each Guarantor shall in
all events be deemed a Significant Subsidiary.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which any principal of such Note or such installment of interest is due
and payable, and when used with respect to any other Indebtedness or any
installments of interest thereon, means any date specified in the instrument
governing such Indebtedness as the fixed date on which the principal of such
Indebtedness, or such installment of interest thereon, is due and payable.
"Subordinated Indebtedness" means, with respect to the Company,
Indebtedness of the Company which is expressly subordinated in right of payment
to the Notes or, with respect to any Guarantor, Indebtedness of such Guarantor
which is expressly subordinated in right of payment to the Guarantee of such
Guarantor.
"Subsidiary" means, with respect to any person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such person, by one or more Subsidiaries of such person or by such person and
one or more Subsidiaries of such person and (ii) any other person (other than a
corporation), including, without limitation, a joint venture or partnership, in
which such person, one or more Subsidiaries of such person or such person and
one or more Subsidiaries of such person, directly or indirectly, at the date of
determination thereof, has at least a majority ownership interest entitled to
vote in the election of directors, managers or trustees thereof (or other person
performing similar functions). For purposes of this definition, any directors'
qualifying shares or investments by foreign nationals mandated by applicable law
shall be disregarded in determining the ownership of a Subsidiary.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two business days prior to the date fixed
for redemption of the Notes following a Change of Control (or, if such
Statistical Release is no longer published, any publicly available source of
similar market data)) most nearly equal to the then remaining Average Life to
Stated Maturity of the Notes; provided, however, that if the Average Life to
Stated Maturity of the Notes is not equal to the constant maturity of a United
States Treasury security for which a weekly average yield is given, the Treasury
Rate shall be obtained by linear interpolation (calculated to the nearest
one-twelfth of a year) from the weekly average yields of United States Treasury
securities for which such yields are given, except that if the Average Life to
Stated Maturity of the Notes is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
"Unrestricted Subsidiary" means any Subsidiary of the Company designated as
such by the Company (a) no portion of the Indebtedness or any other obligation
(contingent or otherwise) of which (i) is guaranteed by the Company or any other
Subsidiary of the Company, (ii) is recourse to or obligates the Company or any
other Subsidiary of the Company in any way or (iii) subjects any property or
asset of the Company or any other Subsidiary of the Company, directly or
indirectly, contingently or otherwise, to the satisfaction thereof, (b) which
has no Indebtedness or any other obligation that, if in default in any respect
(including a nonpayment default), would permit (upon notice, lapse of time or
both) any holder of any other Indebtedness of the Company or any Restricted
Subsidiary to declare a default on such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its Stated Maturity, (c) with
which the Company or any other Subsidiary of the Company has no contract,
agreement, arrangement, understanding or is subject to an obligation of any
kind, whether written or oral, other than a transaction on terms no less
favorable to the Company or any other Subsidiary of the Company than those which
might be obtained at the time from persons at arm's length who are not
Affiliates of the Company, and (d) with which neither the Company nor any other
Subsidiary of the Company has any obligation (other than by the terms of the
Indenture) (i) to subscribe for additional shares of Capital Stock or other
equity interest therein or (ii) to
65
<PAGE> 67
maintain or preserve such Subsidiary's financial condition or to cause such
Subsidiary to achieve certain levels of operating results; provided, however,
that in no event shall any Guarantor be an Unrestricted Subsidiary. The Company
may designate an Unrestricted Subsidiary as a Restricted Subsidiary by written
notice to the Trustee under the Indenture; provided, however, that the Company
shall not be permitted to designate any Unrestricted Subsidiary as a Restricted
Subsidiary unless (A) after giving pro forma effect to such designation, the
Company would be permitted to incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the Indenture and (B) any Indebtedness or Liens of
such Unrestricted Subsidiary would be permitted to be incurred by a Restricted
Subsidiary of the Company under the Indenture. A designation of an Unrestricted
Subsidiary as a Restricted Subsidiary may not thereafter be rescinded.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
"Wholly Owned Restricted Subsidiary" means (i) any Restricted Subsidiary of
the Company of which 100% of the outstanding Capital Stock is owned by the
Company or another Wholly Owned Restricted Subsidiary of the Company and (ii)
SPT. For purposes of this definition, any directors' qualifying shares or
investments by foreign nationals mandated by applicable law shall be disregarded
in determining the ownership of a Restricted Subsidiary.
UNDERWRITING
The Underwriters named below have severally agreed to purchase from the
Company the principal amount of Notes set forth opposite their respective names:
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
----------- ------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................... $
Donaldson, Lufkin & Jenrette Securities Corporation.............
Wertheim Schroder & Co. Incorporated............................
------------
Total.............................................. $260,000,000
------------
------------
</TABLE>
The purchase agreement between the Company and the several Underwriters
provides that the obligations of the Underwriters are subject to certain
conditions precedent and that the Underwriters will be obligated to purchase all
of the Notes if any are purchased.
The Underwriters have advised the Company that they propose initially to
offer the Notes to the public at the offering price set forth on the cover page
of this Prospectus, and in part to certain dealers at such price less a
concession not in excess of % of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of % of the principal amount of the Notes to certain other dealers. After the
initial public offering of the Notes, the public offering price, concession and
discount may be changed.
There is no public market for the Notes and the Company does not intend to
apply for listing of the Notes on any national securities exchange or for
quotation of the Notes on Nasdaq. The Company has been advised by the
Underwriters that, following the completion of the initial offering of the
Notes, the Underwriters presently intend to make a market in the Notes; however,
the Underwriters are not obligated to do so and may discontinue such
market-making activity at any time without notice. No assurance can be given as
to the liquidity of the trading market for the Notes or that an active public
market for the Notes will develop. If an active public market does not develop,
the market price and liquidity of the Notes may be adversely affected. See
"Investment Considerations--Absence of Public Market."
The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act of 1933, as
amended (the "Act"), and, under certain circumstances, to contribute to payments
that the Underwriters may be required to make in respect thereof.
66
<PAGE> 68
Merrill Lynch, Pierce, Fenner & Smith Incorporated and its affiliates have
from time to time provided investment banking services to the Company, including
acting as a financial advisor in connection with the SPT Purchase.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the
Company by Gardner, Carton & Douglas, Chicago, Illinois. Certain legal matters
will be passed upon for the Underwriters by Skadden, Arps, Slate, Meagher &
Flom, Chicago, Illinois. Peter H. Merlin, a partner of Gardner, Carton &
Douglas, is a director of the Company. Skadden, Arps, Slate, Meagher & Flom also
represented the Company in connection with the SPT Purchase and certain related
matters.
EXPERTS
The audited financial statements and schedules included or incorporated by
reference in this Prospectus have been audited by Arthur Andersen & Co.,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
following regional offices of the Commission: 14th Floor, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661; and 13th Floor, Seven
World Trade Center, New York, New York 10048. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. Such reports, proxy
statements and other information also can be inspected at the offices of The New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005, and at the
offices of the Pacific Stock Exchange, 301 Pine Street, San Francisco,
California 94104 and 618 South Spring Street, Los Angeles, California 90014.
The Company has filed with the Commission a registration statement on Form
S-3 (together with all amendments, the "Registration Statement") under the Act
with respect to the Notes. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. Statements made in this Prospectus
as to the contents of any contract, agreement or other document referred to are
not necessarily complete; with respect to each such contract, agreement or other
document filed as an exhibit or schedule to the Registration Statement,
reference is made to the exhibit or schedule, as applicable, for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. For further information pertaining
to the Company and the Notes, reference is made to the Registration Statement
and the exhibits and schedules thereto, which may be examined or copied at the
locations described above.
For California Residents: with respect to sales of the security being
offered hereby to California residents, such security may be sold only to: (1)
"Accredited Investors" within the meaning of Regulation D under the Securities
Act of 1933, (2) Banks, savings and loan associations, trust companies,
insurance companies, investment companies registered under the Investment
Company Act of 1940, pension or profit-sharing trusts, corporations or other
entities which, together with the corporation's or other entity's affiliates
which are under common control have a net worth on a consolidated basis
according to their most recent regularly prepared financial statements (which
shall have been reviewed, but not necessarily audited, by outside accountants)
of not less than $14 million and subsidiaries of the foregoing, or (3) Any
person (other than a person formed for
67
<PAGE> 69
the sole purpose of purchasing the security being offered hereby) who purchases
at least $1 million aggregate amount of the security offered hereby. Each
California resident purchasing the security offered hereby will be deemed to
represent by such purchase that it comes within one of the aforementioned
categories.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1993 and the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1994, which were previously filed by the Company with the
Commission under the Exchange Act, are incorporated herein by reference.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the Offering shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the respective dates of filing of
such documents.
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference, or contained in this Prospectus, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed document
which also is or is deemed to be incorporated herein by reference modified or
superseded such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all of the documents referred to above which have been or may be
incorporated by reference in this Prospectus, other than certain exhibits to
such documents. Requests should be directed to James M. Sheridan, Vice
President, Administration and General Counsel, SPX Corporation, 700 Terrace
Point Drive, Muskegon, Michigan 49443, (616) 724-5000.
68
<PAGE> 70
SPX CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
SPX CORPORATION AND SUBSIDIARIES
Report of Independent Public Accountants............................................. F-2
Audited Consolidated Financial Statements--
Consolidated Balance Sheets--December 31, 1993 and 1992......................... F-3
Consolidated Statements of Income for the three years ended December 31, 1993... F-4
Consolidated Statements of Shareholders' Equity for the three years ended
December 31, 1993.............................................................. F-5
Consolidated Statements of Cash Flows for the three years ended December 31,
1993........................................................................... F-6
Notes to Consolidated Financial Statements...................................... F-7
Unaudited Consolidated Financial Statements--
Consolidated Condensed Balance Sheets--March 31, 1994 and
December 31, 1993 (unaudited)................................................. F-31
Consolidated Condensed Statements of Income for the three months ended March 31,
1994
and 1993 (unaudited).......................................................... F-32
Consolidated Condensed Statements of Cash Flows for the three months ended March
31, 1994 and 1993 (unaudited).................................................. F-33
Notes to Consolidated Condensed Financial Statements (unaudited)................ F-34
SEALED POWER TECHNOLOGIES LIMITED PARTNERSHIP AND SUBSIDIARIES
Report of Independent Public Accountants............................................. F-35
Consolidated Balance Sheets--December 31, 1993 and 1992............................ F-36
Consolidated Statements of Operations for the three years ended December 31,
1993............................................................................ F-37
Consolidated Statements of Partners' Capital for the three years ended December 31,
1993............................................................................ F-38
Consolidated Statements of Cash Flows for the three years ended December 31,
1993............................................................................ F-39
Notes to Consolidated Financial Statements......................................... F-40
Schedules omitted
No schedules are submitted because they are not applicable or not required or because
the required information is included in the consolidated financial statements or
notes thereto.
</TABLE>
F-1
<PAGE> 71
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
SPX Corporation:
We have audited the accompanying consolidated balance sheets of SPX
CORPORATION (a Delaware corporation) AND SUBSIDIARIES as of December 31, 1993
and 1992, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1993. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of SPX Corporation and
subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, effective
January 1, 1993, the company changed its method of accounting for its Employee
Stock Ownership Plan and Sealed Power Technologies Limited Partnership changed
its method of accounting for postretirement benefits other than pensions and
effective January 1, 1992, the company changed its methods of accounting for
postretirement benefits other than pensions and for income taxes.
ARTHUR ANDERSEN & CO.
Chicago, Illinois,
March 25, 1994.
F-2
<PAGE> 72
SPX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1993 1992
--------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CURRENT ASSETS:
Cash and temporary cash investments.............................. $ 117,843 $ 9,729
Receivables (Note 12)............................................ 123,081 84,931
Lease finance receivables-current portion (Note 21).............. 33,834 -
Inventories (Note 13)............................................ 159,223 171,622
Deferred income tax asset and refunds (Note 14).................. 54,489 18,601
Prepaid and other current assets................................. 29,726 22,796
--------- --------
Total current assets........................................ $ 518,196 $307,679
INVESTMENTS (Note 15).............................................. 13,446 2,156
PROPERTY, PLANT, AND EQUIPMENT, at cost (Note 16).................. $ 367,832 $218,105
Less: Accumulated depreciation................................ 169,687 101,310
--------- --------
Net property, plant, and equipment.......................... $ 198,145 $116,795
OTHER ASSETS....................................................... 39,452 38,835
LEASE FINANCE RECEIVABLES -- LONG-TERM (Note 21)................... 51,013 -
COSTS IN EXCESS OF NET ASSETS OF BUSINESSES ACQUIRED (Note 17)..... 204,149 94,863
--------- --------
TOTAL ASSETS....................................................... $1,024,401 $560,328
--------- --------
--------- --------
CURRENT LIABILITIES:
Notes payable and current maturities of long-term debt (Note
19)........................................................... $ 93,975 $ 13,999
Accounts payable................................................. 62,968 49,956
Accrued liabilities (Note 27).................................... 229,998 54,177
Income taxes payable (Note 14)................................... 11,864 7,375
--------- --------
Total current liabilities................................... $ 398,805 $125,507
LONG-TERM LIABILITIES (Note 10).................................... 123,235 18,931
SPT EQUITY LOSSES IN EXCESS OF INVESTMENT (Note 5)................. - 15,904
DEFERRED INCOME TAXES (Note 14).................................... 20,787 54,176
COMMITMENTS AND CONTINGENCIES (Note 18)............................
LONG-TERM DEBT (Note 19)........................................... 336,187 160,320
SHAREHOLDERS' EQUITY:
Preferred stock, no par value, authorized 3,000,000 shares; no
shares issued (Note 20)....................................... - -
Common stock, $10 par value, authorized 50,000,000 shares; issued
15,555,835 in 1993 and 15,535,978 in 1992 (Note 20)........... 155,558 155,360
Paid in capital.................................................. 58,926 60,199
Retained earnings................................................ 20,282 65,732
--------- --------
$ 234,766 $281,291
LESS: Common stock held in treasury (Note 20)...................... 50,000 50,000
Unearned compensation -- ESOP (Note 10).................... 35,900 44,181
Minority interest (Note 9)................................. 1,080 -
Cumulative translation adjustments......................... 2,399 1,620
--------- --------
Total shareholders' equity................................. $ 145,387 $185,490
--------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY......................... $1,024,401 $560,328
---------- --------
---------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 73
SPX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------------
1993 1992 1991
--------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
REVENUES (Note 3).................................... $ 756,145 $ 801,169 $ 673,468
COSTS AND EXPENSES:
Cost of products sold.............................. 508,032 533,169 461,626
Selling, general, and administrative expense....... 207,607 209,945 193,943
Other expense, net................................. 7,524 6,594 3,046
Restructuring and special charges (Note 9)......... 27,500 -- 18,200
SPT equity losses (Note 5)......................... 26,845 2,407 8,532
SP Europe equity loss (Note 15).................... 21,500 -- --
---------- ---------- ----------
OPERATING INCOME (LOSS).............................. $ (42,863) $ 49,054 $ (11,879)
Interest expense, net.............................. 17,882 15,061 16,853
(Gain) on sale of businesses (Note 6).............. (105,400) -- --
---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING METHODS AND
EXTRAORDINARY LOSS................................. $ 44,655 $ 33,993 $ (28,732)
PROVISION (BENEFIT) FOR INCOME TAXES (Note 14)....... $ 29,455 $ 13,433 $ (7,172)
---------- ---------- ----------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING METHODS AND EXTRAORDINARY LOSS.......... $ 15,200 $ 20,560 $ (21,560)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING METHODS,
NET OF TAXES (Note 2).............................. $ (31,800) $ (5,700) $ --
EXTRAORDINARY LOSS, NET OF TAXES (Note 8)............ $ (24,000) $ -- $ --
---------- ---------- ----------
NET INCOME (LOSS).................................... $ (40,600) $ 14,860 $ (21,560)
---------- ---------- ----------
---------- ---------- ----------
INCOME (LOSS) PER SHARE OF COMMON STOCK:
Before cumulative effect of change in accounting
methods and extraordinary loss.................. $ 1.20 $ 1.48 $ (1.56)
Cumulative effect of change in accounting methods,
net of taxes.................................... (2.52) (0.41) --
Extraordinary loss, net of taxes................... (1.90) -- --
---------- ---------- ----------
Net income (loss).................................. $ (3.22) $ 1.07 $ (1.56)
---------- ---------- ----------
---------- ---------- ----------
Weighted average number of common shares outstanding
(Note 1)........................................... 12,604,000 13,856,000 13,828,000
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 74
SPX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK PAID IN RETAINED
$10 PAR VALUE CAPITAL EARNINGS OTHER
------------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
PREVIOUSLY REPORTED BALANCE, DECEMBER 31, 1990..... $ 154,585 $ 59,976 $ 93,453 $(91,530)
1989 and 1990 restatement (Note 5)............... -- -- (6,378) --
------------- -------- -------- --------
RESTATED BALANCE, DECEMBER 31, 1990................ $ 154,585 $ 59,976 $ 87,075 $(91,530)
Net loss......................................... -- -- (21,560) --
Cash dividends ($.70 per share).................. -- -- (9,679) --
Earned ESOP shares............................... -- -- -- 1,823
Tax benefit on dividends paid to ESOP trust...... -- -- 378 --
Translation adjustment........................... -- -- -- (492)
Vesting of restricted stock...................... -- -- -- 113
Issuance of restricted stock..................... 120 32 -- (152)
------------- -------- -------- --------
BALANCE, DECEMBER 31, 1991......................... $ 154,705 $ 60,008 $ 56,214 $(90,238)
Net income....................................... -- -- 14,860 --
Cash dividends ($.40 per share).................. -- -- (5,541) --
Net shares sold under stock option plans......... 655 191 -- --
Earned ESOP shares............................... -- -- -- 2,044
Tax benefit on dividends paid to ESOP trust...... -- -- 199 --
Translation adjustment........................... -- -- -- (7,742)
Vesting of restricted stock...................... -- -- -- 135
------------- -------- -------- --------
BALANCE, DECEMBER 31, 1992......................... $ 155,360 $ 60,199 $ 65,732 $(95,801)
Net loss......................................... -- -- (40,600) --
Cash dividends ($.40 per share).................. -- -- (5,040) --
Net shares sold under stock option plans......... 198 82 -- --
Earned ESOP shares............................... -- (1,355) -- 3,046
Tax benefit on dividends paid to ESOP trust...... -- -- 190 --
Minority interest in SP Europe................... -- -- -- (1,080)
Translation adjustment........................... -- -- -- (779)
Cumulative effect of change in ESOP accounting
method, net of taxes (Note 2)................. -- -- -- 5,100
Vesting of restricted stock...................... -- -- -- 135
------------- -------- -------- --------
BALANCE, DECEMBER 31, 1993......................... $ 155,558 $ 58,926 $ 20,282 $(89,379)
------------- -------- -------- --------
------------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 75
SPX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------
1993 1992 1991
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: (Note 22)............ $ 25,285 $ 67,489 $ 67,449
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchase of Miller Tools...................... $ -- $ -- $(12,100)
Investment in SPT.......................................... -- -- (5,000)
Investment in SP Europe.................................... (19,900) (3,117) (1,272)
Investment in RSV.......................................... -- (2,618) --
Payments for purchase of ATP and AGL....................... (101,957) -- --
Payments for purchase of Lowener GmbH...................... (7,014) -- --
Net proceeds from sale of SPR division..................... 117,516 -- --
Net proceeds from sale of Truth division................... 71,562 -- --
Capital expenditures....................................... (15,116) (20,351) (19,428)
Sale of property, plant and equipment, net................. (797) 1,169 2,874
-------- -------- --------
Net cash provided (used) for investing activities.......... $ 44,294 $(24,917) $(34,926)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) borrowings under line of credit agreement... $(17,000) $(19,000) $(20,000)
Long-term borrowings....................................... 19,937 -- --
Payments of long-term debt................................. (12,207) (16,544) (4,493)
Increase (decrease) in notes payable and current maturities
of long-term debt........................................ 53,283 (2,141) 244
Dividends paid............................................. (5,040) (5,541) (9,679)
-------- -------- --------
Net cash provided (used) for financing activities.......... $ 38,973 $(43,226) $(33,928)
-------- -------- --------
Net cash provided (used)................................... $108,552 $ (654) $ (1,405)
-------- -------- --------
Effect of exchange rate changes on cash.................... $ (438) $ (757) $ --
-------- -------- --------
Net increase (decrease) in cash and temporary cash
investments.............................................. $108,114 $ (1,411) $ (1,405)
Cash and temporary cash investments, beginning of period... 9,729 11,140 12,545
-------- -------- --------
Cash and temporary cash investments, end of period......... $117,843 $ 9,729 $ 11,140
-------- -------- --------
-------- -------- --------
Supplemental disclosure of cash flows information:
Cash payments for interest............................... $ 18,347 $ 16,124 $ 16,425
Cash payments (refunds), net for income taxes............ $ 40,454 $ 110 $ (2,040)
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 76
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993
(1) BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES
The accounting and financial policies which affect significant elements of
the consolidated financial statements of SPX Corporation (the "company") and
which are not apparent on the face of the statements, or in other notes to the
consolidated financial statements, are described below.
Restatement -- As a result of the company's purchase of Riken Corporation's
interest in Sealed Power Technologies Limited Partnership ("SPT") as of
December 31, 1993, prior years' consolidated financial statements have been
restated to reflect the company's 49% share of SPT's earnings or losses for
prior years (see Note 5).
Consolidation -- The consolidated financial statements include the accounts
of the company and all of its majority-owned subsidiaries after the
elimination of all significant intercompany accounts and transactions.
Foreign Currency Translation -- Translation of significant subsidiaries
results in unrealized translation adjustments being reflected as cumulative
translation adjustment in shareholders' equity.
Lease Finance Income Recognition -- The company's lease financing operation,
SPX Credit Corporation, uses the direct financing method of accounting for
leases. Under this method, the excess of future lease payments and estimated
residual value over the cost of equipment leased is recorded as unearned
income and is recognized over the life of the lease by the effective
interest method.
Deferred Service Revenue -- Revenue from service contracts and long-term
maintenance arrangements has been deferred and will be recognized as revenue
on a pro rata basis over the agreement periods.
Research and Development Costs -- The company expenses currently all costs
for development of products. Research and developments costs were $17.6
million in 1993, $14.7 million in 1992, and $13.1 million in 1991.
Earnings Per Share -- Primary earnings per share is computed by dividing net
income by the weighted average number of common shares outstanding. Common
shares outstanding includes issued shares less shares held in treasury and,
in 1993, unallocated and uncommitted shares held by the ESOP trust. The
exclusion of unallocated and uncommitted shares held by the ESOP trust in
1993 is due to the company's adoption of Statement of Position 93-6 (see
Note 2). Prior to 1993, unallocated and uncommitted shares held by the ESOP
trust were included in weighted average number of common shares outstanding
used for calculating earnings per share. Average weighted unallocated and
uncommitted shares in the ESOP trust were 1,361,000 shares at the end of
1992 and 1,476,000 shares at the end of 1991. The potential dilutive effect
from the exercise of stock options is not material.
(2) CHANGES IN ACCOUNTING METHODS
In 1993 and 1992, the company adopted three new accounting methods relating
to its Employee Stock Ownership Plan ("ESOP"), postretirement benefits, and
income taxes. The effect of the change to these new accounting methods has been
reflected in the consolidated statements of income as "Cumulative effect of
change in accounting methods, net of taxes."
Effective January 1, 1993, the company elected to adopt new accounting for
its ESOP in accordance with Statement of Position 93-6 of the Accounting
Standards Division of the American Institute of Certified Public Accountants,
issued in November of 1993. As part of this change, the company recorded a one
time cumulative charge of $5.1 million pretax, or $3.3 million after tax. This
charge recognizes the cumulative difference of expense since the inception of
the ESOP until January 1, 1993 to reflect the shares allocated method of
accounting for ESOPs. As the company adopted this accounting change in the
fourth quarter of 1993, previously reported 1993 quarterly information has been
restated to reflect the change effective January 1, 1993. See Note 10 for
further discussion of the effect of this change.
Effective January 1, 1993, SPT adopted Statement of Financial Accounting
Standards (SFAS) No. 106 -- "Employers' Accounting for Postretirement Benefits
Other Than Pensions", using the immediate recognition transition option. SFAS
No. 106 requires recognition, during the employees' service with the company, of
the cost of their retiree health and life insurance benefits. At that date, the
full accumulated postretirement benefit obligation was $89.5 million pretax. The
company recorded its 49% share of this transition obligation, $28.5 million, net
of deferred taxes of $15.4 million in the first quarter.
Effective January 1, 1992, the company adopted SFAS No. 106 using the
immediate recognition transition option. At January 1, 1992, the accumulated
postretirement benefit obligation was $16.8 million and was recorded as a pretax
transition obligation. The decrease in net earnings and shareholders' equity was
$10.7 million after a deferred tax benefit of $6.1 million.
Effective January 1, 1992, the company adopted Statement of Financial
Accounting Standards (SFAS) No. 109 -- "Accounting for Income Taxes." Under SFAS
No. 109, deferred tax balances are stated at tax rates expected to be in effect
when taxes are actually paid or recovered. The cumulative effect of adoption as
of January 1, 1992 was a $5.0 million after tax benefit.
As of the beginning of 1994, the company must adopt Statement of Financial
Accounting Standards, No. 112, "Employers' Accounting for Postemployment
Benefits." This standard requires that the cost of benefits provided to former
or inactive employees be
F-7
<PAGE> 77
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(2) CHANGES IN ACCOUNTING METHODS (CONTINUED)
recognized on the accrual basis of accounting. The company does not anticipate
that this standard will materially impact its financial position or results of
operations upon adoption.
(3) SEGMENT AND GEOGRAPHIC INFORMATION
The company is comprised of three business segments. Specialty Service Tools
includes operations that design, manufacture and market a wide range of
specialty service tools and diagnostic equipment primarily to the global motor
vehicle industry. Original Equipment Components includes operations that design,
manufacture and market component parts for light and heavy duty vehicle markets.
SPX Credit Corporation, a lease financing operation, provides Specialty Service
Tools customers with a leasing option for purchasing more expensive diagnostic
testing, emission testing, and wheel service equipment. SPX Credit Corporation
was created with the purchase of Allen Group Leasing in June of 1993.
<TABLE>
<CAPTION>
BUSINESS SEGMENTS 1993 1992 1991
- ----------------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Specialty Service Tools..................................................... $ 503,600 $539,619 $430,074
Original Equipment Components............................................... 26,657 15,154 7,764
SPX Credit Corporation...................................................... 8,974 -- --
Businesses sold in 1993..................................................... 216,914 246,396 235,630
--------- -------- --------
Total..................................................................... $ 756,145 $801,169 $673,468
--------- -------- --------
--------- -------- --------
Operating income (loss):
Specialty Service Tools (a)................................................. $ (11,748) $ 51,680 $ 3,302
Original Equipment Components (b)........................................... (46,477) (7,053) (14,946)
SPX Credit Corporation...................................................... 5,483 -- --
Businesses sold in 1993..................................................... 25,249 21,531 20,005
General corporate expenses.................................................. (15,370) (17,104) (20,240)
--------- -------- --------
Total..................................................................... $ (42,863) $ 49,054 $(11,879)
--------- -------- --------
--------- -------- --------
Identifiable Assets:
Specialty Service Tools..................................................... $ 383,295 $347,763 $355,736
Original Equipment Components (Note 5)...................................... 343,816 21,771 19,301
SPX Credit Corporation...................................................... 85,165 -- --
Businesses sold in 1993..................................................... -- 110,450 124,157
General corporate (c)....................................................... 212,125 80,344 80,149
--------- -------- --------
Total..................................................................... $1,024,401 $560,328 $579,343
--------- -------- --------
--------- -------- --------
Capital expenditures:
Specialty Service Tools..................................................... $ 7,479 $ 6,823 $ 10,515
Original Equipment Components............................................... 1,014 3,944 3,477
SPX Credit Corporation...................................................... -- -- --
Businesses sold in 1993..................................................... 6,439 9,584 4,975
General corporate........................................................... 184 -- 461
--------- -------- --------
Total..................................................................... $ 15,116 $ 20,351 $ 19,428
--------- -------- --------
--------- -------- --------
Depreciation and amortization:
Specialty Service Tools..................................................... $ 14,485 $ 14,960 $ 15,312
Original Equipment Components............................................... 1,796 1,487 1,160
SPX Credit Corporation...................................................... -- -- --
Businesses sold in 1993..................................................... 7,462 8,383 6,966
General corporate........................................................... 627 447 333
--------- -------- --------
Total..................................................................... $ 24,370 $ 25,277 $ 23,771
--------- -------- --------
--------- -------- --------
</TABLE>
- ---------------
(a) 1993 includes a $27.5 million restructuring charge to merge Allen
Testproducts and Bear Automotive into Automotive Diagnostics.
(b) 1993 includes $26.9 million of SPT equity losses and $21.5 million of SP
Europe equity losses.
(c) Increase in 1993 was primarily the additional $108.1 million in cash
resulting from the SPR and Truth divestitures.
F-8
<PAGE> 78
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(3) SEGMENT AND GEOGRAPHIC INFORMATION (CONTINUED)
Revenues by business segment represent sales to unconsolidated customers.
Intercompany sales between segments are not significant. Operating income (loss)
by segment does not include general unallocated corporate expense, interest
expense, income taxes and extraordinary items.
Identifiable assets by business segment are those used in company operations
in each segment. General corporate assets are principally cash, deferred tax
assets, prepaid pension and prepaid health care expenses.
Information about the company's operations in different geographic areas is
as follows:
<TABLE>
<CAPTION>
GEOGRAPHIC AREAS: 1993 1992 1991
- ----------------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues -- Unaffiliated customers:
United States (a)........................................................... $ 637,143 $679,875 $544,103
Other North America......................................................... 21,719 24,593 25,623
Other....................................................................... 97,283 96,701 103,742
--------- -------- --------
Total..................................................................... $ 756,145 $801,169 $673,468
--------- -------- --------
--------- -------- --------
Revenues -- Between affiliated customers:
United States............................................................... $ 34,934 $ 33,757 $ 34,406
Other North America......................................................... -- -- 36
Other....................................................................... 1,708 312 229
Eliminations................................................................ (36,642) (34,069) (34,671)
--------- -------- --------
Total..................................................................... $ -- $ -- $ --
--------- -------- --------
--------- -------- --------
Operating income (loss):
United States (b)........................................................... $ (19,549) $ 47,304 $(17,084)
Other North America......................................................... (192) 1,878 531
Other (c)................................................................... (23,122) (128) 4,674
--------- -------- --------
Total..................................................................... $ (42,863) $ 49,054 $(11,879)
--------- -------- --------
--------- -------- --------
Total assets:
United States (Note 5)...................................................... $ 893,172 $466,995 $479,458
Other North America......................................................... 8,591 10,121 11,423
Other (d)................................................................... 122,638 83,212 88,462
--------- -------- --------
Total..................................................................... $1,024,401 $560,328 $579,343
--------- -------- --------
--------- -------- --------
</TABLE>
(a) Included in the United States revenues are export sales to unconsolidated
customers of $74.4 million in 1993, $64.0 million in 1992 and $55.4 million
in 1991.
(b) 1993 includes a $27.5 million restructuring charge to merge Allen
Testproducts and Bear Automotive into Automotive Diagnostics and a $26.9
million of SPT equity losses.
(c) 1993 includes $21.5 million of SP Europe equity losses.
(d) 1993 includes assets resulting from the consolidation of SP Europe and
assets acquired in the Lowener purchase during the third quarter.
Approximately 9% in 1993, 13% in 1992 and 9% in 1991 of the company's
consolidated sales were made to General Motors Corporation and its various
divisions, dealers and distributors. No other customer or group of customers
under common control accounted for more than 10% of consolidated sales for any
of these years. With the effect of the consolidation of SPT, the percentage
sales to General Motors will increase in the future. SPT's sales to General
Motors were 25% in 1993, 27% in 1992 and 31% in 1991. SPT's sales to Ford Motor
Company and it various divisions, dealers and distributors were 23% in 1993, 20%
in 1992 and 15% in 1991. With the consolidation of SPT, sales to Ford should
exceed 10% of consolidated sales in the future.
(4) ACQUISITION--ALLEN TESTPRODUCTS AND ALLEN GROUP LEASING
On June 10, 1993, the company acquired the Allen Testproducts division
("ATP") and its related leasing company, Allen Group Leasing ("AGL"), from the
Allen Group, Inc. for $102 million. ATP is a manufacturer and marketer of
vehicular test and service equipment. This acquisition has been recorded using
the purchase method of accounting, and the results of ATP and AGL have been
included in the company's consolidated statement of income since June 10, 1993.
The purchase price has been allocated to the fair values of the net assets of
ATP and AGL. The purchase price allocations recorded are based upon estimates
available and may be revised at a
F-9
<PAGE> 79
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(4) ACQUISITION--ALLEN TESTPRODUCTS AND ALLEN GROUP LEASING (CONTINUED)
later date. The excess of the purchase price over the estimated fair value of
the net assets acquired of $16.3 million has been recorded as costs in excess of
net assets acquired and is being amortized over the remaining life of goodwill
from the 1988 acquisition of Bear Automotive (approximately 35 years). The
purchase price allocation was as follows (in millions of dollars):
<TABLE>
<S> <C>
Current assets........................................................................................... $ 37.7
Property, plant & equipment.............................................................................. 7.5
Leasing assets........................................................................................... 75.8
Cost in excess of net assets acquired.................................................................... 16.3
Liabilities.............................................................................................. (35.3)
------
Total.................................................................................................. $102.0
------
------
</TABLE>
Financing was obtained by a $50 million note with two banks, a $19.7
million, three year, 8%, note from the seller and the balance by utilizing the
company's existing revolving credit line.
The acquired businesses have been combined with the company's Bear
Automotive division to form a single business unit called Automotive
Diagnostics. In the third quarter of 1993, the company recorded a pretax $27.5
million restructuring charge to provide for substantial reduction in work force
and facilities related to the combination. The restructuring charge was $18.5
million aftertax.
(5) ACQUISITION--SEALED POWER TECHNOLOGIES LIMITED PARTNERSHIP ("SPT")
Effective December 31, 1993, the company acquired Riken Corporation's 49%
interest in SPT for $39 million. Additionally, SPT will redeem the 2% management
interest in SPT for $2.7 million. The company previously owned 49% of SPT.
Accordingly, the net assets of SPT have been included in the accompanying
consolidated balance sheet as of December 31, 1993. Prior to this acquisition,
the company accounted for its investment using the equity method. Beginning in
the first quarter of 1994, the results of operations of SPT will be reflected in
the company's consolidated statements of income and cash flows.
SPT designs and manufactures engine parts, castings and filters for the
automotive and heavy duty original equipment manufacturers ("OEM") and the
aftermarket. SPT was created in 1989 when the company contributed the Sealed
Power, Contech, Filtran and Hy-Lift divisions to the newly created limited
partnership. SPT obtained nonrecourse financing through a combination of bank
debt and a public offering of subordinated debentures. In exchange for the net
assets of the divisions contributed, the company received $245 million in cash
from the partnership and a 49% interest in the partnership. As the debt incurred
by SPT to fund this transaction was nonrecourse to the company, the company
previously recorded a pretax $91 million gain in 1989, in accordance with
guidance prescribed by Emerging Issues Task Force pronouncement 89-7. The cash
distribution to the company resulted in an initial partnership capital deficit.
SPT has had cumulative losses since its inception and, up to December 31, 1993,
the company had carried its investment in SPT at zero. Because the SPT debt was
nonrecourse, the company properly did not reflect its share of the equity losses
of SPT and did not amortize the difference between its investment balance and
its share of SPT's initial partnership capital deficit in its previously
reported financial statements.
As a result of the acquisition of the remaining 51% of SPT, as of December
31, 1993, the company accounted for this transaction as follows:
1. The company recorded this acquisition using step acquisition
accounting. Step acquisition accounting requires that when the company
previously did not record its share of SPT's losses because the company's
investment was zero and now, as a result of additional ownership,
consolidates SPT, the company must retroactively reflect its share of SPT
losses not previously recorded. Accordingly, the financial statements for
the 1993 quarters and prior years were restated to record the company's
previous 49% share of SPT's income or losses, the effect of amortizing
the difference between its investment balance and its share of SPT's
initial partnership capital deficit and an adjustment required to record
the company's previous investment in SPT at historical cost.
2. The 51% of SPT's net assets acquired has been included in the
accompanying consolidated balance sheet at December 31, 1993 at estimated
fair value based upon preliminary information which may be revised at a
later date. The excess of the purchase price (including the acquired
equity deficit of $87.9 million) over the estimated fair values of the
net assets acquired was $97.1 million and has been recorded as costs in
excess of net assets acquired and will be amortized over 40 years.
F-10
<PAGE> 80
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(5) ACQUISITION--SEALED POWER TECHNOLOGIES LIMITED PARTNERSHIP ("SPT")
(CONTINUED)
A summary of the purchase price allocation is as follows (in millions of
dollars):
<TABLE>
<CAPTION>
EXISTING ACQUIRED
49% 51% TOTAL
-------- -------- -------
<S> <C> <C> <C>
Current assets......................................................................... $ 37.5 $ 39.2 $ 76.7
Property, plant & equipment............................................................ 44.8 66.6 111.4
Other assets........................................................................... 6.7 7.0 13.7
Cost in excess of net assets acquired.................................................. -- 97.1 97.1
Current liabilities.................................................................... (26.2) (27.2) (53.4)
Deferred income taxes.................................................................. -- 16.0 16.0
Long term liabilities.................................................................. (47.7) (49.8) (97.5)
Debt................................................................................... (103.0) (107.2) (210.2)
-------- -------- -------
Subtotal........................................................................... (87.9) 41.7 (46.2)
SPT equity losses in excess of investment*............................................. -- 87.9
-------- -------
Purchase Price......................................................................... $ 41.7 $ 41.7
-------- -------
-------- -------
</TABLE>
* Represents the cumulative restatement of equity losses, including the
company's 49% share of the 1993 SPT adoption of SFAS No. 106, recorded by the
company prior to the consolidation of the net assets of SPT at December 31,
1993.
(6) DIVESTITURES
During 1993, the company sold its Sealed Power Replacement and Truth
divisions.
Sealed Power Replacement ("SPR") -- On October 22, 1993, the company sold
SPR to Federal-Mogul Corporation for approximately $141 million in cash. SPR
distributes engine and undervehicle parts into the U.S. and Canadian
aftermarket. Net proceeds, after income taxes, were approximately $117.5
million. The company recorded a pretax gain of $52.4 million after
transaction and facility reduction expenses, or $32.4 million aftertax. The
proceeds were used to reduce a portion of the company's debt and the excess
invested in short term investments.
Truth -- On November 5, 1993, the company sold Truth to Danks America
Corporation, an affiliate of FKI Industries, Inc. for approximately $92.5
million in cash. In addition, the company will receive an annual royalty
ranging from 1.0% to 1.5% of Truth's annual sales for a five year period
following the closing (cumulatively not to exceed $7.5 million) which will
be recorded as income as received. Truth manufactures and markets window and
door hardware primarily in the U.S. and Canada. Net proceeds, after income
taxes, were approximately $71.6 million. The company recorded a pretax gain
of $53.0 million after transaction expenses, or $31.8 million aftertax. The
proceeds were invested in short term investments.
The final proceeds for these divestitures are based upon the closing balance
sheet of each business which are being completed. Any changes in proceeds as a
result of adjustments to the closing balance sheets are not expected to be
material.
(7) PRO FORMA RESULTS OF OPERATIONS (UNAUDITED)
The accompanying consolidated statements of income include the results of
operations of Allen Testproducts ("ATP") and Allen Group Leasing ("AGL") from
the date of acquisition, June 10, 1993, the results of the Sealed Power
Replacement ("SPR") division through the date of disposition, October 22, 1993,
the results of the Truth division through the date of disposition, November 5,
1993, the company's 49% share of the earnings or losses of SPT, and the equity
losses of SP Europe. The following 1993 unaudited pro forma selected financial
data reflects the acquisition of ATP and AGL and related restructuring, the
divestiture of the SPR and Truth divisions, the acquisition of 51% of SPT, and
the consolidation of SP Europe as if they had occurred as of January 1, 1993.
Pro forma adjustments are described below. The 1992 pro forma assumes that these
transactions occurred as of January 1, 1992 and comparable pro forma adjustments
were made.
F-11
<PAGE> 81
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(7) PRO FORMA RESULTS OF OPERATIONS (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
1993 ATP & SP PRO FORMA 1993 1992
HISTORICAL AGL (a) DIVESTITURES (b) EUROPE (c) SPT (d) ADJUST PRO FORMA PRO FORMA
---------- ------- ---------------- ---------- ------- --------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues..................... $756.1 $32.4 $ (217.0) $ 40.6 $391.6 $ -- $1,003.7 $1,042.9
Cost and expenses:
Cost of products........... 508.0 14.1 (147.0) 44.6 337.8 (6.8)(a) 752.7 746.4
2.0(d)
SG&A....................... 207.6 20.5 (44.5) 9.1 28.2 (10.2)(a) 210.7 223.6
Other, net................. 7.5 -- (.2) .5 (2.0 ) .3(a) 4.2 1.7
(4.3)(c)
2.4(d)
Restructuring charge....... 27.5 -- -- -- -- -- 27.5 --
SPT equity losses.......... 26.9 -- -- -- -- (26.9)(d) --
SP Europe equity losses.... 21.5 -- -- -- -- (21.5)(c) -- --
---------- ------- ------- ---------- ------- --------- --------- ---------
Operating income (loss)...... (42.9) (2.2) (25.3) (13.6) 27.6 65.0 8.6 71.2
Interest, net................ 17.8 1.6 -- .9 27.1 (5.8)(e) 41.6 45.8
(Gain) on sale of business
units...................... (105.4) -- -- -- -- 105.4(f) --
---------- ------- ------- ---------- ------- --------- --------- ---------
Income before income taxes... 44.7 (3.8) (25.3) (14.5) .5 (34.6) (33.0) 25.4
Provision (benefit) for
income taxes............... 29.5 -- -- -- -- (35.8)(g) (6.3) 13.6
---------- ------- ------- ---------- ------- --------- --------- ---------
Income (loss) (h)............ $ 15.2 $(3.8) $ (25.3) $(14.5) $ .5 $ 1.2 $ (26.7) $ 11.8
---------- ------- ------- ---------- ------- --------- --------- ---------
---------- ------- ------- ---------- ------- --------- --------- ---------
Income (loss) per share...... $ 1.20 $ (2.12) $ 0.85
Weight average number of
common shares
outstanding................ 12.6 12.6 13.9
</TABLE>
(a) Historical results of ATP and AGL through June 10, 1993, the date of
acquisition. Pro forma adjustments include a $6.8 million reduction in cost
of products sold resulting from primarily work force reductions; a $10.2
million reduction in SG&A resulting from primarily work force reductions:
and $0.3 million of additional goodwill amortization.
(b) SPR and Truth were divested during the fourth quarter of 1993. This
represents the results of operations through the date of divestiture.
(c) SP Europe was consolidated as of December 31, 1993. This pro forma adds the
results of operations for the full year. Pro forma adjustments include
reflecting the minority owner's share of losses, $4.3 million, and $21.5
million to reverse the Company's share of equity losses as SP Europe is
consolidated in the pro forma.
(d) SPT was consolidated as of December 31, 1993. This pro forma adds the
results of operations for the full year. Pro forma adjustments include $2.0
million of additional depreciation expense resulting from purchase
accounting; $26.9 million to reverse the company's share of equity losses as
SPT is consolidated in the pro forma; and $2.4 million to reflect goodwill
amortization resulting from purchase accounting.
(e) Adjustment to interest expense, net to reflect the financing to purchase ATP
and AGL and 51% of SPT and to reflect the net proceeds from the sale of SPR
and Truth. Proceeds in excess of expenditures are assumed to have reduced
outstanding revolving credit, short-term notes and notes payable to The
Allen Group. Any excess was then assumed to be invested in short-term
investments.
(f) Reversal of gain on the sale of the SPR and Truth divisions.
(g) Adjustment to income tax expense to reflect a consolidated effective rate of
39%, which was then adjusted for the inability to tax benefit SP Europe
losses and the effect of the change in U.S. federal income tax rate to 35%
from 34% on deferred tax assets and liabilities.
(h) Income (loss) excludes cumulative effect of changes in accounting methods
for ESOP accounting and SPT's 1993 SFAS No. 106 adoption and the 1993
extraordinary loss recorded for the early retirement of indebtedness.
The unaudited pro forma selected results of operations does not purport to
represent what the company's results of operations would actually have been had
the above transactions in fact occurred as of January 1, 1993, or January 1,
1992, or project the results of operations for any future date or period.
F-12
<PAGE> 82
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(8) EXTRAORDINARY LOSS
During the fourth quarter of 1993, the company determined to refinance both
SPX and SPT debt. As a result, the company recorded an extraordinary charge of
$37.0 million ($24.0 million after taxes) for extinguishment costs associated
with the early retirement of $415 million (principal amount) of debt expected to
be refinanced. The aggregate amount to retire this debt, including existing
unamortized debt placement fees, will be $452 million. See Note 23 for further
discussion of the refinancing.
(9) RESTRUCTURING AND SPECIAL CHARGES
1993 -- During 1993, the company recorded a $27.5 million restructuring
charge for the costs required to merge the Bear Automotive division with Allen
Testproducts, acquired in June of 1993. This charge was recorded in the third
quarter. Of the $27.5 million restructuring charge, approximately $16 million
relates to work force reductions and associated costs. The combined businesses
started with approximately 2,200 employees. That number was reduced to
approximately 1,800 employees at December 31, 1993 and will be at approximately
1,700 employees by the end of the second quarter of 1994. The charge also
included $9.3 million of facility duplication and shutdown costs, including the
write down of excess assets of $4.2 million (non-cash). The balance of the
reserves at December 31, 1993 is approximately $14.5 million, which is
principally required for remaining work force reduction and facility closing
costs.
1991 -- In the third quarter of 1991, the company recorded a pretax special
charge of $18.2 million which included; a $6.0 million charge associated with
organizational and facility consolidation of two operating units which included
employment reductions and facility closings; a $6.5 million charge-off of
certain capitalized computer software development costs due to conceptual
changes in future product offerings whereby these costs are more appropriately
characterized as general software development; a $1.4 million net charge
associated with consummation of two transactions with an overseas partner that
relate to further globalization of the company's automotive original equipment
affiliated businesses; and a $4.3 million charge for losses, resulting
principally from recessionary conditions, on certain project development
investments and notes receivable related to previous sales of certain business
units.
(10) EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT PENSION PLANS
The company has defined benefit pension plans which cover substantially all
domestic employees. These plans provide pension benefits that are principally
based on the employees' years of credited service and levels of earnings.
Contributions in excess of pension expense are considered prepayments for
financial accounting purposes. The company has determined that foreign defined
pension plans are immaterial to the consolidated financial statements.
Net periodic pension cost (benefit) included the following components:
<TABLE>
<CAPTION>
1993 1992 1991
-------- ------- --------
(in thousands)
<S> <C> <C> <C>
Service cost-benefits earned during the period................................... $ 4,585 $ 3,973 $ 3,577
Interest cost on projected benefit obligation.................................... 6,852 6,088 5,743
Actual gain on assets............................................................ (19,633) (9,363) (27,778)
Net amortization and deferral.................................................... 8,440 (1,136) 18,320
-------- ------- --------
Net periodic pension cost (benefit).............................................. $ 244 $ (438) $ (138)
-------- ------- --------
-------- ------- --------
Actuarial assumptions used:
Discount rates................................................................... 7.5% 8.25% 8.25%
Rates of increase in compensation levels......................................... 5.0 5.5 5.5
Expected long-term rate of return on assets...................................... 9.5 9.5 9.5
</TABLE>
F-13
<PAGE> 83
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(10) EMPLOYEE BENEFIT PLANS (CONTINUED)
Plan assets principally consist of equity and fixed income security
investments. The following table sets forth the plans' funded status and amounts
recognized in the company's consolidated balance sheets as Other Assets for its
U.S. pension plans (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1992
------------------------- -------------------------
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 benefit obligations:
Vested benefit obligation................................... $ 151,217 $ 6,570 $ 67,876 $ --
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Accumulated benefit obligation.............................. $ 172,068 $ 7,395 $ 70,661 $ --
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Projected benefit obligation................................ $ 200,249 $ 7,395 $ 87,604 $ --
Plan assets at fair value................................... 242,429 6,297 118,939 --
----------- ----------- ----------- -----------
Projected benefit obligation less (greater) than plan
assets.................................................... $ 42,180 $(1,098) $ 31,335 $ --
Unrecognized net (gain) loss................................ (31,893) 34 (19,031) --
Prior service cost not yet recognized in net periodic
pension cost.............................................. 10,183 607 1,909 --
Unrecognized net asset at January 1, 1985................... (220) 34 (407) --
----------- ----------- ----------- -----------
Prepaid pension cost recognized in the consolidated balance
sheets.................................................... $ 20,250 $ (423) $ 13,806 $ --
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The significant increase in pension benefit obligations, assets and prepaid
pension cost was due to the consolidation of SPT as of December 31, 1993.
As part of the divestitures of the SPR and Truth divisions, the company
recorded curtailment gains of $4.1 million. These gains have been included in
the gain recognized on the sale of these divisions.
POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE
Prior to 1992, postretirement health care and life insurance benefits were
recognized as expense when claims or premiums were paid. In 1992, the company
adopted SFAS No. 106. These costs totaled $958,000 in 1991. The following
summarizes the 1993 and 1992 expense for postretirement health and life
insurance (in thousands):
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Recognition of transition obligation......................................................... $ -- $16,829
Benefit cost for service during the the year--net of employee contributions.................. 317 315
Net amortization and deferral................................................................ (64) --
Interest cost on accumulated post-retirement benefit obligation.............................. 1,338 1,306
------- -------
Postretirement benefit cost.................................................................. $ 1,591 $18,450
------- -------
------- -------
</TABLE>
The accumulated postretirement benefit obligation was actuarially determined
based on assumptions regarding the discount rate and health care trend rates.
The health care trend assumption applies to postretirement medical and dental
benefits. Different trend rates are used for pre-age 65 and post-age 65 medical
claims and for expected dental claims. The trend rate used for the medical plan
was 15% initially, grading to a 6% ultimate rate by 1% each year for pre-65
claims; and 10.5% grading to 6% by .5% each year for post-age 65 claims. The
trend rate for the dental plan was 6% each year. The liability was discounted
using a 7.5% interest rate. Increasing the health care trend rate by one
percentage point would increase the accumulated postretirement benefit
obligation by $.7 million and would increase the 1993 postretirement benefit
cost by $.1 million.
F-14
<PAGE> 84
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(10) EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table summarizes the accumulated benefit obligation (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1993 1992
----------------- -----------------
<S> <C> <C>
Accumulated postretirement benefits obligation ("APBO") Retirees................ $ 56,084 $ 11,708
Actives fully eligible........................................................ 9,399 1,463
-------- --------
APBO fully eligible........................................................... 65,483 13,171
Actives not fully eligible.................................................... 24,112 3,271
-------- --------
Total APBO.................................................................... $ 89,595 $ 16,442
Assets.......................................................................... (845) --
-------- --------
Unfunded status................................................................. $ 88,750 $ 16,442
Unrecognized:
Prior service cost............................................................ 27,498 1,000
Net gain (loss)............................................................... (2,492) --
-------- --------
Accrued APBO included in long-term liabilities.................................. $ 113,756 $ 17,442
-------- --------
-------- --------
</TABLE>
The significant increase in accumulated postretirement benefits obligation
was due to the consolidation of SPT as of December 31, 1993. SPT adopted SFAS
No. 106 in 1993.
EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP")
In June 1989, the company established an ESOP, which includes substantially
all domestic employees not covered by collective bargaining agreements. The ESOP
borrowed $50 million, which is guaranteed by the company, and used the proceeds
to purchase 1,746,725 shares of common stock issued directly by the company.
Employees vest in these shares based upon a predetermined formula. Employees may
vote allocated shares directly, while the ESOP trustee will vote the unallocated
shares proportionally on the same basis as the allocated shares were voted.
During 1993, 1992 and 1991, 114,588, 114,735 and 114,870 shares were allocated
to the employees, leaving 1,246,346 unallocated shares in the ESOP trust at
December 31, 1993. The fair market value of these unallocated shares was $22.1
million at December 31, 1993. The company's contributions to the ESOP trust were
as follows (in thousands of dollars):
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Compensation expense................................................ $1,925 $5,548 $4,840
Interest expense.................................................... 3,902 -- --
Dividends........................................................... -- 590 1,113
Principal payment................................................... 288 -- --
------ ------ ------
Total........................................................... $6,115 $6,138 $5,953
------ ------ ------
------ ------ ------
</TABLE>
With the change in ESOP accounting in 1993, compensation expense is now
measured using the fair market value when the shares are committed to the
employee. Interest expense represents the actual interest paid by the ESOP trust
and any dividends paid on unallocated shares in the trust are recorded as direct
debt principal payments rather than as dividends.
OTHER
The company provides defined contribution pension plans for substantially
all employees not covered by defined benefit pension plans. Collectively, the
company's contributions to these plans were $683,000 in 1993, $848,000 in 1992
and $580,000 in 1991.
The company provides a Retirement Savings Plan for eligible employees.
Employees can contribute up to 15% of their earnings with the company matching a
portion of the amount up to 6% of their earnings. The company's contribution to
this plan was $875,000 in 1993, $715,000 in 1992 and $725,000 in 1991. Starting
in 1994, the company matching contribution will consist of unallocated ESOP
shares.
F-15
<PAGE> 85
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(11) RELATED PARTY TRANSACTIONS
Since the creation of SPT on May 30, 1989, the company has continued to
provide certain administrative and insurance services to SPT. The costs
associated with these services are identified and recovered from the
partnership.
In addition, the company's former Sealed Power Replacement division
purchased replacement engine parts, principally piston rings, cylinder sleeves
and valve lifters from SPT at arm's-length prices. Purchases from the
partnership during 1993 through October 22 (date of sale of SPR), 1992 and 1991
were $21.5 million, $27.8 million and $27.0 million, respectively.
(12) RECEIVABLES
Changes in the reserve for losses on receivables were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year....................................................... $10,789 $ 9,541 $ 9,521
Recorded in acquisition of SPT and due to consolidation of SP Europe............... 747 -- --
Amount charged to income........................................................... 3,609 3,788 2,876
------- ------- -------
$15,145 $13,329 $12,397
Accounts written off, net of recoveries............................................ (2,398) (2,495) (2,878)
Reduction resulting from sale of SPR and
Truth divisions.................................................................... (3,588) -- --
Reclassifications and other........................................................ 18 (45) 22
------- ------- -------
Balance at end of year............................................................. $ 9,177 $10,789 $ 9,541
------- ------- -------
------- ------- -------
</TABLE>
The company has a three year agreement, expiring in April 1994, with a
financial institution whereby the company agreed to sell undivided fractional
interests in designated pools of domestic trade accounts receivable, in an
amount not to exceed $30 million. In order to maintain the balance in the
designated pools of trade accounts receivable sold, the company sells
participating interests in new receivables as existing receivables are
collected. At December 31, 1993 and 1992, the company had sold $25.9 million and
$30 million of trade accounts receivable under this program. Under the terms of
this agreement, the company is obligated to pay fees which approximate the
purchasers' cost of issuing a like amount in commercial paper plus certain
administrative costs. The amount of such fees in 1993 and 1992 were $1,215,000
and $1,465,000 respectively. These fees are included in other expense, net.
(13) INVENTORIES
Domestic inventories, amounting to $122.6 and $141.3 million at December 31,
1993 and 1992, respectively, are based on the last-in, first-out (LIFO) method.
Such inventories, if priced on the first-in, first-out (FIFO) method, would have
been approximately $17.7 and $34.8 million greater at December 31, 1993 and
1992, respectively. During 1993 and 1992, certain inventory quantities were
reduced resulting in liquidations of LIFO inventory quantities carried at lower
costs prevailing in prior years. The effect was to increase net income in 1993
by $455,000 and in 1992 by $1.8 million. Foreign inventories are valued at FIFO
costs. None of the inventories exceed realizable values.
The components of inventory at year-end were as follows:
<TABLE>
<CAPTION>
1993 1992
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Finished products.......................................................................... $ 94,478 $128,043
Work in process............................................................................ 29,324 16,835
Raw materials and supplies................................................................. 35,421 26,744
-------- --------
$159,223 $171,622
-------- --------
-------- --------
</TABLE>
F-16
<PAGE> 86
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(14) INCOME TAXES
The provision (benefit) for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
U.S. Federal:
Current.......................................................................... $32,817 $ 8,180 $(4,925)
Deferred......................................................................... (9,521) 2,217 (4,842)
State.............................................................................. 4,411 1,363 1,060
Foreign............................................................................ 1,748 1,673 1,535
------- ------- -------
Total.............................................................................. $29,455 $13,433 $(7,172)
------- ------- -------
------- ------- -------
</TABLE>
A reconciliation of the effective rate for income taxes shown in the
consolidated statements of income with the U.S. statutory rate of 35% in 1993
and 34% in 1992 and 1991 is shown below:
<TABLE>
<CAPTION>
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Amount computed at statutory rate.................................................. 35.0% 34.0% (34.0)%
Increase (decrease) in taxes resulting from:
U.S. rate change on net deferred taxes........................................... 2.0 -- --
Tax credits and incentives....................................................... (0.5) (0.6) (1.6)
Foreign losses not tax benefited................................................. 22.8 6.1 3.1
Foreign tax rates less than the statutory rate................................... (1.8) (1.1) (1.9)
State income taxes, net of federal income tax benefit............................ 5.8 2.5 2.8
Amortization of goodwill and other acquisition costs............................. 3.6 3.2 4.0
Tax benefit of the Foreign Sales Corporation..................................... (2.0) (3.1) (3.4)
Special charge items not tax benefited........................................... -- -- 8.6
Other, net....................................................................... 1.1 (1.5) (2.6)
----- ----- -----
66.0% 39.5% (25.0)%
----- ----- -----
----- ----- -----
</TABLE>
No provision has been made for income and withholding taxes which would
become payable upon distribution of the undistributed earnings of foreign
subsidiaries and affiliates. It is the company's present intention to
permanently reinvest these earnings in its foreign operations. The amount of
undistributed earnings which have been reinvested in foreign subsidiaries and
affiliates at December 31, 1993, was $26.7 million. It is not practical to
determine the hypothetical U.S. federal income tax liability if all such
earnings were remitted, but distribution as dividends at the end of 1993 would
have resulted in payment of withholding taxes of approximately $1.4 million.
The following summarizes the detail of the deferred income tax provision
(benefit) for 1991, which has not been restated in accordance with SFAS No. 109:
<TABLE>
<CAPTION>
1991
--------------
(IN THOUSANDS)
<S> <C>
Receivable reserves....................................................................... $ (110)
Inventories............................................................................... (568)
Depreciation.............................................................................. 306
Health and medical costs.................................................................. (170)
Pension................................................................................... 146
Employee benefit programs................................................................. (342)
Special charge............................................................................ (3,191)
Other, net................................................................................ 459
-------
$ (3,470)
-------
-------
</TABLE>
F-17
<PAGE> 87
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(14) INCOME TAXES (CONTINUED)
The components of the net deferred income tax assets (liabilities) were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1993 1992
----------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Deferred income tax asset:
Receivables reserve............................................................... $ 6,736 $ 3,088
Inventory......................................................................... 5,835 7,505
Debt extinguishment reserves...................................................... 13,000 --
Compensation and benefit-related.................................................. 3,004 1,100
Restructuring reserves............................................................ 4,226 --
Divestiture-related reserves...................................................... 5,580 --
Workers' compensation............................................................. 1,708 1,270
Warranty reserve.................................................................. 2,216 2,786
Other liabilities................................................................. 6,584 (175)
-------- --------
Current deferred tax asset.......................................................... $ 48,889 $ 15,574
-------- --------
Non-current deferred tax:
Depreciation...................................................................... $ (24,300) $ (13,570)
Postretirement health and life.................................................... 38,900 6,300
Book basis investment greater than tax basis investment in affiliates............. (31,400) (46,906)
Other............................................................................. (3,987) --
Net operating loss carryforwards.................................................. 14,700 4,800
Capital loss carryforwards........................................................ -- 8,900
Valuation allowance............................................................... (14,700) (13,700)
-------- --------
Non-current deferred tax liability.................................................. $ (20,787) $ (54,176)
-------- --------
Net deferred tax asset (liability).................................................. $ 28,102 $ (38,602)
-------- --------
-------- --------
</TABLE>
Included on the consolidated balance sheets are U.S. federal income tax
refunds of $5.6 million in 1993 and $3.0 million in 1992.
At December 31, 1993, the company has net operating loss carryforwards
attributable to foreign operations of approximately $32.5 million that are
available to offset future taxable income. These loss carryforwards expire as
follows: $.6 million in 1994, $0 in 1995, $0 in 1996, $2.4 million in 1997, $1.5
million in 1998 and $28.0 million thereafter. During 1993, the company utilized
$2.8 million of net operating loss carryforwards attributable to foreign
operations, resulting in tax benefits of $1.2 million. The deferred tax asset
related to the net operating loss carryforwards have been reserved in the
valuation allowance.
During the fourth quarter of 1993, the company settled a dispute with the
Internal Revenue Service regarding the company's tax deferred treatment of the
1989 transaction in which several operating units were contributed to SPT. The
settlement of approximately $5 million in tax eliminates the IRS contention that
one half of the 1989 transaction was currently taxable. The settlement and
interest will be paid during the second quarter of 1994 and is adequately
provided for in the company's deferred income tax accounts.
(15) INVESTMENTS
As of December 31, 1993, investments, as shown on the consolidated balance
sheet, include equity investments in non-majority owned subsidiaries. These
investments include the company's 50% owned interest in a U.S. joint venture,
two 50% owned interests in joint ventures in Japan, a 40% interest in a Mexican
company and a 50% interest in a German company. All of these investments are
accounted for using the equity method. These investments, both individually and
collectively, are not material to the company's consolidated financial
statements.
Until December 31, 1993, the company held a 49% interest in SPT. The pro
rata share of earnings or losses and the amortization of the company's
investment in SPT is reflected as "SPT equity losses" on the consolidated
statements of income (see Note 5).
Until December 31, 1993, the company reported that it held a 50% interest in
SP Europe. As of December 31, 1993, Riken's pending 20% participation in SP
Europe reverted to the company in connection with the transaction to acquire
Riken's 49% interest in SPT. SP Europe had not been previously consolidated due
to the company's deemed temporary control and because nonrecourse (to the
partners)
F-18
<PAGE> 88
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(15) INVESTMENTS (CONTINUED)
financing was being pursued. Up to December 31, 1993, the company carried its
investment in SP Europe at zero. Due to the resulting 70% ownership, the company
is recording its share of cumulative losses since the partnership formation in
mid-1991 of $21.5 million. As of December 31, 1993, the balance sheet of this
partnership is included in the consolidated financial statements, reflecting the
company's 70% ownership and Mahle GmbH's 30% minority interest. Beginning in the
first quarter of 1994, results of operations of SP Europe will be reflected in
the consolidated statements of income and cash flows.
(16) PROPERTY, PLANT, AND EQUIPMENT AND RELATED ACCUMULATED DEPRECIATION
The company uses principally the straight line method for computing
depreciation expense over the useful lives of the property, plant and equipment.
For income tax purposes, the company uses accelerated methods where permitted.
Asset additions and improvements are added to the property accounts while
maintenance and repairs, which do not renew or extend the lives of the
respective assets, are expensed currently. Upon sale or retirement of
depreciable properties, the related cost and accumulated depreciation are
removed from the property accounts. The net gain or loss on disposition of
property is reflected in income.
Changes in property, plant, and equipment accounts and in related
accumulated depreciation for the three years ended December 31, 1993 were as
follows:
<TABLE>
<CAPTION>
MACHINERY
AND CONSTRUCTION
PROPERTY, PLANT & EQUIPMENT, AT COST LAND BLDGS. EQUIPMENT IN PROGRESS TOTAL
------- ------- --------- ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1990.............................. $ 6,586 $50,378 $123,392 $ 6,398 $186,754
Additions, at cost...................................... 245 4,362 14,788 33 19,428
Retirements, at cost.................................... (1,283) (699) (2,380) -- (4,362)
Reclassifications and other............................. 699 63 (454) -- 308
------- ------- --------- ------------ --------
BALANCE AT DECEMBER 31, 1991.............................. $ 6,247 $54,104 $135,346 $ 6,431 $202,128
Additions, at cost...................................... 18 2,314 18,415 (396) 20,351
Retirements, at cost.................................... (48) (515) (5,376) -- (5,939)
Reclassifications and other............................. 280 2,417 (1,132) -- 1,565
------- ------- --------- ------------ --------
BALANCE AT DECEMBER 31, 1992.............................. $ 6,497 $58,320 $147,253 $ 6,035 $218,105
Additions, at cost...................................... 840 1,920 10,998 1,358 15,116
Recorded in acquisitions of
ATP and SPT and due to consolidation of SP Europe....... 4,551 40,552 169,903 1,253 216,259
Assets sold in connection with divestiture of units..... (1,174) (15,280) (55,241) (3,325) (75,020)
Retirements, at cost.................................... (15) (502) (5,541) -- (6,058)
Reclassifications and other............................. 81 (474) 448 (625) (570)
------- ------- --------- ------------ --------
BALANCE AT DECEMBER 31, 1993.............................. $10,780 $84,536 $267,820 $ 4,696 $367,832
------- ------- --------- ------------ --------
------- ------- --------- ------------ --------
</TABLE>
<TABLE>
<CAPTION>
MACHINERY
AND
ACCUMULATED DEPRECIATION BLDGS. EQUIPMENT TOTAL
------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1990................................................... $10,797 $ 58,045 $ 68,842
Additions-charged to income.................................................. 2,443 16,449 18,892
Deductions-retirements, renewals, transfers, dispositions and replacements... (43) (2,086) (2,129)
Reclassifications and other.................................................. 226 (22) 204
------- --------- --------
BALANCE AT DECEMBER 31, 1991................................................... $13,423 $ 72,386 $ 85,809
Additions-charged to income.................................................. 3,196 16,393 19,589
Deductions-retirements, renewals, transfers, dispositions and replacements... (201) (4,549) (4,750)
Reclassifications and other.................................................. 1,156 (494) 662
------- --------- --------
BALANCE AT DECEMBER 31, 1992................................................... $17,574 $ 83,736 $101,310
------- --------- --------
Additions-charged to income.................................................. 2,611 16,476 19,087
Additions-carryover basis in SPT............................................. 15,810 75,661 91,471
Deductions-retirements, renewals, transfers, dispositions and replacements... (245) (2,782) (3,027)
Deductions-assets sold in connection with divestitures of units.............. (4,499) (34,508) (39,007)
Reclassifications and other.................................................. -- (147) (147)
------- --------- --------
BALANCE AT DECEMBER 31, 1993................................................... $31,251 $138,436 $169,687
------- --------- --------
------- --------- --------
</TABLE>
F-19
<PAGE> 89
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(17) COSTS IN EXCESS OF NET ASSETS OF BUSINESSES ACQUIRED
At December 31, 1993 and 1992, total costs in excess of net assets of
businesses acquired were $223.3 and $113.2 million, respectively, and
accumulated amortization of costs in excess of net assets of businesses acquired
was $19.2 and $18.3 million, respectively. The increase is attributable to the
acquisition of ATP and AGL, $16.3 million, and the acquisition of 51% of SPT,
$97.1 million. Amortization was $3.4 million in 1993, $3.4 million in 1992 and
$3.1 million in 1991.
The company amortizes costs in excess of the net assets of businesses
("goodwill") acquired on a straight-line method over the estimated periods
benefitted, not to exceed 40 years. After an acquisition, the company
continually reviews whether subsequent events and circumstances have occurred
that indicate the remaining estimated useful life of goodwill may warrant
revision or that the remaining balance of goodwill may not be recoverable. If
events and circumstances indicate that goodwill related to a particular business
should be reviewed for possible impairment, the company uses projections to
assess whether future operating income on a non-discounted basis (before
goodwill amortization) of the unit is likely to exceed the goodwill amortization
over the remaining life of the goodwill, to determine whether a writedown of
goodwill to recoverable value is appropriate.
At December 31, 1993, $74 million of goodwill relates to the Automotive
Diagnostics division (which is composed of Bear Automotive and Allen
Testproducts, which was acquired in 1993). This division has incurred
significant operating losses in 1993 and in prior years. The company projects
that, in the near future, the cost savings, market synergies and other factors
which, in part, will be realized from the Bear Automotive and Allen Testproducts
combination will result in non-discounted operating income sufficient to exceed
goodwill amortization. However, should such projections require downward
revision based on changed events or circumstances, this division's goodwill may
require writedown. Although having no cash flow impact, the resulting charge, if
any, could materially reduce the company's future reported results of operations
and shareholders' equity. At this time, based upon present information,
projections and strategic plans, the company has concluded that there has been
no permanent impairment of the Automotive Diagnostics division's tangible or
intangible assets.
(18) COMMITMENTS AND CONTINGENT LIABILITIES
The company leases certain offices, warehouses and equipment under lease
agreements which expire at various dates through 2006. Future minimum rental
commitments under non-cancelable operating leases are $10.9 million for 1994,
$8.8 million for 1995, $6.3 million for 1996, $4.0 million for 1997, $2.9
million for 1998 and aggregate $14.5 million thereafter. Rentals on these leases
were approximately $12.9 million in 1993, $9.3 million in 1992 and $10.8 million
in 1991.
Certain claims, including environmental matters, suits and complaints
arising in the ordinary course of business, have been filed or are pending
against the company. In the opinion of management, all such matters are without
merit or are of such kind, or involve such amounts, as would not have a
significant effect on the financial position or results of operations of the
company if disposed of unfavorably. Additionally, the company has insurance to
minimize its exposures of this nature.
The company's operations and products are subject to federal, state and
local regulatory requirements relating to environmental protection. It is the
company's policy to comply fully with all such applicable requirements. As part
of its effort to comply, management has established an ongoing internal
compliance auditing program which has been in place since 1989. Based on current
information, management believes that the company's operations are in
substantial compliance with applicable environmental laws and regulations and
the company is not aware of any violation that could have a material adverse
effect on the business, financial condition or results of operations of the
company. There can be no assurance, however, that currently unknown matters, new
laws and regulations, or stricter interpretations of existing laws and
regulations will not materially affect the company's business or operations in
the future.
The company is also subject to potential liability for the costs of
environmental remediation. This liability may be based upon the ownership or
operation of industrial facilities where contamination may be found as well as
contribution to contamination existing at offsite, non-owned facilities. These
offsite remediation costs cannot be quantified with any degree of certainty. At
this time, management can estimate the environmental remediation costs only in
terms of possibilities and probabilities based on available information.
The company is involved as a potentially responsible party ("PRP") under the
Comprehensive, Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), as amended, or similar state superfund statutes in eight active
proceedings involving off-site waste disposal facilities. At three of these
sites it has been established that the company is a de minimis contributor. A
determination has not been made with respect to the remaining five sites, but
the company believes that it will be found to be a de minimis contributor at
three of them. Based on information available to the company, which in most
cases includes estimates from PRPs and/or federal or state regulatory agencies
for the investigation, clean up costs at these sites, data related to the
quantities and characteristics of materials generated at or shipped to each
site, the company believes that the costs for each site are not material and in
total the anticipated clean up costs of current PRP actions would not have a
material adverse effect on the company's financial condition or operations.
In the case of contamination existing upon properties owned or controlled by
the company, the company has established reserves which it deems adequate to
meet its current remediation obligations.
There can be no assurance that the company will not be required to pay
environmental compliance costs or incur liabilities that may be material in
amount due to matters which arise in the future or are not currently known to
the company.
During 1988, the company's Board of Directors adopted executive severance
agreements which create certain liabilities in the event of the termination of
the covered executives following a change of control of the company. The
aggregate commitment under these executive severance agreements should all 7
covered employees be terminated is approximately $10 million.
F-20
<PAGE> 90
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(19) NOTES PAYABLE AND DEBT
The following table summarizes the company's current and long-term debt
obligations as they existed at December 31, 1993 and 1992. During the first
quarter of 1994, the company significantly restructured this debt. Refer to Note
23 for further explanation of this subsequent refinancing.
<TABLE>
<CAPTION>
1993 1992
-------- --------
(IN THOUSANDS)
<S> <C> <C>
SPX
Senior Notes, 9.72%, due in annual installments from 1994 through 2000................... $ 53,000 $ 53,000
Senior Notes, 9.58%, $5 million due in 1993, the remainder due in 1995................... 22,000 27,000
Revolving Credit Loans................................................................... -- 17,000
Industrial Revenue Bonds, with interest rates established monthly based on an index of
short-term municipal bond interest rates, due 2010 to 2025............................. 15,200 15,200
Note to Allen Group, 8.0%, due in annual installments from 1994 through 1996............. 19,737 --
Bank loans, LIBOR plus 7/8%, due May 1994............................................... 50,000 --
Long-Term Debt -- ESOP Guarantee......................................................... 42,062 44,275
Other.................................................................................... 17,957 17,844
-------- --------
Total SPX debt......................................................................... $219,956 $174,319
-------- --------
SPT
Senior subordinated debentures, 14.5%, due May 15, 1999, with mandatory sinking fund
payment of $50 million on May 15, 1998................................................. $100,000 $ --
Term bank loan, with interest rates established periodically based on prime or LIBOR
rates, due in varying quarterly installments through September 30, 1996................ 78,863 --
Revolving Credit Loans................................................................... 30,000 --
Other.................................................................................... 1,343 --
-------- --------
Total SPT debt......................................................................... $210,206 $ --
-------- --------
Total Consolidated debt................................................................ $430,162 $174,319
Less current maturities.................................................................. 93,975 13,999
-------- --------
Total Long-Term Debt................................................................... $336,187 $160,320
-------- --------
-------- --------
</TABLE>
Aggregate maturities of total debt are as follows before the debt
refinancing described in Note 23:
<TABLE>
<CAPTION>
SPX SPT TOTAL
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
1994............................................................ $67,275 $26,700 $ 93,975
1995............................................................ 43,700 28,900 72,600
1996............................................................ 9,500 54,600 64,100
1997............................................................ 11,200 -- 11,200
1998............................................................ 3,400 50,000 53,400
Thereafter...................................................... 84,881 50,006 134,887
</TABLE>
SPX
Revolving credit loans, under revolving credit agreements dated July 1, 1991
as amended, aggregating $75 million with five banks, have terms of one year.
During the period of the revolving credit loans, the borrowings will bear
interest at negotiated rates not to exceed prime. The company has agreed to pay
the banks commitment fees of 3/8% per annum of the unused portion of the credit
commitments. The credit agreements do not require the company to maintain any
additional balances at the participating banks, and the agreements can be
reduced in amount or terminated at any time at the option of the company. At
December 31, 1993, the company had unused lines of revolving credit of $75
million. This facility was replaced by a new revolving credit agreement dated
March 1994 (see Note 23).
The company has guaranteed a note purchase agreement with certain insurance
companies under its ESOP. This loan bears interest at 9.04%. Principal is
payable in fifteen annual installments commencing June 1990. The company's
semiannual contributions to the
F-21
<PAGE> 91
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(19) NOTES PAYABLE AND DEBT (CONTINUED)
ESOP trust enable the trust to make interest and principal payments.
Additionally, dividends on the ESOP's unallocated shares are used to make
interest and principal payments and are deductible for income tax purposes.
Dividends on unallocated shares were $545,000 in 1993, $590,000 in 1992 and
$1,113,000 in 1991. Beginning in 1993, as a result of new ESOP accounting, these
dividends are no longer reflected as dividends in the consolidated financial
statements and are accounted for as direct principal payments. This facility
will be terminated by the end of March 1994 and will be replaced by the new
revolving credit agreement.
The company is subject to a number of restrictive covenants under the
various debt agreements. At December 31, 1993 without consideration of the
availability of the new revolving credit agreement, the company is in default on
the following restrictive covenants due to the consolidation of SP Europe and
the purchase of Riken's 49% ownership interest in SPT; (a) the company is
required to maintain a consolidated fixed charge ratio of 1.5 to 1.0, at
December 31, 1993 it is .54 to 1.0, (b) the company is required to maintain
consolidated net tangible assets of at least 160% of consolidated funded
indebtedness, at December 31, 1993 it is 122%, (c) the company will not declare
dividends that exceed the sum of $40 million plus cumulative consolidated net
income since May 31, 1989, at December 31, 1993, cumulative dividends exceeded
the limitation by $32 million, and (d) the company is required to maintain
consolidated current assets of at least 150% of current liabilities, at December
31, 1993 it was 130%. These restrictive covenant defaults pertain to the $53
million of senior notes, the $22 million of senior notes, the $75 million
revolving credit line, the $19.7 million note to the Allen Group, Inc. and the
guaranteed $42.1 million ESOP note and make the debt payable on demand should
the conditions of default continue after notification. However, in March 1994,
the company obtained a new revolving credit facility of $250 million and will
utilize this facility to repay this defaulted debt (see Note 23). As the new
credit facility expires in 1999, the debt existing at December 31, 1993 has been
classified as long-term.
Included in interest expense, net, was $1.5 million in 1993, $0.5 million in
1992 and $0.5 million in 1991 of interest income.
SPT
The Term Bank Loan and the Revolving Credit Loans are provided by a
syndicate of ten banks. SPT has unused available credit of up to $25 million on
the revolving credit agreement as of December 31, 1993, subject to receivable
and inventory balances. Additionally, $16 million of financing is available
through the Deferred Term Loan Facility under the Bank Credit Agreement to make
payments on borrowings under the Term Loan Facility should funds not be
sufficient to make scheduled amortization payments due under the Term Loan
Facility. SPT also has $5 million available on a swingline loan facility used to
manage daily cash receipts and disbursements. Loans under this facility are
payable in 5 days. Management believes the facilities are adequate to cover the
1994 financing requirements of SPT.
SPT has entered into hedging arrangements which fix the interest rate of
approximately $70 million of the bank borrowings at 11 1/2% for a period
ranging from one to three years. The unhedged bank loans bear interest at
1 1/4% over the prime rate or 2 1/4% over the LIBOR rate. The rates are set,
at SPT's option, for various periods up to one year in length. Substantially all
of SPT's assets are pledged as collateral for loans under the Bank Credit
Agreement.
SPT is subject to a number of restrictive covenants under the Bank Credit
Agreement, as amended, and the Indenture related to the subordinated debentures.
Under the most restrictive of these covenants as of year-end, SPT must: (a) meet
a fixed charge coverage ratio of 1.10 to 1; (b) meet a cash interest expense
coverage ratio of 1.90 to 1; (c) meet a current ratio of 1.5 to 1; and (d) limit
capital expenditures for the year ended December 31, 1993 to $18 million. At
year-end, SPT's actual fixed charge ratio was 1.12 to 1; its cash interest
expense coverage ratio was 2.04 to 1; its current ratio was 1.5 to 1 and net
capital expenditures were approximately $17.8 million. The cash interest expense
coverage ratio becomes more restrictive in future periods. The covenants also
restrict distributions to the partners.
Financing costs incurred by SPT were being amortized over the life of the
respective borrowings. Amortization of $1.2 million was recorded in 1993, 1992
and 1991 with the remaining $3.9 million written off as part of the debt
extinguishment charge (see Note 8).
At December 31, 1993, substantially all of SPT's assets are pledged as
collateral under SPT's bank credit agreements. The distribution of these assets,
as well as partnership distributions, to the company from SPT are restricted.
The company's planned second quarter issuance of $260 million of senior
subordinated notes and concurrent payment to the SPT lenders will remove this
restriction. Should the notes not be issued, the SPT indebtedness will remain in
place, including the restrictions.
F-22
<PAGE> 92
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(20) CAPITAL STOCK
Authorized shares of common stock (par value $10.00) total 50,000,000
shares. Common shares issued and outstanding are summarized in the table below.
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
SHARES OF COMMON STOCK 1993 1992 1991
- ---------------------- ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Issued................................................................................ 15,556 15,536 15,471
In treasury........................................................................... (1,633) (1,633) (1,633)
------ ------ ------
Outstanding........................................................................... 13,923 13,903 13,838
------ ------ ------
------ ------ ------
ESOP trust -- unallocated............................................................. 1,246 1,361 1,476
</TABLE>
The company's treasury stock was purchased in the last half of 1989 at an
average cost of $30 5/8 per share using $50 million of proceeds from the
creation of the company's leveraged ESOP.
The company has 3,000,000 shares of preferred stock, no par value,
authorized, but no shares have been issued.
In June 1989, the company established an employee stock ownership plan
(ESOP). 1,746,725 shares of common stock were issued to the ESOP trust in
exchange for $50 million. These shares were issued at market value ($28 5/8 per
share) and the appropriate amounts are included in common stock and paid in
capital.
The company restated, amended and renamed its 1982 Stock Option Plan to the
1992 Stock Compensation Plan, effective December 15, 1992. Under the new Stock
Compensation Plan, up to 700,000 shares of the company's common stock may be
granted to key employees with those shares still available for use under the
1982 Stock Option Plan being carried forward and forming a part of the 700,000
shares. Awards of incentive stock options, nonqualified stock options, stock
appreciation rights (SAR's), performance units and restricted stock may be made
under the Plan although no more than 200,000 shares may be granted in the form
of restricted stock. The Plan also authorizes the granting of stock options to
directors.
Stock options may be granted to key employees in the form of incentive stock
options or nonqualified stock options at an option price per share of no less
than the fair market value of the common stock of the company on the date of
grant. The options become exercisable six months after the date of the grant and
expire no later than 10 years from the date of grant (or 10 years and 1 day with
respect to nonqualified stock options).
SAR's may be granted to key employees either in conjunction with the
awarding of nonqualified stock options or on a stand-alone basis. The SAR's
entitle the holder to receive a cash payment equal to the excess of the fair
market value of a share of common stock of the company over the exercise price
of the right at the date of exercise of the right.
Performance units, which are equivalent to a share of common stock, may be
granted to key employees and may be earned, in whole or in part, dependent upon
the attainment of performance goals established at the time of grant.
Restricted stock may be granted to key individuals to recognize or foster
extraordinary performance, promotion, recruitment or retention. At the time of
the grant, restrictions are placed on ownership of the shares for a stated
period of time during which a participant will not be able to dispose of the
restricted shares. Upon lapse of the restriction period, complete ownership is
vested in the participant and the shares become freely transferable.
F-23
<PAGE> 93
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(20) CAPITAL STOCK (CONTINUED)
A summary of common stock options, SAR's, and restricted stock issued under
the company's Stock Compensation Plan is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Stock Options:
Outstanding at beginning of year.............................................. 877,140 735,818 634,729
Granted....................................................................... 148,400 215,750 281,350
Exercised..................................................................... (21,903) (74,428) --
Surrendered/canceled.......................................................... (79,337) -- (180,261)
-------- -------- --------
Outstanding at end of year.................................................... 924,300 877,140 735,818
-------- -------- --------
-------- -------- --------
Price of options exercised and outstanding.................................... $ 11.38- $ 11.38- $ 11.38-
28.00 28.00 28.00
Restricted stock granted during year............................................ -- -- 12,000
Shares reserved and available for future grants................................. 442,387 511,450 74,375
Stock Appreciation Rights:
Outstanding at beginning of year.............................................. -- -- 171,100
Granted....................................................................... -- -- --
Exercised..................................................................... -- -- --
Surrendered/canceled.......................................................... -- -- (171,100)
-------- -------- --------
Outstanding at end of year.................................................... -- -- --
-------- -------- --------
-------- -------- --------
</TABLE>
Preferred stock is issuable in series with the Board of Directors having the
authority to determine, among other things, the stated value of each series,
dividend rate, conversion rights and preferences in liquidation or redemption.
On June 25, 1986, the company entered into a Rights Agreement which was
amended and restated as of October 20, 1988. Pursuant to the Rights Agreement,
in July 1986, the company issued a dividend of one preferred stock purchase
right on each outstanding share of common stock. Each right entitles the holder,
upon the occurrence of certain events, to purchase one one-hundredth of a share
of a new series of junior participating preferred stock for $100. Furthermore,
if the company is involved in a merger or other business combination at any time
after the rights become exercisable, the rights will entitle the holder to buy
the number of shares of common stock of the acquiring company having a market
value of twice the then current exercise price of each right. Alternatively, if
a 20% or more shareholder acquires the company by means of a reverse merger in
which the company and its stock survive, or engages in self-dealing transactions
with the company, or if any person acquires 20% or more of the company's common
stock, then each right not owned by a 20% or more shareholder will become
exercisable for the number of shares of common stock of the company having a
market value of twice the then current exercise price of each right. The rights,
which do not have voting rights, expire on July 15, 1996, and may be redeemed by
the company at a price of $.05 per right at any time prior to their expiration.
(21) SPX CREDIT CORPORATION
In June of 1993, the company acquired Allen Group Leasing from The Allen
Group Inc. (see Note 4). The company's SP Financial division was merged with
this lease financing unit and has been renamed SPX Credit Corporation ("SPX
CC"). SPX CC provides direct financing leasing alternatives to primarily
electronic diagnostic, emissions testing, and wheel service equipment customers
in the United States and Canada.
SPX CC purchases equipment for lease to others from the company's Specialty
Service Tools divisions, its sole supplier, at prices comparable to those to
third parties. The aggregate cost of equipment purchased from Specialty Service
Tools divisions amounted to approximately $16.0 million in 1993. The company's
Specialty Service Tools divisions charge a commission representing an
origination fee for providing leases and for the cost of services provided to
SPX CC with respect to the negotiation and consummation of new leases in the
amount of $521,000 for 1993 (since the acquisition). SPX CC has an agreement
with Specialty Service Tools divisions for the repurchase of repossessed
equipment at amounts determined to approximate realizable value by the Specialty
Service Tools divisions. In 1993 (since the acquisition), approximately $5.8
million of equipment was repurchased under this agreement.
F-24
<PAGE> 94
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(21) SPX CREDIT CORPORATION (CONTINUED)
Information regarding lease receivables included in the consolidated balance
sheets is as follows (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1993 CURRENT LONG-TERM TOTAL
- ----------------- ------- --------- -----
<S> <C> <C> <C>
Direct financing lease receivables............................................. $ 36,661 $ 60,263 $ 96,924
Residual value of lease equipment.............................................. 469 2,862 3,331
Other leasing assets........................................................... 9,159 192 9,351
Unearned lease finance income.................................................. (10,427) (10,825) (21,252)
Allowance for credit losses.................................................... (2,028) (1,479) (3,507)
-------- -------- --------
$ 33,834 $ 51,013 $ 84,847
-------- -------- --------
-------- -------- --------
</TABLE>
The aggregate maturities of direct financing lease receivables as of
December 31, 1993 were $36.7 million in 1994, $28.4 million in 1995, $18.0
million in 1996, $10.3 million in 1997 and $3.5 million in 1998.
Essentially all of SPX CC's direct financing lease receivables are with
companies or individuals operating within the automotive repair industry,
including automotive dealerships, garages and similar repair and inspection
facilities, and approximately one-third of lease receivables are with lessees
located in the state of California.
The company has a program whereby certain lease receivables are sold to
financial institutions with limited recourse. In the event of default by a
lessee, the financial institution has recourse equal to their net lease
receivable. In return, the company receives the collateralized lease equipment.
In 1993, 1992 and 1991, $5,613,000, $21,390,000 and $18,705,000 of gross lease
receivables were sold to financial institutions generating revenues of $846,000,
$1,386,000 and $2,936,000. At December 31, 1993 and 1992, financial institutions
held lease receivables, which are subject to limited recourse, of $42,766,000
and $49,235,000. Correspondingly, allowances for recourse liabilities, net of
recoverable value, were $3,743,000 and $2,225,000 at December 31, 1993 and 1992.
(22) CASH FLOWS FROM OPERATING ACTIVITIES
The following provides supplementary information comprising the company's
cash flows from operating activities:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1993 1992 1991
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) from operating activities..................................... $(40,600) $ 14,860 $(21,560)
Adjustments to reconcile net income (loss) to net cash provided (used) by
operating activities --
Cumulative effect of change in accounting methods............................. 31,800 5,700 --
Extraordinary loss............................................................ 24,000 -- --
Depreciation and amortization................................................. 24,370 25,277 23,771
SPT equity losses............................................................. 26,845 2,407 8,532
SP Europe equity losses....................................................... 21,500 -- --
Increase (decrease) in deferred income taxes.................................. (15,306) 7,644 (5,286)
(Increase) decrease in receivables............................................ (15,523) (1,061) 30,842
Decrease in inventories....................................................... 11,609 2,560 22,800
(Increase) decrease in prepaid and other current assets....................... 2,136 (1,380) (848)
Increase (decrease) in accounts payable....................................... (1,623) 3,945 307
Decrease in accrued liabilities............................................... (7,238) (787) (6,172)
Increase in income taxes payable.............................................. 4,529 4,457 52
Increase in lease finance receivables......................................... (9,154) -- --
Gain on sale of businesses, net of taxes...................................... (64,200) -- --
Restructuring and special charges............................................. 27,500 -- 18,200
Increase in long-term liabilities............................................. 6,803 2,131 --
Other, net.................................................................... (2,163) 1,736 (3,189)
-------- -------- --------
Net cash provided by operating activities....................................... $ 25,285 $ 67,489 $ 67,449
-------- -------- --------
-------- -------- --------
</TABLE>
F-25
<PAGE> 95
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(23) SUBSEQUENT EVENT -- REFINANCING
Late in the fourth quarter of 1993, the company determined that virtually
all existing SPX and SPT debt should be refinanced in anticipation of the
purchase of Riken's 49% interest in SPT, due to favorable prevailing interest
rates, scheduled and accelerated debt maturities, and to maintain the
flexibility of the company to grow through internal investments and
acquisitions. The plan of refinancing (the "Refinancing") includes two elements,
a new $225 million revolving bank facility and the issuance of $260 million of
senior subordinated notes. The Refinancing is expected to be completed by the
end of the second quarter of 1994.
In March of 1994, the first portion of the Refinancing was completed when
the company closed a $250 million revolving credit facility with The First
National Bank of Chicago, as agent for a syndicate of banks. This revolving
credit facility bears interest at LIBOR plus 1.0% or the prime rate (at the
company's option) and expires in 1999. Upon completion of the senior
subordinated note offering, this revolving credit facility is to be reduced to
$225 million of maximum availability. Proceeds from this revolving credit
facility will be used to extinguish SPX debt as follows: Senior Notes
aggregating $75 million, the $19.7 million note to the Allen Group, the
company's ESOP trust's note of $42.1 million and $68 million of miscellaneous
debt, much of which was technically in default of covenant provisions. Also,
$15.2 million of letters of credit securing the Industrial Revenue Bonds were
renegotiated.
By June 30, 1994, the company expects to have completed its $260 million
offering of senior subordinated notes. These notes are anticipated to bear
interest at a rate of approximately 10% and will be due in or after the year
2002. At that time, the proceeds will be used to retire existing SPT borrowings,
including the $100 million of 14.5% senior subordinated debentures, the Term
Bank Loan, and the revolving credit loans. Excess proceeds will be used to pay
down the company's new revolving credit facility at that time.
The revolving credit agreement contains covenants, the most restrictive of
which are as follows: (a) maintain a leverage ratio of 78% in 1994, declining on
a graduated scale to 65% in 1999, (b) maintain an interest expense coverage
ratio of 2.0 to 1.0 in 1994 rising on a graduated scale to 3.5 to 1.0 in 1998
and thereafter, (c) maintenance of a fixed charge coverage ratio, as defined in
the revolving credit agreement, of 1.75 to 1.0 in 1994 and 1995, and 2.0 to 1.0
thereafter, and (d) dividends are limited to $8 million for the five quarters
starting with the first quarter of 1994, and are limited to 10% of operating
income plus depreciation and amortization (EBITDA) thereafter. The revolving
credit agreement also limits capital expenditures, investments, and transactions
with affiliates.
If the company does not issue senior subordinated notes, provisions have
been made so that the revolving credit facility will remain at $250 million and
the rate of interest would become LIBOR plus 1.5% or the prime rate plus .5% (at
the company's option) and the facility would be secured by substantially all of
SPX's assets. Also, the existing SPT debt would remain outstanding in its
current form, including security interests in SPT's assets. The financial
covenants, the most restrictive of which, will require the company (excluding
SPT) to: (a) maintain a leverage ratio of 55% in 1994 and 1995, and 50%
thereafter, (b) maintain an interest expense coverage ratio of 3.0 to 1.0 in
1994, 4.0 to 1.0 in 1995 and 5.0 to 1.0 thereafter, (c) maintenance of a fixed
charge coverage ratio, as defined in the revolving credit agreement, of 2.0 to
1.0 in 1994, 1995 and 1996 and 2.25 to 1.0 thereafter, and (d) dividends
declared before March 31, 1995 and paid before June 30, 1995 are limited to $8
million, and thereafter are limited to 10% of operating income plus depreciation
and amortization (EBITDA) during the preceding twelve months. The revolving
credit agreement also limits capital expenditures, investments, transactions
with affiliates, and transactions with SPT.
F-26
<PAGE> 96
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(24) SEALED POWER TECHNOLOGIES -- SELECTED FINANCIAL INFORMATION
As discussed in Note 5, the company consolidated SPT's balance sheet at
December 31, 1993. The company's 49% share of SPT's results of operations has
been recognized on the equity method of accounting. Selected historical
financial information on SPT is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
OPERATING DATA:
Revenues.............................................................................. $391.6 $355.2 $319.8
Gross profit.......................................................................... 53.8 56.9 45.3
Selling, distribution, & administrative expenses...................................... 28.2 26.7 24.0
Other (income), net................................................................... (2.0) (2.8) (2.0)
------ ------ ------
Earnings before interest.............................................................. $ 27.6 $ 33.0 $ 23.3
Interest expense, net................................................................. 27.1 29.3 32.1
------ ------ ------
Income (loss) before cumulative effect of change in accounting method................. $ .5 $ 3.7 $ (8.8)
Cumulative effect of change in accounting method*..................................... (89.5) -- --
------ ------ ------
Income (loss)......................................................................... $(89.0) $ 3.7 $ (8.8)
------ ------ ------
------ ------ ------
Depreciation and amortization......................................................... 20.4 19.1 18.7
Capital expenditures, net............................................................. 17.8 12.9 13.1
Research and development.............................................................. 3.4 3.8 3.6
Pension expense....................................................................... .1 -- .2
Lease rental expense.................................................................. .9 .9 9
Incremental SFAS No. 106 expense...................................................... 6.1 -- --
BALANCE SHEET DATA (AT PERIOD END):
Current assets........................................................................ $ 76.7 $ 74.6 $ 73.0
Net property, plant and equipment..................................................... 91.4 91.1 94.4
Other assets.......................................................................... 13.7 15.1 17.3
------ ------ ------
$181.8 $180.8 $184.7
------ ------ ------
------ ------ ------
Current liabilities................................................................... $ 80.0 $ 66.6 $ 57.6
Long-term liabilities*................................................................ 97.5 3.0 --
Long-term debt........................................................................ 183.5 199.1 218.7
Partners' capital (deficit)........................................................... (179.2) (87.9) (91.6)
------ ------ ------
$181.8 $180.8 $184.7
------ ------ ------
------ ------ ------
</TABLE>
- ---------------
* In 1993, SPT adopted SFAS No. 106, "Employers Accounting for
Postretirement Benefits other than Pensions."
(25) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure about Fair
Value of Financial Instruments" requires disclosure of an estimate of the fair
value of certain financial instruments. The following methods and assumptions
were used by the company in estimating its fair value disclosures:
Cash and temporary cash investments: The carrying amount reported on the
consolidated balance sheet approximates its fair value.
Lease Finance Receivables: The carrying amount, which is net of deferred
future lease finance income and reserves for credit losses, approximates fair
value.
Notes payable and current maturities of long-term debt and Long-term debt:
The fair value of the company's debt either approximates its carrying value or
represents the carrying value plus the early extinguishment costs to be paid in
the first quarter of 1994 or to be paid during the second quarter of 1994.
Interest rate swaps: The fair value represents the early extinguishment
costs required to terminate the arrangement in 1994.
Letters of Credit: The company utilizes letters of credit to back certain
financing instruments and insurance policies. The Letters of Credit reflect fair
value as a condition of their underlying purpose and are subject to fees
competitively determined in the marketplace.
F-27
<PAGE> 97
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(25) FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying amounts and fair values of the company's financial instruments
at December 31, 1993 are as follows (amounts in thousands):
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- ----------
<S> <C> <C>
Cash and temporary cash investments........................................................ $117,843 $ 117,843
Lease finance receivables.................................................................. 84,847 84,847
Notes payable and current maturities of long-term debt and long-term debt.................. (430,162) (457,662)
Off-Balance Sheet Financial Instruments:
Interest rate swaps...................................................................... -- (4,500)
Letters of Credit........................................................................ -- (44,700)
</TABLE>
(26) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The first three quarters of 1993 and each quarter of the years 1992 and 1991
have been restated to reflect the company's previous 49% share of SPT income or
losses and the effect of amortizing the difference between its investment
balance and its share of SPT's initial partnership capital deficit. The first
three quarters of 1993 have also been restated to reflect new accounting for the
company's ESOP.
<TABLE>
<CAPTION>
1993
------------------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
-------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues................................................. $179,164 $212,548 $195,079 $169,354 $756,145
Gross profit............................................. 57,388 70,848 65,265 54,612 248,113
Income (loss) before cumulative effect of change in
accounting methods and extraordinary loss.............. 357 5,428 (20,256)* 29,671** 15,200
Cumulative effect of change in accounting method, net of
taxes.................................................. (31,800) -- -- -- (31,800)
Extraordinary loss, net of taxes......................... -- -- -- (24,000) (24,000)
Net income (loss)........................................ (31,443) 5,428 (20,256) 5,671 (40,600)
Income (loss) per share:
Before cumulative effect of change in accounting method
and extraordinary loss, net of taxes................. $ 0.02 $ 0.43 $ (1.61)* $ 2.34** $ 1.20
Cumulative effect of change in accounting method, net
of
taxes................................................ (2.52) -- -- -- (2.52)
Extraordinary loss, net of taxes....................... -- -- -- (1.90) (1.90)
Net income (loss)...................................... $ (2.50) $ 0.43 $ (1.61) $ 0.44 $ (3.22)
</TABLE>
* Includes a pretax restructuring charge of $27.5 million, $18.5 million
aftertax and $1.47 per share.
** Includes SP Europe equity losses, $21.5 million after tax and $1.71 per
share. Also includes a pretax gain on the sale of businesses of $105.4
million, $64.2 million aftertax and $5.07 per share.
<TABLE>
<CAPTION>
1992
------------------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
-------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues................................................. $175,230 $217,627 $237,262 $171,050 $801,169
Gross profit............................................. 58,716 75,166 76,365 57,753 268,000
Income before cumulative effect of change in accounting
methods................................................ 948 8,366 9,289 1,957 20,560
Cumulative effect of change in accounting methods, net of
taxes.................................................. (5,700) -- -- -- (5,700)
Net income (loss)........................................ (4,752) 8,366 9,289 1,957 14,860
Income (loss) per share:
Before cumulative effect of change in accounting
methods.............................................. $ .07 $ .60 $ .67 $ .14 $ 1.48
Cumulative effect of change in accounting methods, net
of taxes............................................. (.41) -- -- -- (.41)
Net income (loss)...................................... $ (.34) $ .60 $ .67 $ .14 $ 1.07
</TABLE>
F-28
<PAGE> 98
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(26) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
1991
------------------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
-------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues................................................. $156,731 $177,513 $172,000 $167,224 $673,468
Gross profit............................................. 51,570 59,117 52,275 48,880 211,842
Net income (loss)........................................ (4,460) 2,769 (16,539)* (3,327) (21,557)
Net income (loss) per share.............................. $ (.32) $ .20 $ (1.20)* $ (.24) $ (1.56)
</TABLE>
* Includes a pretax special charge of $18.2 million, $14.7 million aftertax and
$1.06 per share.
(27) SUPPLEMENTARY FINANCIAL INFORMATION
PROFIT AND LOSS
<TABLE>
<CAPTION>
CHARGED TO COSTS AND EXPENSES
-------------------------------
1993 1992 1991
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Maintenance and repairs............................................................ $ 7,539 $ 9,643 $ 6,254
Depreciation and amortization...................................................... 24,370 25,277 23,771
Payroll taxes...................................................................... 14,705 12,039 10,244
Advertising........................................................................ 5,821 6,151 6,278
Research and development costs..................................................... 17,569 14,718 13,113
</TABLE>
BALANCE SHEET
<TABLE>
<CAPTION>
1993 1992
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accrued payrolls............................................................................. $27,554 $12,200
Warranty reserve............................................................................. 7,060 8,300
Automotive Diagnostics restructuring reserve................................................. 14,533 --
Debt extinguishment reserves................................................................. 32,000 --
Amount payable for SPT acquisition........................................................... 41,700 --
</TABLE>
F-29
<PAGE> 99
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
(28) SP EUROPE-- SELECTED FINANCIAL INFORMATION (UNAUDITED)
Selected historical financial information on SP Europe is as follows:
<TABLE>
<CAPTION>
1993 1992 1991*
------ ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
OPERATING DATA:
Revenues................................................................................ $ 40.6 $49.6 $19.2
Gross profit............................................................................ (4.0) (5.4) (3.9)
Selling, distribution, & administrative expenses........................................ 9.1 5.8 1.5
Other (income), net..................................................................... 0.5 (2.4) (0.7)
------ ----- -----
Earnings (loss) before interest......................................................... $(13.6) $(8.8) $(4.7)
Interest expense, net................................................................... 0.9 0.1 0.0
------ ----- -----
Income (loss)........................................................................... $(14.5) $(8.9) $(4.7)
------ ----- -----
------ ----- -----
Depreciation and amortization........................................................... (1.0) (2.0) (0.3)
Capital expenditures, net............................................................... 4.2 1.1 0.6
BALANCE SHEET DATA (AT PERIOD END):
Current assets.......................................................................... $ 15.7 $16.1 $17.0
Net property, plant and equipment....................................................... 5.1 1.5 0.8
Other assets............................................................................ 0.7 (0.6) (5.1)
------ ----- -----
$ 21.5 $17.0 $12.7
------ ----- -----
------ ----- -----
Current liabilities..................................................................... $ 10.4 $19.0 $12.8
Long-term liabilities................................................................... 2.2 3.1 3.9
Long-term debt.......................................................................... 19.6 1.6 0.2
Partners' capital (deficit)............................................................. (10.7) (6.7) (4.2)
------ ----- -----
$ 21.5 $17.0 $12.7
------ ----- -----
------ ----- -----
</TABLE>
- ---------------
* Operating data include the results of SP Europe since acquisition in July,
1991.
F-30
<PAGE> 100
SPX CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
--------- DECEMBER
MARCH 31 31
1994 1993
--------- ----------
(000S OMITTED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and temporary cash investments............................. $ 14,899 $ 117,843
Receivables..................................................... 148,440 123,081
Lease finance receivables--current portion...................... 32,839 33,834
Inventories..................................................... 161,066 159,223
Deferred income tax asset and refunds........................... 54,489 54,489
Prepaid expenses and other current assets....................... 27,451 29,726
--------- ----------
Total Current Assets.......................................... $ 439,184 $ 518,196
Investments..................................................... 13,945 13,446
Property, plant and equipment (at cost)......................... $ 374,644 $ 367,832
Less: Accumulated depreciation.................................. (176,203) (169,687)
--------- ----------
$ 198,441 $ 198,145
Lease finance receivables--long term............................ 50,079 51,013
Costs in excess of net assets of businesses acquired............ 202,835 204,149
Other assets.................................................... 43,420 39,452
--------- ----------
$ 947,904 $1,024,401
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current maturities of long-term debt.......... $ 44,208 $ 93,975
Accounts payable................................................ 80,141 62,968
Accrued liabilities............................................. 179,144 229,998
Income taxes payable............................................ 12,596 11,864
--------- ----------
Total Current Liabilities..................................... $ 316,089 $ 398,805
Long-term liabilities........................................... 123,953 123,235
Deferred income taxes........................................... 21,338 20,787
Long-term debt.................................................. 338,513 336,187
SHAREHOLDERS' EQUITY:
Common stock.................................................... $ 155,772 $ 155,558
Paid in capital................................................. 58,624 58,926
Retained earnings............................................... 22,112 20,282
--------- ----------
$ 236,508 $ 234,766
Less: Common stock held in treasury............................. 50,000 50,000
Unearned compensation--ESOP............................... 35,046 35,900
Minority interest......................................... 1,320 1,080
Cumulative translation adjustments........................ 2,131 2,399
--------- ----------
Total Shareholders' Equity.............................. $ 148,011 $ 145,387
--------- ----------
$ 947,904 $1,024,401
--------- ----------
--------- ----------
</TABLE>
F-31
<PAGE> 101
SPX CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED MARCH
31
--------------------------
1994 1993
---------- ----------
(IN THOUSANDS OF DOLLARS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
REVENUES.......................................................... $277,451 $179,164
COSTS AND EXPENSES
Cost of products sold........................................... 207,357 121,776
Selling, general and administrative expenses.................... 54,160 50,762
Other expense (income), net..................................... 606 1,519
SPT equity losses............................................... - 565
-------- --------
OPERATING INCOME.................................................. $ 15,328 $ 4,542
Interest expense, net........................................... 10,228 3,907
-------- --------
INCOME BEFORE INCOME TAXES........................................ $ 5,100 $ 635
-------- --------
Provision for Income Taxes...................................... 2,000 278
-------- --------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING METHODS... $ 3,100 $ 357
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING METHODS, NET OF
INCOME TAXES.................................................... - (31,800)
NET INCOME (LOSS)................................................. $ 3,100 $(31,443)
-------- --------
-------- --------
INCOME (LOSS) PER SHARE:
Before cumulative effect of change in accounting methods........ $.24 $ .02
Cumulative effect of change in accounting methods............... - (2.52)
---- ------
Net income (loss)............................................... $.24 $(2.50)
---- ------
---- ------
Dividends per share............................................... $.10 $ .10
Weighted average number of common shares outstanding.............. 12,707,000 12,557,000
</TABLE>
F-32
<PAGE> 102
SPX CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31
---------------------
1994 1993
--------- --------
(000S OMITTED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) from operating activities.......................... $ 3,100 $(31,443)
Adjustments to reconcile net income (loss) to net cash from operating
activities--Cumulative effect of change in accounting methods..... - 31,800
Depreciation and amortization..................................... 9,791 6,424
Increase in deferred income taxes................................. 551 2,527
Increase in accounts receivable................................... (25,359) (17,539)
Increase in inventories........................................... (1,843) (899)
Decrease in prepaid assets........................................ 2,275 867
Increase (decrease) in accounts payable........................... 17,173 (1,264)
Increase (decrease) in accrued liabilities........................ (5,891) 6,685
Increase (decrease) in income taxes payable....................... 732 (6,652)
Decrease in lease finance receivables............................. 1,929 -
Increase in long-term liabilities................................. 718 508
Other, net........................................................ 2,019 (600)
--------- --------
Net cash from operating activities................................... $ 5,195 $ (9,586)
--------- --------
CASH FLOWS USED BY INVESTING ACTIVITIES:
Capital expenditures................................................. $ (10,318) $ (3,935)
Advance to SP Europe................................................. - (5,206)
--------- --------
Net cash used by investing activities................................ $ (10,318) $ (9,141)
--------- --------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Net borrowings (payments) under debt agreements...................... $ (47,567) $ 17,950
Payment of debt extinguishment costs................................. (5,963) -
Payment of debt acquisition costs.................................... (4,147) -
Payment for interest in SPT.......................................... (39,000) -
Dividends paid....................................................... (1,144) (1,260)
--------- --------
Net cash provided (used) by financing activities..................... $ (97,821) $ 16,690
--------- --------
NET DECREASE IN CASH AND TEMPORARY CASH INVESTMENTS.................... $(102,944) $ (2,037)
CASH AND TEMPORARY CASH INVESTMENTS, BEGINNING OF PERIOD............... 117,843 9,729
--------- --------
CASH AND TEMPORARY CASH INVESTMENTS, END OF PERIOD..................... $ 14,899 $ 7,692
--------- --------
--------- --------
</TABLE>
F-33
<PAGE> 103
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1994
(UNAUDITED)
1. The interim financial statements reflect all adjustments which are, in
the opinion of management, necessary to a fair statement of the results of the
interim periods presented. All adjustments are of a normal recurring nature.
Amounts in the 1993 consolidated financial statements have been restated to
reflect the company's previous 49% share of SPT income or loss and the effect of
amortizing the difference between its investment balance and its share of SPT's
initial partnership capital deficit and to reflect new accounting for the
company's ESOP.
2. Information regarding the company's segments was as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
------------------
1994 1993
------ ------
(IN MILLIONS)
<S> <C> <C>
REVENUES:
Specialty Service Tools....................................................................... $139.7 $111.4
SPX Credit Corporation........................................................................ 3.4 0.5
Original Equipment Components................................................................. 134.4 6.1
Businesses sold in 1993....................................................................... - 61.2
------ ------
Total..................................................................................... $277.5 $179.2
------ ------
------ ------
OPERATING INCOME (LOSS):
Specialty Service Tools....................................................................... $ 6.3 $ 4.2
SPX Credit Corporation........................................................................ 2.2 0.1
Original Equipment Components................................................................. 11.7 (0.5)
Businesses sold in 1993....................................................................... - 4.6
General corporate expenses.................................................................... (4.9) (3.9)
------ ------
Total..................................................................................... $ 15.3 $ 4.5
------ ------
------ ------
CAPITAL EXPENDITURES:
Specialty Service Tools....................................................................... $ 2.8 $ 1.2
SPX Credit Corporation........................................................................ - -
Original Equipment Components................................................................. 6.0 0.1
Businesses sold in 1993....................................................................... - 2.6
General corporate............................................................................. 1.5 0.0
------ ------
Total..................................................................................... $ 10.3 $ 3.9
------ ------
------ ------
DEPRECIATION AND AMORTIZATION:
Specialty Service Tools....................................................................... $ 4.0 $ 3.6
SPX Credit Corporation........................................................................ - -
Original Equipment Components................................................................. 5.7 0.5
Businesses sold in 1993....................................................................... - 2.2
General corporate............................................................................. 0.1 0.1
------ ------
Total..................................................................................... $ 9.8 $ 6.4
------ ------
------ ------
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1994 DECEMBER 31, 1993
-------------- -----------------
(IN MILLIONS)
<S> <C> <C>
IDENTIFIABLE ASSETS:
Specialty Service Tools...................................................... $422.4 $ 383.3
SPX Credit Corporation....................................................... 84.6 85.2
Original Equipment Components................................................ 356.7 343.8
General corporate............................................................ 84.2 212.1
------ --------
Total.................................................................... $947.9 $ 1,024.4
------ --------
------ --------
</TABLE>
3. In March of 1994, the first portion of the Refinancing was completed
when the company closed a $250 million revolving credit facility with The First
National Bank of Chicago, as agent for a syndicate of banks. This revolving
credit facility bears interest at LIBOR plus 1.0% or the prime rate (at the
company's option) and expires in 1999. Upon completion of the senior
subordinated note offering, this revolving credit facility is to be reduced to
$225 million of maximum availability. Proceeds from this revolving credit
facility will be used to extinguish SPX debt as follows: Senior Notes
aggregating $75 million, the $19.7 million note to the Allen Group, the
company's ESOP trust's note of $42.1 million and $68 million of miscellaneous
debt, much of which was technically in default of covenant provisions. Also,
$15.2 million of letters of credit securing the Industrial Revenue Bonds were
renegotiated. At March 31, 1994, approximately $80 million of this indebtedness
had been paid using the revolving credit facility and existing cash.
By June 30, 1994, the company expects to have completed its $260 million
offering of senior subordinated notes. These notes are anticipated to bear
interest at a rate of approximately 11% and will be due in or after the year
2002. At that time, the proceeds will be used to retire existing SPT borrowings,
including the $100 million of 14.5% senior subordinated debentures, the Term
Bank Loan, and the Revolving Credit Loans. Excess proceeds will be used to pay
down the company's new revolving credit facility at that time.
F-34
<PAGE> 104
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Sealed Power Management Corp.:
We have audited the accompanying consolidated balance sheets of Sealed
Power Technologies Limited Partnership (a Delaware limited partnership) and
Subsidiaries as of December 31, 1993 and 1992, and the related consolidated
statements of operations, partners' capital and cash flows for each of the three
years in the period ended December 31, 1993. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sealed Power Technologies
Limited Partnership and Subsidiaries as of December 31, 1993 and 1992 and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1993, in conformity with generally accepted
accounting principles.
As explained in the notes to the consolidated financial statements,
effective January 1, 1993, the Partnership changed its method of accounting for
postretirement benefits to adopt the provisions of Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions."
ARTHUR ANDERSEN & CO.
Chicago, Illinois,
March 17, 1994
F-35
<PAGE> 105
SEALED POWER TECHNOLOGIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1993 1992
--------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
ASSETS
Current Assets:
Cash............................................................. $ 187 $ 198
Trade accounts receivable, less allowances for doubtful accounts
of $656 and $567, respectively.................................. 40,323 33,514
Accounts receivable--Affiliate................................... 0 578
Inventories:
Finished products.............................................. 6,479 9,174
Work in process................................................ 7,099 6,872
Raw materials and supplies..................................... 7,379 6,995
Prepaid expenses and other current assets........................ 15,184 17,230
--------- ---------
Total Current Assets........................................... $ 76,651 $ 74,561
Investment in affiliates............................................ 10,250 9,626
Property, plant and equipment, at cost.............................. 274,353 265,844
Less: Accumulated depreciation...................................... (182,960) (174,738)
--------- ---------
$ 91,393 $ 91,106
Other assets........................................................ 3,476 5,542
--------- ---------
$ 181,770 $ 180,835
--------- ---------
--------- ---------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current Liabilities:
Bank overdrafts.................................................. $ 3,771 $ 1,348
Accounts payable................................................. 18,930 20,754
Current maturities of long-term debt............................. 26,693 19,159
Accrued liabilities.............................................. 30,620 25,362
--------- ---------
Total Current Liabilities...................................... $ 80,014 $ 66,623
Long-Term Debt...................................................... 183,513 199,144
Post-employment Benefits............................................ 92,951 0
Other Long-Term Liabilities......................................... 4,550 3,000
Partners' Capital (Deficit):
General Partners................................................. (1,462) 364
Limited Partners................................................. (177,796) (88,296)
--------- ---------
Total Partners' Capital (Deficit).............................. $(179,258) $ (87,932)
--------- ---------
$ 181,770 $ 180,835
--------- ---------
--------- ---------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-36
<PAGE> 106
SEALED POWER TECHNOLOGIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1993 1992 1991
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
NET SALES:
Customers................................................... $370,072 $327,410 $292,824
Affiliate................................................... 21,497 27,823 27,024
-------- -------- --------
$391,569 $355,233 $319,848
COSTS AND EXPENSES:
Costs of products sold...................................... 337,771 298,364 274,535
Selling, distribution & administrative expenses............. 28,271 26,653 24,046
Other expense (income), net................................. (2,031) (2,757) (1,987)
-------- -------- --------
EARNINGS BEFORE INTEREST...................................... $ 27,558 $ 32,973 $ 23,254
Interest expense, net....................................... 27,058 29,273 32,054
-------- -------- --------
Income (loss) before cumulative effect of change in accounting
method...................................................... $ 500 $ 3,700 $ (8,800)
Cumulative effect of change in accounting method.............. (89,500) 0 0
-------- -------- --------
INCOME (LOSS)................................................. $(89,000) $ 3,700 $ (8,800)
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-37
<PAGE> 107
SEALED POWER TECHNOLOGIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
-------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Partners' Capital (Deficit) at December 31, 1990............. $ 466 $ (93,284) $ (92,818)
Loss for the Year Ended December 31, 1991.................. (176) (8,624) (8,800)
Contributed Capital........................................ 0 10,014 10,014
Return of Capital.......................................... 0 (28) (28)
-------- --------- ---------
Partners' Capital (Deficit) at December 31, 1991............. $ 290 $ (91,922) $ (91,632)
Income for the Year Ended December 31, 1992................ 74 3,626 3,700
-------- --------- ---------
Partners' Capital (Deficit) at December 31, 1992............. $ 364 $ (88,296) $ (87,932)
Loss for the Year Ended December 31, 1993.................. (1,780) (87,220) (89,000)
Distribution of Capital.................................... (46) (2,244) (2,290)
Return of Capital.......................................... 0 (36) (36)
-------- --------- ---------
Partners' Capital (Deficit) at December 31, 1993............. $ (1,462) $(177,796) $(179,258)
-------- --------- ---------
-------- --------- ---------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-38
<PAGE> 108
SEALED POWER TECHNOLOGIES LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1993 1992 1991
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Income (loss)............................................... $(89,000) $ 3,700 $ (8,800)
Adjustments to reconcile income (loss) to net cash provided
by operations:
Cumulative effect of change in accounting method......... 89,500 0 0
Depreciation and amortization............................ 20,377 19,090 18,655
Decrease (increase) in accounts receivable............... (6,231) (4,068) 71
Decrease in inventories.................................. 2,084 3,618 3,622
Decrease (increase) in prepaid expenses and other current
assets................................................. 2,046 (1,066) (2,876)
(Decrease) increase in bank overdrafts................... 2,423 (1,881) (1,319)
(Decrease) increase in accounts payable.................. (1,824) 4,595 (971)
Increase in accrued liabilities.......................... 5,258 504 1,420
Earnings of affiliate.................................... (292) (690) (467)
Dividends from affiliates................................ 0 0 1,005
Increase in long term liabilities........................ 5,001 357 1,322
Other.................................................... (835) (72) 365
-------- -------- --------
Net cash provided by operating activities................... $ 28,507 $ 24,087 $ 12,027
-------- -------- --------
Cash Flows From Investing Activities:
Capital expenditures, net................................... $(17,763) $(12,870) $(13,144)
Investment in affiliates.................................... (332) (63) (300)
-------- -------- --------
Net cash used for investing activities...................... $(18,095) $(12,933) $(13,444)
-------- -------- --------
Cash Flows From Financing Activities:
Capital contributed in cash................................. 0 0 10,014
Bank payments, net.......................................... (8,097) (11,157) (8,554)
Distribution................................................ (2,326) 0 (28)
-------- -------- --------
Net cash provided by (used for) financing activities.......... $(10,423) $(11,157) $ 1,432
-------- -------- --------
Net increase (decrease) in cash............................... (11) (3) 15
Cash at beginning of period................................... 198 201 186
-------- -------- --------
Cash at end of period......................................... $ 187 $ 198 $ 201
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-39
<PAGE> 109
SEALED POWER TECHNOLOGIES LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
Sealed Power Technologies Limited Partnership (the "Partnership" or "Sealed
Power Technologies") began operating at the end of May 1989, upon completion of
a plan in which SPX Corporation ("SPX") contributed the Sealed Power, Contech,
Filtran and Hy-Lift divisions of SPX (the "Contributed Operations") to the
Partnership. SPX retained a 49% interest in the Partnership. The Partnership
obtained financing on the basis of the Contributed Operations through a
combination of bank debt and subordinated debentures (the "Financing") with no
recourse to SPX. Proceeds from the Financing of $245 million were distributed by
the Partnership to SPX at the end of May 1989. SPX retained $15 million of
accounts receivable from the Contributed Operations. The transactions described
above are collectively referred to as the "Transactions."
The consolidated financial statements include the assets and liabilities of
the Sealed Power, Contech, Hy-Lift and Filtran divisions of Sealed Power
Technologies Limited Partnership and two wholly owned subsidiaries and are
stated on the basis of historical cost at the time of contribution. Prior to May
31, 1989, the assets and liabilities of the Sealed Power, Contech, Hy-Lift, and
Filtran divisions were part of SPX and had no separate legal status.
Effective December 31, 1993, SPX acquired Riken Corporation's 49% interest
in Sealed Power Technologies for $39 million. Additionally, the Partnership
intends to redeem the 2% management interest in Sealed Power Technologies for
approximately $3 million. As a result of this transaction, SPX is accounting for
Sealed Power Technologies as a wholly owned subsidiary beginning with the
consolidation of the Sealed Power Technologies balance sheet as of December 31,
1993.
(2) SUMMARY OF ACCOUNTING POLICIES
The accounting and financial policies which affect significant elements of
the consolidated financial statements of the Partnership and which are not
apparent on the face of the statements, or in other notes to consolidated
financial statements, are described below.
A. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Sealed Power
Technologies and wholly-owned subsidiaries after elimination of all significant
intercompany accounts and transactions. Certain amounts shown for 1992 and 1991
have been reclassified to conform with the 1993 presentation in order to provide
a more meaningful basis for comparison with 1993.
B. INVENTORIES
Inventories are stated at the lower of cost or market and include material,
labor and factory overhead. Inventories are based on the last-in, first-out
(LIFO) method. Inventories, if priced on the first-in, first-out (FIFO) method,
which approximates market, would have been approximately $6,995,000 and
$8,761,000 greater at December 31, 1993 and 1992, respectively. During 1993,
1992 and 1991, certain inventory quantities were reduced, resulting in
liquidations of LIFO inventory quantities carried at lower costs. The effect was
to increase income by $1,453,000, $1,554,000 and $1,560,000 in 1993, 1992 and
1991, respectively.
C. PROPERTY, PLANT AND EQUIPMENT
The Partnership principally uses the straight-line method for computing
depreciation expense. For income tax purposes, the Partnership generally has
used accelerated methods where permitted.
Asset additions and improvements are added to the property accounts at cost
while maintenance and repairs which do not renew or extend the lives of the
respective assets are expensed currently. Upon sale or retirement of depreciable
properties, the related cost and accumulated depreciation are removed from the
accounts. The net gain or loss on disposition of property is credited or charged
to income.
D. DEFERRED CHARGES
Pre-operating costs of $8,154,000 are being amortized on a straight line
basis over a period of five years. The accumulated amortization of these costs
were $7,425,000, $5,805,000 and $4,185,000 as of December 31, 1993, 1992 and
1991, respectively.
E. INCOME TAXES
As a limited partnership, Sealed Power Technologies is not liable for state
or federal income taxes. Subject to certain restrictions, the Partnership will
distribute cash to the partners in an amount that approximates the tax liability
of the partners' arising from the operations of the Partnership. The Partnership
expects to distribute approximately $5 million in 1994 relating to 1993 taxable
income. The Partnership distributed $2.3 million in 1993 relating to 1992
taxable income. No distributions were required for 1991 or 1990.
F. PARTNERS' CAPITAL
The Managing General Partner of the Partnership is Sealed Power Management
Corp. SPX owns 96% of the limited partnership interest and a 2% general
partnership interest in the Partnership. Members of management of the
Partnership collectively own approximately a 2% limited partnership interest.
Earnings or losses of the Partnership are shared by the general and limited
partners in proportion to their ownership interests. Partnership interests are
subject to restrictions and are not publicly traded.
F-40
<PAGE> 110
SEALED POWER TECHNOLOGIES LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) INDEBTEDNESS
Long-term debt at December 31, 1993 and 1992, consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1993 1992
-------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Senior subordinated debentures, 14 1/2%, due May 15, 1999, with mandatory sinking fund
payment of $50,000 on May 15, 1998...................................................... $100,000 $100,000
Term bank loan, with interest rates established periodically based on prime or LIBOR
rates, due in varying quarterly installments through September 30, 1996................. 78,863 98,925
Mortgage loan, 9 5/8%, due in monthly installments through September 30, 1994............. 1,343 1,378
Revolving credit loans.................................................................... 30,000 18,000
-------- --------
Total..................................................................................... $210,206 $218,303
Less: current maturities.................................................................. 26,693 19,159
-------- --------
$183,513 $199,144
-------- --------
-------- --------
</TABLE>
The Term Bank Loan and the Revolving Credit Loans are provided by a
syndicate of ten banks. The Partnership has available up to $25 million of
revolving credit as of December 31, 1993, subject to receivable and inventory
balances. Additionally, $16 million of financing is available through the
Deferred Term Loan Facility under the Bank Credit Agreement to make payments on
borrowings under the Term Loan Facility should funds not be sufficient to make
scheduled amortization payments due under the Term Loan Facility. The
Partnership also has $5 million available on a swingline loan facility used to
manage daily cash receipts and disbursements. Loans under this facility are
payable in 5 days. Management believes the facilities are adequate to cover the
1994 cash requirements of the Partnership.
The Partnership has entered into hedging arrangements which fix the interest
rate of approximately $70 million of the bank borrowings at 11 1/2% for a period
ranging from one to three years. The unhedged bank loans bear interest at 1 1/4%
over the prime rate or 2 1/4% over the LIBOR rate. The rates are set, at the
option of the Partnership, for various periods up to one year in length.
Substantially all assets of the Partnership are pledged as collateral for loans
under the Bank Credit Agreement.
The Partnership is subject to a number of restrictive covenants under the
Bank Credit Agreement, as amended, and the Indenture related to the subordinated
debentures. Under the most restrictive of these covenants as of year-end, the
Partnership must: (a) meet a fixed charge coverage ratio of 1.10 to 1; (b) meet
a cash interest expense coverage ratio of 1.90 to 1; (c) meet a current ratio of
1.5 to 1; and (d) limit net capital expenditures for the year ended December 31,
1993, to $18 million. At year end, the Partnership's actual fixed charge ratio
was 1.12 to 1; its cash interest expense coverage ratio was 2.04 to 1; its
current ratio was 1.5 to 1 and net capital expenditures were approximately $17.8
million. The cash interest expense coverage ratio becomes more restrictive in
future periods. The covenants also restrict distributions to the partners.
Under Statement of Financial Accounting Standards No. 107, "Disclosures
About Fair Value of Financial Instruments", the Partnership is required to
report the amounts at which its debt securities could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale.
The fair market value of the Partnership's senior subordinated debentures was
$108,000,000 at December 31, 1993. With respect to the term loan and related
hedging agreement, the Partnership has determined that the book value is not
materially different than the fair market value.
Financing costs incurred by the Partnership at the time of the Transactions
are being amortized over the life of the respective borrowings. Amortization of
$1.2 million was recorded in 1993, 1992 and 1991.
The aggregate amounts of long-term debt due in each of the next five years
are as follows:
<TABLE>
<CAPTION>
AMOUNT DUE
YEAR -----------------------
---- (THOUSANDS OF DOLLARS)
<S> <C>
1994................................................................... $26,693
1995................................................................... 28,906
1996................................................................... 54,607
1997................................................................... 0
1998................................................................... 50,000
Thereafter............................................................. 50,000
</TABLE>
The aggregate amount of cash payments for interest for the years ended
December 31, 1993, 1992 and 1991 was $25.9 million, $28.1 million and $30.9
million, respectively.
F-41
<PAGE> 111
SEALED POWER TECHNOLOGIES LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) PENSION PLANS AND POSTRETIREMENT BENEFITS
Upon the contribution of the net assets from SPX to the Partnership on May
31, 1989, the Partnership assumed the liability for employees' prior service
with SPX and the pension funds associated with those liabilities.
The policy of the Partnership is to record pension expense in accordance
with Statement of Financial Accounting Standards No. 87 subject to the minimum
funding requirements of ERISA. Contributions in excess of pension expense are
considered prepayments for financial accounting purposes.
Substantially all employees of the Partnership are covered by defined
benefit or defined contribution pension plans. The Partnership's defined benefit
plans provide pension benefits that are principally based on the employee's
years of credited service.
Pension expense for the defined benefit plans consisted of:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1993 1992 1991
-------- ------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service cost-benefit earned during the period....................................... $ 2,671 $ 2,569 $ 2,206
Interest cost on projected benefit obligation....................................... 7,597 7,021 6,604
Actual return on assets............................................................. (16,425) (8,104) (28,542)
Net amortization and deferral....................................................... 6,217 (1,476) 19,936
-------- ------- --------
Net periodic pension cost........................................................... $ 60 $ 10 $ 204
-------- ------- --------
-------- ------- --------
</TABLE>
Assumptions used to determine pension expense:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Discount rates............................................................................... 7.5 % 8.3 % 8.3 %
Rates of increase in compensation levels
To age 40.................................................................................. 5.0 7.0 7.0
To age 50.................................................................................. 5.0 6.0 6.0
After age 50............................................................................... 5.0 4.5 4.5
Expected long-term rate of return on assets.................................................. 9.5 9.5 9.5
</TABLE>
The following table sets forth the funded status and amounts recognized in the
Partnership's consolidated balance sheet at December 31, 1993 and 1992. Plan
assets consist principally of equity and fixed income security investments.
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1992
-------------------------- --------------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
----------- ----------- ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations
Vested benefit obligation............................... $ 80,672 $ 2,707 $ 68,421 $ 2,156
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Accumulated benefit obligation.......................... $ 97,596 $ 3,342 $ 82,129 $ 2,590
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Projected benefit obligation............................ $ 107,190 $ 3,342 $ 91,382 $ 2,590
Plan assets at fair value............................... 120,836 2,898 109,119 2,384
----------- ----------- ----------- -----------
Projected benefit obligation (in excess of) or less than
plan assets........................................... $ 13,646 $ (444) $ 17,737 $ (206)
Unrecognized net (gain) loss............................ (18,074) 108 (20,300) (105)
Prior service cost not yet recognized in net periodic
pension cost.......................................... 8,981 173 6,994 195
Unrecognized net obligation at January 1, 1985.......... (1,856) 34 (1,999) 40
----------- ----------- ----------- -----------
Prepaid pension cost (pension liability) recognized in
the consolidated balance sheet........................ $ 2,697 $ (129) $ 2,432 $ (76)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
In addition to the defined benefit plans, cash contributions to defined
contribution pension plans were $291,000 in 1993, $227,000 in 1992, and $223,000
in 1991.
F-42
<PAGE> 112
SEALED POWER TECHNOLOGIES LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) PENSION PLANS AND POSTRETIREMENT BENEFITS (CONTINUED)
Under the Partnership's Retirement Savings Plan, income tax is deferred on
amounts contributed by employees under Section 401(k) of the Internal Revenue
Code. An eligible employee may contribute up to 6% of his regular cash
compensation and the Partnership contributes, on a matching basis, 50% of the
employees' contributions. Eligible employees also are permitted to make
additional unmatched contributions under the Retirement Savings Plan of up to
another 9% of their total cash compensation. The Partnership's expense for the
Retirement Savings Plan for the years ended December 31, 1993, 1992 and 1991,
was $951,000, $845,000, and $818,000, respectively.
In addition to providing the above described benefits, the Partnership
provides postretirement health care and life insurance benefits for certain
retired employees. Prior to 1993, the cost of these benefits was recognized as
expense as claims or premiums were paid. The total cost of these postretirement
benefits charged to income was $2,766,000 and $2,338,000 for 1992 and 1991,
respectively.
Effective January 1, 1993, the Partnership adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." SFAS No. 106 requires recognition, during the
employees' service with the company, of the cost of their retiree health and
life insurance benefits.
The Partnership elected to immediately recognize the cumulative effect of
the change in accounting for postretirement benefits of $89.5 million, which
represents the accumulated postretirement benefit obligation (APBO) existing at
January 1, 1993. The APBO represents the present value of estimated future
benefits payable to current retirees, and the earned portion of estimated
benefits payable to active employees after retirement. Ongoing additional
charges for active employees are accrued annually to the date of full
eligibility.
The following tables summarize the components of net periodic benefit cost
and the plans' funded status (all dollar amounts in thousands):
<TABLE>
<CAPTION>
NET PERIODIC POSTRETIREMENT BENEFIT COST FOR 1993
- ---------------------------------------- --------
<S> <C>
Service Cost......................................................................................... $1,579
Interest Cost........................................................................................ 7,430
Expected Return on Assets............................................................................ (48)
-------
Net Cost............................................................................................. $8,961
-------
-------
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL POSITION DECEMBER 31, 1993
- ------------------ -----------------
<S> <C>
Accumulated Postretirement Benefit Obligation:
Retirees..................................................................................... $ (43,896)
Actives Fully Eligible....................................................................... (8,331)
--------
APBO Fully Eligible.......................................................................... $ (52,227)
Actives--Not Fully Eligible.................................................................. (20,840)
--------
Total APBO................................................................................... $ (73,067)
Assets......................................................................................... 845
--------
Unfunded Status................................................................................ $ (72,222)
Unrecognized:
Prior Service Cost........................................................................... (24,194)
Net (Gain) Loss.............................................................................. 865
--------
Accrued Postretirement Benefit Cost............................................................ $ (95,551)
--------
--------
</TABLE>
The APBO was actuarially determined based on assumptions regarding the
discount rate and health care trend rates. The health care trend assumption
applies to postretirement medical and dental benefits. Different trend rates are
used for pre-age 65 and post-age 65 medical claims and for expected dental
claims. The trend rate used for the medical plan was 15% initially, grading to a
6% ultimate rate by 1% each year for pre-age 65 claims; and 10.5% grading to 6%
by .5% each year for post-age 65 claims. The trend rate for the dental plan was
6% each year. The liability was discounted using a 7.5% interest rate. A 1%
increase in the health care cost inflation trend rate would cause the APBO to
increase by approximately $6 million and would increase the periodic expense
provision by approximately $1 million.
Effective January 1, 1994, the Partnership must adopt Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits." The Partnership's preliminary assessment of this statement indicates
that it should not have a significant impact on the financial position or
results of operations of the Partnership.
(5) COMMITMENTS AND CONTINGENT LIABILITIES
The Partnership leases certain facilities and equipment under lease
agreements which expire at various dates through 1998. Minimum rental
commitments on these leases are $807,000 for 1994, $615,000 for 1995, $386,000
for 1996, $160,000 for 1997, and
F-43
<PAGE> 113
SEALED POWER TECHNOLOGIES LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
$129,000 for 1998. Rentals on these leases were approximately $903,000,
$889,000, and $892,000 for the years ended December 31, 1993, 1992 and 1991,
respectively.
The Partnership is guarantor of certain debt securities, amounting to $2.5
million issued by its U.S. joint venture.
Certain claims, including environmental matters, suits and complaints
arising in the ordinary course of business, have been filed or are pending
against the Partnership. In the opinion of management, all such matters are
without merit or are of such kind, or involve such amounts, as would not have a
significant effect on the financial position or results of operations of the
Partnership if disposed of unfavorably. Additionally, the Partnership has
insurance to minimize its exposures of this nature.
The Partnership's operations and products are subject to federal, state and
local regulatory requirements relating to environmental protection. It is the
Partnership's policy to comply fully with all such applicable requirements. As
part of its effort to comply, management has established an ongoing internal
compliance auditing program which has been in place since 1989. Based on current
information, management believes that the Partnership's operations are in
substantial compliance with applicable environmental laws and regulations and
the Partnership is not aware of any violation that could have a material adverse
effect on the business, financial conditions, or results of operations of the
Partnership. There can be no assurance, however, that currently unknown matters,
new laws and regulations, or stricter interpretations of existing laws and
regulations will not materially affect the Partnership's business or operations
in the future.
In addition, it is the Partnership's practice to reduce use of
environmentally sensitive materials as much as possible. First, it reduces the
risk to the environment in that such use could result in adverse environmental
affects either from operations or utilization of the end product. Second, a
reduction in environmentally sensitive materials reduces the ongoing burden and
resulting cost of handling, controlling emissions, and disposing of wastes that
may be generated from such materials.
The Partnership is also subject to potential liability for the costs of
environmental remediation. This liability may be based upon the ownership or
operation of industrial facilities where contamination may be found as well as
contribution to contamination existing at offsite, non-owned facilities. These
offsite remediation costs cannot be quantified with any degree of certainty. At
this time, management can estimate the environmental remediation costs only in
terms of possibilities and probabilities based on available information.
The Partnership has been identified as a potentially responsible party with
respect to six separate sites which involve CERCLA type environmental
remediation. In all but one of these sites, it has been established that the
Partnership falls into the category of de minimus contributor, and thus, it
believes its liabilities, both individually and in the aggregate, are not
material. A determination has not been made at the other site, where the
Partnership may be found to be a Superfund contributor, however, it does not
believe its liability for remediation costs would exceed $150,000.
In the case of contamination existing upon properties owned or controlled by
the Partnership, the Partnership has established reserves which it deems
adequate to meet its current remediation obligations.
There can be no assurance that the Partnership will not be required to pay
environmental compliance costs or incur liabilities that may be material in
amount due to matters which arise in the future or are not currently known to
the Partnership.
(6) OPTION SHARES
The Partnership has an Employee Option Plan which provides Limited
Partnership Shares (the "Option Shares") to key employees of the Partnership.
Options expire no later than 10 years from the date of grant. Following exercise
of the options, the Management Partners and other key employees of the
Partnership are expected to own, in the aggregate, 10% of the Partnership
interests. Option Shares will be reserved for the Management Partners to
maintain their 2% aggregate Partnership interest. Employee options vest over
time and after the Partnership achieves certain financial targets. Under the
Plan, 8,601 options are authorized for grant, of which 7,875 have been granted
and are outstanding. In 1993, no options were granted. In 1992 and 1991, 900 and
780 options were granted at an average price of $484 and $550 per share,
respectively. Options vested under the plan were 2,861 through December 31,
1993. There were 110 options exercised and no options canceled in 1993. There
were 178 options exercised and no options canceled in 1992. No options were
exercised or canceled in 1991. There were 290, 200 and 1,330 options forfeited
in 1993, 1992 and 1991, respectively.
(7) BUSINESS
The Partnership is in one line of business. It manufactures engine,
transmission and steering column components and distributes these components to
manufacturers of transportation equipment and distributors of aftermarket parts.
Sales to various plants, divisions or subsidiaries of General Motors and
Ford were approximately 25% and 23%, respectively, of 1993 sales, 27% and 20%,
respectively, of 1992 sales, and 31% and 15%, respectively, of 1991 net sales.
Sales to SPX were 5%, 8%, and 8%, of 1993, 1992, and 1991 net sales,
respectively. No other customer or group of customers under common control
accounted for 10% or more of net sales in 1993. See Note 12 for a discussion of
sales to related parties. Export sales were less than 10% of net sales for 1993,
1992, and 1991.
F-44
<PAGE> 114
SEALED POWER TECHNOLOGIES LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) INVESTMENT IN AFFILIATES
As of December 31, 1993 and 1992, investments as shown on the consolidated
balance sheet included the Partnership's 40% interest in a Mexican affiliate and
50% interest in a U. S. joint venture for the production and sale of engine
parts. The remaining 50% of the U.S. joint venture is owned equally by SPX and
Riken. These investments are accounted for under the equity method. As of
December 31, 1993 and 1992, approximately $1,818,000 and $1,527,000,
respectively, of the Partnership's capital consisted of undistributed earnings
of the investments. At December 31, 1993, the Partnership's prorata share of the
Mexican affiliate's equity exceeded the carrying value of the investment
recorded in the consolidated financial statements by approximately $1.8 million.
Summarized combined financial information from the unaudited financial
statements of the two affiliates was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1993 1992
------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Current assets........................................................................... $13,352 $13,745
Non-current assets....................................................................... 31,810 33,680
Current liabilities...................................................................... 8,706 10,056
Non-current liabilities.................................................................. 6,316 8,856
Equity................................................................................... 30,140 28,514
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-----------------------------
1993 1992 1991
------- ------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Net sales............................................................................. $36,005 $35,953 $34,680
Costs and expenses.................................................................... 32,395 31,488 28,854
Earnings before interest.............................................................. 3,610 4,197 5,834
Interest expense, net................................................................. 862 1,388 2,016
Net income............................................................................ 1,309 1,879 3,795
</TABLE>
(9) SUPPLEMENTARY FINANCIAL INFORMATION
PROFIT AND LOSS
<TABLE>
<CAPTION>
CHARGED TO COSTS AND EXPENSES
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------------
1993 1992 1991
------- ------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Maintenance and repairs......................................................... $29,578 $28,517 $25,844
Depreciation and amortization................................................... 20,377 19,090 18,655
Taxes, other than income taxes
Payroll taxes................................................................. 10,484 9,895 8,514
Other taxes................................................................... 4,146 4,664 4,175
Research and Development........................................................ 3,429 3,835 3,599
</TABLE>
F-45
<PAGE> 115
SEALED POWER TECHNOLOGIES LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) SUPPLEMENTARY FINANCIAL INFORMATION (CONTINUED)
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1993 1992
------ -------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
ASSETS
Prepaid tooling........................................................................... $9,212 $11,306
<CAPTION>
DECEMBER 31,
-----------------------
1993 1992
------- ------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
LIABILITIES
Accrued payrolls.......................................................................... $10,199 $8,620
Accrued employee benefit programs......................................................... 7,521 8,431
Accrued interest.......................................................................... 4,428 4,530
</TABLE>
(10) RESERVE FOR LOSSES ON RECEIVABLES
Changes in the reserve for losses on receivables were as follows:
<TABLE>
<CAPTION>
(THOUSANDS OF DOLLARS)
<S> <C>
BALANCE AT DECEMBER 31, 1990............................................................... $ 873
Amount charged to operations............................................................... 96
Accounts written off, net of recoveries.................................................... 6
------
BALANCE AT DECEMBER 31, 1991............................................................... $ 975
Amount charged to operations............................................................... 94
Accounts written off, net of recoveries.................................................... (502)
------
BALANCE AT DECEMBER 31, 1992............................................................... $ 567
Amount charged to operations............................................................... 48
Accounts written off, net of recoveries.................................................... 41
------
BALANCE AT DECEMBER 31, 1993............................................................... $ 656
------
------
</TABLE>
F-46
<PAGE> 116
SEALED POWER TECHNOLOGIES LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(11) PROPERTY, PLANT AND EQUIPMENT AND RELATED ACCUMULATED DEPRECIATION
Changes in property, plant and equipment accounts and in related accumulated
depreciation for the years ended December 31, 1993, 1992 and 1991, are shown
below:
<TABLE>
<CAPTION>
MACHINERY
AND
PROPERTY, PLANT & EQUIPMENT, AT COST LAND BUILDINGS EQUIPMENT TOTAL
------ --------- --------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1990............................................. $1,447 $ 48,347 $191,109 $240,903
Additions and transfers, at cost....................................... 50 3,019 10,485 13,554
Retirements and other, at cost......................................... 0 0 (335) (335)
------ -------- -------- --------
BALANCE AT DECEMBER 31, 1991............................................. $1,497 $ 51,366 $201,259 $254,122
Additions and transfers at cost........................................ 5 1,117 11,973 13,095
Retirements and other, at cost......................................... 0 0 (1,373) (1,373)
------ -------- -------- --------
BALANCE AT DECEMBER 31, 1992............................................. $1,502 $ 52,483 $211,859 $265,844
Additions and transfers at cost........................................ 0 607 18,992 19,599
Retirements and other, at cost......................................... 0 (3,020) (8,070) (11,090)
------ -------- -------- --------
BALANCE AT DECEMBER 31, 1993............................................. $1,502 $ 50,070 $222,781 $274,353
------ -------- -------- --------
------ -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
MACHINERY
AND
PROPERTY, PLANT & EQUIPMENT, ACCUMULATED DEPRECIATION BUILDINGS EQUIPMENT TOTAL
--------- --------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1990..................................................... $25,662 $118,206 $143,868
Additions-charged to operations................................................ 1,191 14,562 15,753
Deductions-retirements, renewals, transfers, dispositions, replacements........ 0 76 76
--------- --------- --------
BALANCE AT DECEMBER 31, 1991..................................................... $26,853 $132,844 $159,697
Additions-charged to operations................................................ 2,267 13,953 16,220
Deductions-retirements, renewals, transfers, dispositions, replacements........ 0 (1,179) (1,179)
--------- --------- --------
BALANCE AT DECEMBER 31, 1992..................................................... $29,120 $145,618 $174,738
Additions-charged to operations................................................ 2,222 15,254 17,476
Deductions-retirements, renewals, transfers, dispositions, replacements........ (2,065) (7,189) (9,254)
--------- --------- --------
BALANCE AT DECEMBER 31, 1993..................................................... $29,277 $153,683 $182,960
--------- --------- --------
--------- --------- --------
</TABLE>
The Partnership's plant, property and equipment and related accumulated
depreciation for 1993 were impacted by the write-down to estimated fair market
value of a foundry, which is scheduled to be closed in 1994, and the accelerated
depreciation of assets used in the production of a product line scheduled to be
discontinued. The impact of the foundry write-down on plant, property and
equipment retirements was $3 million on buildings and $7.2 million on machinery
and equipment, and the impact on accumulated depreciation retirement was $2.1
million on buildings and $6.3 million on machinery and equipment. The impact of
the accelerated depreciation of assets used in the production of a product line
scheduled to be discontinued was to increase additions to accumulated
depreciation by $1.8 million.
(12) RELATED PARTY TRANSACTIONS
Sales to and purchases from affiliates, primarily with the aftermarket
operations of SPX, are based upon negotiated prices. Sales to affiliates were
$21, $28, and $27 million during the years ended December 31, 1993, 1992 and
1991, respectively. Sales to SPX were discontinued effective November 1, 1993,
as a result of SPX's sale of its aftermarket operations. Purchases from
affiliates were $2, $3, and $4 million during the years ended December 31, 1993,
1992 and 1991, respectively.
Receivables from affiliates represent uncollected sales to the aftermarket
operation of SPX, and unpaid management fees related to SPT (Europe).
The Partnership has entered into service agreements with SPX whereby SPX
administered certain insurance and administrative programs for the Partnership
during 1993, 1992, and 1991. Costs of the insurance programs are based upon paid
or accrued claims that relate directly to the Partnership.
In July 1991, the Partnership began managing a European piston ring and
cylinder sleeve business which was acquired in June 1991 by a partnership formed
by SPX. In October 1992, a new partner effectively contributed its European
piston ring business to this partnership in exchange for an equity ownership in
the European partnership. The business produces piston rings and cylinder
sleeves for
F-47
<PAGE> 117
SEALED POWER TECHNOLOGIES LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) RELATED PARTY TRANSACTIONS (CONTINUED)
European original equipment and replacement markets. It has manufacturing
facilities in Barsinghausen, Germany; Vilanova, Spain; and Pringy, France. The
Partnership receives a fee for managing the European business.
(13) SUBSEQUENT EVENT
Late in the fourth quarter of 1993, SPX determined that virtually all
existing Partnership debt should be refinanced in anticipation of the purchase
of Riken's 49% interest in the Partnership (Note 1), due to favorable prevailing
interest rates, scheduled debt maturities, and to maintain the flexibility to
grow through internal investments and acquisitions. The plan of refinancing
includes an offering by SPX of $260 million of senior subordinated notes, which
SPX expects to have completed by June 30, 1994. These notes are anticipated to
bear interest at a rate of approximately 10% and will be due in or after the
year 2002. At that time, the proceeds will be used to retire existing
Partnership borrowings, including the $100 million of 14.5% Senior Subordinated
Debentures, the Term Bank Loan, and the Revolving Credit Loans. Excess proceeds
will be used to pay down the SPX revolving credit facility at that time.
(14) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
TOTAL FOURTH THIRD SECOND FIRST
PARTNERSHIP RESULTS 1993: YEAR QUARTER QUARTER QUARTER QUARTER
------ ------- ------- ------- -------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Net sales........................................................... $391.6 $94.5 $91.5 $103.8 $101.8
Gross profit........................................................ 56.5 12.9 13.0 16.1 14.5
Income before interest.............................................. 27.6 3.1 7.1 9.7 7.7
Interest............................................................ 27.1 6.7 6.8 6.9 6.7
Income (loss) before cumulative change in accounting method......... 0.5 (3.6) 0.3 2.8 1.0
Cumulative effect of change in accounting method.................... (89.5) 0.0 0.0 0.0 (89.5)
Income (Loss)....................................................... (89.0) (3.6) 0.3 2.8 (88.5)
</TABLE>
<TABLE>
<CAPTION>
TOTAL FOURTH THIRD SECOND FIRST
PARTNERSHIP RESULTS 1992: YEAR QUARTER QUARTER QUARTER QUARTER
------ ------- ------- ------- -------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Net sales........................................................... $355.2 $83.5 $87.2 $ 97.9 $ 86.6
Gross profit........................................................ 56.9 11.6 13.9 17.8 13.6
Income before interest.............................................. 33.0 7.0 9.1 10.5 6.4
Interest............................................................ 29.3 6.9 7.3 7.5 7.6
Income (Loss)....................................................... 3.7 .1 1.8 3.0 (1.2)
</TABLE>
<TABLE>
<CAPTION>
TOTAL FOURTH THIRD SECOND FIRST
PARTNERSHIP RESULTS 1991: YEAR QUARTER QUARTER QUARTER QUARTER
------ ------- ------- ------- -------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Net sales........................................................... $319.8 $79.2 $82.2 $ 82.0 $ 76.4
Gross profit........................................................ 45.3 11.0 12.0 12.4 9.9
Income before interest.............................................. 23.3 5.5 6.4 7.4 4.0
Interest............................................................ 32.1 7.9 8.2 7.9 8.1
Income (Loss)....................................................... (8.8) (2.4) (1.8) (.5) (4.1)
</TABLE>
F-48
<PAGE> 118
[Insert Photo's]
<PAGE> 119
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
---------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Investment Considerations............. 12
Recent Developments................... 15
Use of Proceeds....................... 15
Capitalization........................ 16
Pro Forma Consolidated Financial
Statements.......................... 17
Selected Historical Consolidated
Financial Information............... 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 23
Business.............................. 33
Description of the Bank Credit
Agreement........................... 40
Description of the Notes.............. 41
Underwriting.......................... 66
Legal Matters......................... 67
Experts............................... 67
Available Information................. 67
Incorporation of Certain Documents by
Reference........................... 68
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
[LOGO]
$260,000,000
SPX CORPORATION
% SENIOR SUBORDINATED
NOTES DUE 2002
---------------------------
PROSPECTUS
---------------------------
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
WERTHEIM SCHRODER & CO.
INCORPORATED
, 1994
------------------------------------------------------
------------------------------------------------------
<PAGE> 120
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee................ $ 89,656
Printing Expenses.................................................. 200,000
Legal Fees and Expenses............................................ 450,000
Accounting Fees and Expenses....................................... 100,000
Blue Sky Fees and Expenses......................................... 15,000
NASD Filing Fee.................................................... 26,500
Trustee's Fees and Expenses........................................ 10,000
Rating Agency Fees................................................. 50,000
Miscellaneous...................................................... 50,000
--------
Total.............................................................. $991,156
--------
--------
</TABLE>
All amounts are estimated except for the Securities and Exchange Commission
Registration Fee and the NASD Filing Fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides that the
Company may, and in some circumstances must, indemnify the directors and
officers of the Company against liabilities and expenses incurred by any such
person by reason of the fact that such person was serving in such capacity,
subject to certain limitations and conditions therein set forth. Substantially
similar provisions that require such indemnification are contained in Article
Thirteen of the Company's Restated Certificate of Incorporation. Article
Thirteen of the Company's Restated Certificate of Incorporation also contains
provisions limiting the liability of the Company's directors in certain
instances. In addition, the Company has purchased insurance as permitted by
Delaware law on behalf of directors, officers, employees or agents, which may
cover liabilities under the Securities Act of 1933, as amended (the "Act").
Reference is made to the Underwriting Agreement filed as Exhibit 1 hereto
which provides for indemnification against certain liabilities, including
liabilities under the Act.
ITEM 16. EXHIBITS
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- ---------------------------------------------------------------------------------
<S> <C>
1* Form of Purchase Agreement.
4 Form of Indenture (including Form of Note).
5 Opinion of Gardner, Carton & Douglas as to legality of the Notes.
12 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Arthur Andersen & Co.
23.2 Consent of Gardner, Carton & Douglas (included in Exhibit 5).
24* Powers of Attorney of directors and certain officers of the Company are included
on the signature page.
25* Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act
of 1939 of The Bank of New York, as Trustee under the Indenture.
- ------
</TABLE>
* Previously filed.
II-1
<PAGE> 121
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Act shall be deemed to be part of this registration statement as of
the time it was declared effective.
(2) That, for the purpose of determining any liability under the Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) That, for purposes of determining any liability under the Act, each
filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in this registration
statement shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions of Item 15, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE> 122
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing this Registration Statement on Form S-3 and has
duly caused this Amendment No. 1 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Muskegon, State of Michigan, on May 9, 1994.
SPX CORPORATION
By: /s/ DALE A. JOHNSON
-------------------------------
Chairman and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities indicated on May 9, 1994.
SIGNATURE TITLE
--------- -----
/s/ DALE A. JOHNSON Chairman and Chief Executive
- ------------------------------------- Officer;
Dale A. Johnson Director
/s/ CURTIS T. ATKISSON, JR.* President and Chief Operating
- ------------------------------------- Officer; Director
Curtis T. Atkisson, Jr.
/s/ R. BUDD WERNER* Vice President and
- ------------------------------------- Chief Financial and Accounting
R. Budd Werner Officer
/s/ J. KERMIT CAMPBELL* Director
- -------------------------------------
J. Kermit Campbell
/s/ FRANK A. EHMANN* Director
- -------------------------------------
Frank A. Ehmann
/s/ EDWARD D. HOPKINS* Director
- -------------------------------------
Edward D. Hopkins
/s/ CHARLES E. JOHNSON II* Director
- -------------------------------------
Charles E. Johnson II
/s/ REUBEN W. KAPLAN* Director
- -------------------------------------
Reuben W. Kaplan
/s/ RONALD L. KERBER* Director
- -------------------------------------
Ronald L. Kerber
/s/ PETER H. MERLIN* Director
- -------------------------------------
Peter H. Merlin
/s/ DAVID P. WILLIAMS* Director
- -------------------------------------
David P. Williams
*By: /s/ JAMES M. SHERIDAN Attorney-in-Fact
- -------------------------------------
James M. Sheridan
II-3
<PAGE> 123
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF EXHIBITS PAGE NUMBER
- ---------- -------------------------------------------------------------------- -----------
<S> <C> <C>
1* Form of Purchase Agreement..........................................
4 Form of Indenture (including Form of Note)..........................
5 Opinion of Gardner, Carton & Douglas as to validity of the Notes....
12 Computation of Ratio of Earnings to Fixed Charges...................
23.1 Consent of Arthur Andersen & Co.....................................
23.2 Consent of Gardner, Carton & Douglas (included in Exhibit 5)........
24* Powers of Attorney of directors and certain officers of the Company
are included on the signature page..................................
25* Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of The Bank of New York, as Trustee under the
Indenture...........................................................
- ----------
</TABLE>
* Previously filed.
II-4
<PAGE> 1
Exhibit 4
SPX CORPORATION,
Issuer
To
THE BANK OF NEW YORK
Trustee
Indenture
Dated as of , 1994
$260,000,000
% Senior Subordinated Notes due 2002
<PAGE> 2
SPX CORPORATION
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of , 1994
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C> <C>
Section 310(a)(1) . . . . . . . . . . . . . . . . . 607
(a)(2) . . . . . . . . . . . . . . . . . 607
(b) . . . . . . . . . . . . . . . . . 608
Section 312(c) . . . . . . . . . . . . . . . . . 701
Section 314(a) . . . . . . . . . . . . . . . . . 703
(a)(4) . . . . . . . . . . . . . . . . . 1008(a)
(c)(1) . . . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . . . 102
(e) . . . . . . . . . . . . . . . . . 102
Section 315(b) . . . . . . . . . . . . . . . . . 601
Section 316(a)(last
sentence) . . . . . . . . . . . . . . . . . 101 ("Outstanding")
(a)(l)(A) . . . . . . . . . . . . . . . . . 502, 512
(a)(l)(B) . . . . . . . . . . . . . . . . . 513
(b) . . . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . . . 104(d)
Section 317(a)(1) . . . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . . . 1003
Section 318(a) . . . . . . . . . . . . . . . . . 108
</TABLE>
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS(1)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
<CAPTION>
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
<S> <C> <C>
SECTION 101. Definitions . . . . . . . . . . . . . . . . . . . . . . 2
Acquired Indebtedness . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . . . . . . 3
Applicable Premium . . . . . . . . . . . . . . . . . . 3
Asset Acquisition . . . . . . . . . . . . . . . . . . . 3
Asset Sale . . . . . . . . . . . . . . . . . . . . . . 3
Asset Sale Offer . . . . . . . . . . . . . . . . . . . 4
Average Life to Stated Maturity . . . . . . . . . . . . 4
Bank Credit Agreement . . . . . . . . . . . . . . . . . 4
Banks . . . . . . . . . . . . . . . . . . . . . . . . . 4
Board of Directors . . . . . . . . . . . . . . . . . . 5
Board Resolution . . . . . . . . . . . . . . . . . . . 5
Business Day . . . . . . . . . . . . . . . . . . . . . 5
Capital Stock . . . . . . . . . . . . . . . . . . . . . 5
Capitalized Lease Obligation . . . . . . . . . . . . . 5
Cash Equivalents . . . . . . . . . . . . . . . . . . . 5
Change of Control . . . . . . . . . . . . . . . . . . . 6
Commission . . . . . . . . . . . . . . . . . . . . . . 7
Common Stock . . . . . . . . . . . . . . . . . . . . . 7
Company . . . . . . . . . . . . . . . . . . . . . . . . 7
Company Request or Company Order . . . . . . . . . . . 8
Consolidated EBITDA . . . . . . . . . . . . . . . . . . 8
Consolidated Fixed Charge
Coverage Ratio . . . . . . . . . . . . . . . . . . . 8
Consolidated Fixed Charges . . . . . . . . . . . . . . 9
Consolidated Income Tax
Expense . . . . . . . . . . . . . . . . . . . . . . . 10
Consolidated Interest Expense . . . . . . . . . . . . . 10
Consolidated Net Income . . . . . . . . . . . . . . . . 10
Consolidated Net Worth . . . . . . . . . . . . . . . . 11
Consolidated Non-cash Charges . . . . . . . . . . . . . 11
</TABLE>
- -----------------
NOTE: This table of contents shall not, for any purpose, be deemed
to be a part of this Indenture.
i
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Corporate Trust Office . . . . . . . . . . . . . . . . 12
corporation . . . . . . . . . . . . . . . . . . . . . . 12
covenant defeasance . . . . . . . . . . . . . . . . . . 12
Default . . . . . . . . . . . . . . . . . . . . . . . . 12
Defaulted Interest . . . . . . . . . . . . . . . . . . 12
defeasance . . . . . . . . . . . . . . . . . . . . . . . 12
Designated Senior
Indebtedness . . . . . . . . . . . . . . . . . . . . 12
Employee Liabilities . . . . . . . . . . . . . . . . . 12
Event of Default . . . . . . . . . . . . . . . . . . . 13
Excess Proceeds . . . . . . . . . . . . . . . . . . . . 13
Exchange Act . . . . . . . . . . . . . . . . . . . . . 13
Existing Receivables Financing . . . . . . . . . . . . 13
Federal Bankruptcy Code . . . . . . . . . . . . . . . . 13
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . 13
Guarantee . . . . . . . . . . . . . . . . . . . . . . . 13
guarantee . . . . . . . . . . . . . . . . . . . . . . . 13
Guarantor . . . . . . . . . . . . . . . . . . . . . . . 13
Guarantor Senior Indebtedness . . . . . . . . . . . . . 14
Guarantor Senior Subordinated Note
Obligations . . . . . . . . . . . . . . . . . . . . . 15
Holder . . . . . . . . . . . . . . . . . . . . . . . . 15
Incremental Receivables Financing . . . . . . . . . . . 15
Indebtedness . . . . . . . . . . . . . . . . . . . . . 15
Indenture . . . . . . . . . . . . . . . . . . . . . . . 17
Interest Payment Date . . . . . . . . . . . . . . . . . 17
Interest Rate Protection
Obligations . . . . . . . . . . . . . . . . . . . . . 17
Investment . . . . . . . . . . . . . . . . . . . . . . 17
Issue Date . . . . . . . . . . . . . . . . . . . . . . 18
Lien . . . . . . . . . . . . . . . . . . . . . . . . . 18
Maturity . . . . . . . . . . . . . . . . . . . . . . . 18
Moody's . . . . . . . . . . . . . . . . . . . . . . . . 18
Net Cash Proceeds . . . . . . . . . . . . . . . . . . . 18
Non-payment Default . . . . . . . . . . . . . . . . . . 19
Officers' Certificate . . . . . . . . . . . . . . . . . 19
Opinion of Counsel . . . . . . . . . . . . . . . . . . 19
Outstanding . . . . . . . . . . . . . . . . . . . . . . 19
Paying Agent . . . . . . . . . . . . . . . . . . . . . 21
Payment Blockage Period . . . . . . . . . . . . . . . . 21
Payment Default . . . . . . . . . . . . . . . . . . . . 21
Pari Passu Indebtedness . . . . . . . . . . . . . . . . 21
Pari Passu Offer . . . . . . . . . . . . . . . . . . . 21
Permitted Indebtedness . . . . . . . . . . . . . . . . 21
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Permitted Investment . . . . . . . . . . . . . . . . . 26
person . . . . . . . . . . . . . . . . . . . . . . . . 26
Predecessor Security . . . . . . . . . . . . . . . . . 27
Preferred Stock . . . . . . . . . . . . . . . . . . . . 27
Public Equity Offering . . . . . . . . . . . . . . . . 27
Redeemable Capital Stock . . . . . . . . . . . . . . . 27
Redemption Date . . . . . . . . . . . . . . . . . . . . 27
Redemption Price . . . . . . . . . . . . . . . . . . . 28
Registration Statement . . . . . . . . . . . . . . . . 28
Regular Record Date . . . . . . . . . . . . . . . . . . 28
Responsible Officer . . . . . . . . . . . . . . . . . . 28
Restricted Payment . . . . . . . . . . . . . . . . . . 28
Restricted Subsidiary . . . . . . . . . . . . . . . . . 28
SPT . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SPX Credit Lease Financings . . . . . . . . . . . . . . 28
S&P . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Securities Act . . . . . . . . . . . . . . . . . . . . 29
Security and Securities . . . . . . . . . . . . . . . . 29
Security Register and Security Registrar . . . . . . . . 29
Senior Indebtedness . . . . . . . . . . . . . . . . . . 29
Significant Subsidiary . . . . . . . . . . . . . . . . 30
Special Record Date . . . . . . . . . . . . . . . . . . 30
Stated Maturity . . . . . . . . . . . . . . . . . . . . 30
Subordinated Indebtedness . . . . . . . . . . . . . . . 31
Subsidiary . . . . . . . . . . . . . . . . . . . . . . 31
Surviving Entity . . . . . . . . . . . . . . . . . . . 31
Treasury Rate . . . . . . . . . . . . . . . . . . . . . 31
Trust Indenture Act or TIA . . . . . . . . . . . . . . 32
Trustee . . . . . . . . . . . . . . . . . . . . . . . . 32
Unrestricted Subsidiary . . . . . . . . . . . . . . . . 32
Voting Stock . . . . . . . . . . . . . . . . . . . . . 33
Wholly Owned Restricted
Subsidiary . . . . . . . . . . . . . . . . . . . . . 33
SECTION 102. Compliance Certificates and
Opinions . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 103. Form of Documents Delivered
to Trustee . . . . . . . . . . . . . . . . . . . . . 34
SECTION 104. Acts of Holders . . . . . . . . . . . . . . . . . . . . 35
SECTION 105. Notices, etc., to Trustee and
Company . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 106. Notice to Holders; Waiver . . . . . . . . . . . . . . . 37
SECTION 107. Effect of Headings and Table of
Contents . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
iii
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 108. Conflict of Any Provision of
Indenture with Trust Indenture
Act . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 109. Successors and Assigns . . . . . . . . . . . . . . . . 38
SECTION 110. Separability Clause . . . . . . . . . . . . . . . . . . 39
SECTION 111. Benefits of Indenture . . . . . . . . . . . . . . . . . 39
SECTION 112. Governing Law . . . . . . . . . . . . . . . . . . . . . 39
SECTION 113. Legal Holidays . . . . . . . . . . . . . . . . . . . . 39
<CAPTION>
ARTICLE TWO
SECURITY FORMS
<S> <C> <C>
SECTION 201. Forms Generally . . . . . . . . . . . . . . . . . . . . 40
SECTION 202. Form of Face of Security . . . . . . . . . . . . . . . 40
SECTION 203. Form of Reverse of Security . . . . . . . . . . . . . . 42
SECTION 204. Form of Trustee's Certificate of
Authentication . . . . . . . . . . . . . . . . . . . 46
<CAPTION>
ARTICLE THREE
THE SECURITIES
<S> <C> <C>
SECTION 301. Title and Terms . . . . . . . . . . . . . . . . . . . . 47
SECTION 302. Denominations . . . . . . . . . . . . . . . . . . . . . 48
SECTION 303. Execution, Authentication,
Delivery and Dating . . . . . . . . . . . . . . . . . 48
SECTION 304. Temporary Securities . . . . . . . . . . . . . . . . . 49
SECTION 305. Registration, Registration of
Transfer and Exchange . . . . . . . . . . . . . . . 50
SECTION 306. Mutilated, Destroyed, Lost and
Stolen Securities . . . . . . . . . . . . . . . . . 52
Section 307. Payment of Interest; Interest
Rights Preserved . . . . . . . . . . . . . . . . . . 53
Section 308. Persons Deemed Owners . . . . . . . . . . . . . . . . . 54
Section 309. Cancellation . . . . . . . . . . . . . . . . . . . . . 55
Section 310. Computation of Interest . . . . . . . . . . . . . . . . 55
</TABLE>
iv
<PAGE> 7
<TABLE>
<CAPTION>
ARTICLE FOUR
SATISFACTION AND DISCHARGE
PAGE
----
<S> <C> <C>
SECTION 401. Satisfaction and Discharge of
Indenture . . . . . . . . . . . . . . . . . . . . . 55
SECTION 402. Application of Trust Money . . . . . . . . . . . . . . 57
<CAPTION>
ARTICLE FIVE
REMEDIES
<S> <C> <C>
SECTION 501. Events of Default . . . . . . . . . . . . . . . . . . . 58
SECTION 502. Acceleration of Maturity;
Rescission and Annulment . . . . . . . . . . . . . . 61
SECTION 503. Collection of Indebtedness and
Suits for Enforcement by
Trustee . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 504. Trustee May File Proofs of Claim . . . . . . . . . . . 63
SECTION 505. Trustee May Enforce Claims
without Possession of
Securities . . . . . . . . . . . . . . . . . . . . . 64
SECTION 506. Application of Money Collected . . . . . . . . . . . . 65
SECTION 507. Limitation on Suits . . . . . . . . . . . . . . . . . . 65
SECTION 508. Unconditional Right of Holders
to Receive Principal, Premium
and Interest . . . . . . . . . . . . . . . . . . . . 65
SECTION 509. Restoration of Rights and
Remedies . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 510. Rights and Remedies Cumulative . . . . . . . . . . . . 67
SECTION 511. Delay or Omission Not Waiver . . . . . . . . . . . . . 67
SECTION 512. Control by Holders . . . . . . . . . . . . . . . . . . 68
SECTION 513. Waiver of Past Defaults . . . . . . . . . . . . . . . . 68
SECTION 514. Undertaking for Costs . . . . . . . . . . . . . . . . . 69
SECTION 515. Waiver of Stay or Extension Laws . . . . . . . . . . . 69
<CAPTION>
ARTICLE SIX
THE TRUSTEE
<S> <C> <C>
SECTION 601. Notice of Defaults . . . . . . . . . . . . . . . . . . 70
SECTION 602. Certain Rights of Trustee . . . . . . . . . . . . . . . 70
</TABLE>
v
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 603. Trustee Not Responsible for
Recitals or Issuance of
Securities . . . . . . . . . . . . . . . . . . . . . 72
SECTION 604. May Hold Securities . . . . . . . . . . . . . . . . . . 72
SECTION 605. Money Held in Trust . . . . . . . . . . . . . . . . . . 72
SECTION 606. Compensation and Reimbursement . . . . . . . . . . . . 73
SECTION 607. Conflicting Interests . . . . . . . . . . . . . . . . . 74
SECTION 608. Corporate Trustee Required;
Eligibility . . . . . . . . . . . . . . . . . . . . 74
SECTION 609. Resignation and Removal;
Appointment of Successor . . . . . . . . . . . . . 74
SECTION 610. Acceptance of Appointment by
Successor . . . . . . . . . . . . . . . . . . . . . 76
SECTION 611. Merger, Conversion, Consolidation
or Succession to Business . . . . . . . . . . . . . 76
<CAPTION>
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
<S> <C> <C>
SECTION 701. Disclosure of Names and Addresses
of Holders . . . . . . . . . . . . . . . . . . . . . 77
SECTION 702. Reports by Trustee . . . . . . . . . . . . . . . . . . 77
SECTION 703. Reports by Company . . . . . . . . . . . . . . . . . . 78
<CAPTION>
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
<S> <C> <C>
SECTION 801. Company May Consolidate, etc.,
Only on Certain Terms . . . . . . . . . . . . . . . 79
SECTION 802. Successor Substituted . . . . . . . . . . . . . . . . . 82
<CAPTION>
ARTICLE NINE
SUPPLEMENTAL INDENTURES
<S> <C> <C>
SECTION 901. Supplemental Indentures without
Consent of Holders . . . . . . . . . . . . . . . . . 82
SECTION 902. Supplemental Indentures with
Consent of Holders . . . . . . . . . . . . . . . . . 83
</TABLE>
vi
<PAGE> 9
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 903. Execution of Supplemental
Indentures . . . . . . . . . . . . . . . . . . . . 85
SECTION 904. Effect of Supplemental
Indentures . . . . . . . . . . . . . . . . . . . . . 85
SECTION 905. Conformity with Trust Indenture
Act . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 906. Reference in Securities to
Supplemental Indentures . . . . . . . . . . . . . . 85
SECTION 907. Notice of Supplemental
Indentures . . . . . . . . . . . . . . . . . . . . . 86
<CAPTION>
ARTICLE TEN
COVENANTS
<S> <C> <C>
SECTION 1001. Payment of Principal, Premium,
If Any, and Interest . . . . . . . . . . . . . . . . 86
SECTION 1002. Maintenance of Office or Agency . . . . . . . . . . . . 86
SECTION 1003. Money for Security Payments
to Be Held in Trust . . . . . . . . . . . . . . . . 87
SECTION 1004. Corporate Existence . . . . . . . . . . . . . . . . . . 89
SECTION 1005. Payment of Taxes and Other Claims . . . . . . . . . . . 89
SECTION 1006. Maintenance of Properties . . . . . . . . . . . . . . . 90
SECTION 1007. Insurance . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 1008. Compliance Certificate . . . . . . . . . . . . . . . . 90
SECTION 1009. Notice of Default . . . . . . . . . . . . . . . . . . . 91
SECTION 1010. Limitation on Indebtedness . . . . . . . . . . . . . . 91
SECTION 1011. Limitation on Restricted
Payments . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 1012. Limitation on Liens. . . . . . . . . . . . . . . . . . 95
SECTION 1013. Purchase of Securities upon
Change of Control . . . . . . . . . . . . . . . . . . 96
SECTION 1014. Disposition of Proceeds of Asset
Sales . . . . . . . . . . . . . . . . . . . . . . . 99
SECTION 1015. Limitation on Issuance and
Sale of Capital Stock by
Restricted Subsidiaries . . . . . . . . . . . . . . . 105
SECTION 1016. Limitation on Transactions with
Affiliates . . . . . . . . . . . . . . . . . . . . . 105
SECTION 1017. Limitation on Dividend and
Other Payment Restrictions
Affecting Restricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . 106
</TABLE>
vii
<PAGE> 10
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1018. Limitation on Guarantees by
Restricted Subsidiaries . . . . . . . . . . . . . . 107
SECTION 1019. Restriction on Transfer of Assets . . . . . . . . . . . 108
SECTION 1020. Limitation on Certain Other
Subordinated Indebtedness . . . . . . . . . . . . . 109
SECTION 1021. Waiver of Certain Covenants . . . . . . . . . . . . . . 109
SECTION 1021. Waiver of Stay, Extension or
Usury Laws . . . . . . . . . . . . . . . . . . . . . 109
<CAPTION>
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
<S> <C> <C>
SECTION 1101. Right of Redemption . . . . . . . . . . . . . . . . . . 110
SECTION 1102. Applicability of Article . . . . . . . . . . . . . . . 110
SECTION 1103. Election to Redeem; Notice to
Trustee . . . . . . . . . . . . . . . . . . . . . . 111
SECTION 1104. Selection by Trustee of
Securities to Be Redeemed . . . . . . . . . . . . . 111
SECTION 1105. Notice of Redemption . . . . . . . . . . . . . . . . . 112
SECTION 1106. Deposit of Redemption Price . . . . . . . . . . . . . . 112
SECTION 1107. Securities Payable on Redemption
Date . . . . . . . . . . . . . . . . . . . . . . . 113
SECTION 1108. Securities Redeemed in Part . . . . . . . . . . . . . . 113
<CAPTION>
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
<S> <C> <C>
SECTION 1201. Company's Option to Effect
Defeasance or Covenant Defeasance . . . . . . . . . 114
SECTION 1202. Defeasance and Discharge . . . . . . . . . . . . . . . 114
SECTION 1203. Covenant Defeasance . . . . . . . . . . . . . . . . . . 115
SECTION 1204. Conditions to Defeasance or
Covenant Defeasance . . . . . . . . . . . . . . . . 115
SECTION 1205. Deposited Money and U.S.
Government Obligations to Be
Held in Trust; Other Miscellaneous
Provisions . . . . . . . . . . . . . . . . . . . . 119
SECTION 1206. Reinstatement . . . . . . . . . . . . . . . . . . . . . 119
</TABLE>
viii
<PAGE> 11
<TABLE>
<CAPTION>
ARTICLE THIRTEEN
SUBORDINATION OF SECURITIES
PAGE
----
<S> <C> <C>
SECTION 1301. Securities Subordinate to
Senior Indebtedness . . . . . . . . . . . . . . . . . 120
SECTION 1302. Payment Over of Proceeds upon
Dissolution, etc. . . . . . . . . . . . . . . . . . . 121
SECTION 1303. Suspension of Payment When Senior
Indebtedness in Default . . . . . . . . . . . . . . . 123
SECTION 1304. Payment Permitted If No Default . . . . . . . . . . . . 125
SECTION 1305. Subrogation to Rights of Holders of
Senior Indebtedness . . . . . . . . . . . . . . . . . 125
SECTION 1306. Provisions Solely to Define
Relative Rights . . . . . . . . . . . . . . . . . . . 125
SECTION 1307. Trustee to Effectuate
Subordination . . . . . . . . . . . . . . . . . . . . 126
SECTION 1308. No Waiver of Subordination
Provisions . . . . . . . . . . . . . . . . . . . . . 126
SECTION 1309. Notice to Trustee . . . . . . . . . . . . . . . . . . . 127
SECTION 1310. Reliance on Judicial Order or
Certificate of Liquidating
Agent . . . . . . . . . . . . . . . . . . . . . . . . 128
SECTION 1311. Rights of Trustee as a Holder of
Senior Indebtedness;
Preservation of Trustee's Rights . . . . . . . . . . 129
SECTION 1312. Article Applicable to Paying
Agents . . . . . . . . . . . . . . . . . . . . . . . 129
SECTION 1313. No Suspension of Remedies . . . . . . . . . . . . . . . 129
SECTION 1314. Trust Moneys Not Subordinated . . . . . . . . . . . . . 129
SECTION 1315. Proof of Claim . . . . . . . . . . . . . . . . . . . . 130
TESTIMONIUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
SIGNATURES AND SEALS . . . . . . . . . . . . . . . . . . . . . . . . 131
EXHIBIT A (Article Fourteen) . . . . . . . . . . . . . . . . . . . . A-1
<CAPTION>
ARTICLE FOURTEEN
GUARANTEE OF SECURITIES
<S> <C> <C>
SECTION 1401. Guarantee . . . . . . . . . . . . . . . . . . . . . . . A-1
SECTION 1402. Execution and Delivery of Guarantee . . . . . . . . . . A-3
</TABLE>
ix
<PAGE> 12
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1403. Additional Guarantors . . . . . . . . . . . . . . . . . A-4
SECTION 1404. Guarantee Obligations
Subordinated to Guarantor
Senior Indebtedness . . . . . . . . . . . . . . . . A-4
SECTION 1405. Payment Over of Proceeds upon
Dissolution, etc., of a Guarantor . . . . . . . . . A-5
SECTION 1406. Suspension of Guarantee Obligations
When Senior Indebtedness in
Default . . . . . . . . . . . . . . . . . . . . . . A-6
SECTION 1407. Release of a Guarantor . . . . . . . . . . . . . . . . A-8
SECTION 1408. Waiver of Subrogation . . . . . . . . . . . . . . . . . A-9
SECTION 1409. Subrogation to Rights of Holders of
Guarantor Senior Indebtedness . . . . . . . . . . . A-10
SECTION 1410. Guarantor Provisions Solely to
Define Relative Rights . . . . . . . . . . . . . . A-10
SECTION 1411. Trustee to Effectuate
Subordination of Guarantee
Obligations . . . . . . . . . . . . . . . . . . . . A-11
SECTION 1412. No Waiver of Guarantee
Subordination Provisions . . . . . . . . . . . . . A-11
SECTION 1413. Guarantors to Give Notice to
Trustee . . . . . . . . . . . . . . . . . . . . . . A-12
SECTION 1414. Reliance on Judicial Order or
Certificate of Liquidating Agent
Regarding Dissolution, etc., of
Guarantors . . . . . . . . . . . . . . . . . . . . A-14
SECTION 1415. Rights of Trustee as a Holder of
Guarantor Senior Indebtedness;
Preservation of Trustee's
Rights . . . . . . . . . . . . . . . . . . . . . . . A-14
SECTION 1416. Article Applicable to Paying
Agents . . . . . . . . . . . . . . . . . . . . . . A-14
SECTION 1417. No Suspension of Remedies . . . . . . . . . . . . . . . A-15
SECTION 1418. Proof of Claim . . . . . . . . . . . . . . . . . . . . A-15
EXHIBIT B (Senior Subordinated Guarantee) . . . . . . . . . . B-1
</TABLE>
x
<PAGE> 13
INDENTURE, dated as of , 1994, between SPX
CORPORATION, a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company"), having its principal office at
700 Terrace Point Drive, Muskegon, Michigan 49443, and The Bank of New York,
Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of
% Senior Subordinated Notes due 2002 (herein called the "Securities"), of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.
This Indenture is subject to the provisions of the Trust
Indenture Act of 1939, as amended, that are required to be part of this
Indenture and shall, to the extent applicable, be governed by such provisions.
All acts and things necessary have been done to make the
Securities, when executed by the Company and authenticated and delivered
hereunder and duly issued by the Company, the valid, binding and legal
obligations of the Company, and to make this Indenture a valid agreement of the
Company, in accordance with their and its terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually covenanted and agreed,
for the equal and proportionate benefit of all Holders of the Securities, as
follows:
<PAGE> 14
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as
the singular;
(b) all other terms used herein which are defined in the
Trust Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(c) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally accepted
accounting principles and, except as otherwise herein expressly
provided, the term "generally accepted accounting principles" with
respect to any computation required or permitted hereunder shall mean
such accounting principles as are generally accepted in the United
States on the Issue Date; and
(d) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
Certain terms, used principally in Article Ten, are defined in
that Article.
"Acquired Indebtedness" means Indebtedness of a person (a)
assumed in connection with an Asset Acquisition from such person or (b)
existing at the time such person becomes a Restricted Subsidiary of any other
person, other than Indebtedness incurred in connection with, or in
contemplation of, such person becoming a Restricted Subsidiary or such
acquisition, as the case may be.
2
<PAGE> 15
"Affiliate" means, with respect to any specified person, 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" when used with respect to any person means the power
to direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"Applicable Premium" means, with respect to a Security, the
greater of (i) 1.0% of the then outstanding principal amount of such Security
and (ii) the excess of (A) the present value of the required interest and
principal payments due on such Security, computed using a discount rate equal
to the Treasury Rate plus basis points, over (B) the then outstanding
principal amount of such Security; provided, however, that in no event will the
Applicable Premium exceed the amount of the applicable redemption price upon an
optional redemption less 100%, at any time on or after , 1998.
"Asset Acquisition" means (a) an Investment by the Company or
any Subsidiary of the Company in any other person pursuant to which such person
shall become a Restricted Subsidiary of the Company, or shall be merged with or
into the Company or any Restricted Subsidiary of the Company, or (b) the
acquisition by the Company or any Restricted Subsidiary of the Company of the
assets of any person which constitute all or substantially all of the assets of
such person or any division or line of business of such person.
"Asset Sale" means any sale, issuance, conveyance, transfer,
lease or other disposition (including, without limitation, by way of merger or
consolidation) to any person other than the Company or a Wholly Owned
Restricted Subsidiary of the Company, in one or a series of related
transactions, of: (a) any Capital Stock of any Restricted Subsidiary of the
Company, (b) all or substantially all of the properties and assets of any
division or line of business of the Company or any Restricted Subsidiary of the
Company or (c) any other properties or assets of the Company or a Restricted
Subsidiary (including proprietary brand names, whether registered or otherwise)
other than in the ordinary course of business. For
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<PAGE> 16
the purposes of this definition, the term "Asset Sale" shall not include (i)
any sale, issuance, conveyance, transfer, lease or other disposition of
properties or assets that is governed by the provisions of Article Eight, (ii)
sales of assets consisting of obsolete equipment or assets that in the
Company's reasonable judgment are either (x) no longer used or (y) no longer
useful in the business of the Company or its Restricted Subsidiaries, (iii) any
sale, issuance, conveyance, transfer, lease or other disposition of properties
or assets, whether in one transaction or a series of related transactions,
involving assets with a fair market value determined by the Company to be not
in excess of $500,000, or (iv) any sales or financings of accounts or lease
receivables pursuant to clause (12), (13) or (14) of the definition of
"Permitted Indebtedness."
"Asset Sale Offer" has the meaning set forth in Section 1013.
"Average Life to Stated Maturity" means, with respect to any
Indebtedness, as at any date of determination, the quotient obtained by
dividing (a) the sum of the products of (i) the number of years from such date
to the date or dates of each successive scheduled principal payment (including,
without limitation, any sinking fund requirements) of such Indebtedness
multiplied by (ii) the amount of each such principal payment by (b) the sum of
all such principal payments.
"Bank Credit Agreement" means (a) the Credit Agreement, dated
as of March 24, 1994, among the Company, the Banks and The First National Bank
of Chicago, as agent for the Banks, as in effect on the Issue Date and as such
agreement may be amended, supplemented or otherwise modified from time to time,
and (b) any credit agreement, loan agreement, note purchase agreement,
indenture or other agreement, document or instrument refinancing, refunding or
otherwise replacing such Agreement or any other agreement deemed a Bank Credit
Agreement under clause (a) or (b) hereof.
"Banks" means the lenders from time to time who are parties to
the Bank Credit Agreement.
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<PAGE> 17
"Board of Directors" of any person means the board of
directors of such person or any duly authorized committee of such board.
"Board Resolution" of any person means a copy of a resolution
certified by the Secretary or an Assistant Secretary of such person to have
been duly adopted by the Board of Directors of such person and to be in full
force and effect on the date of such certification and delivered to the
Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday that is not a day on which banking institutions in The City of New
York are authorized or obligated by law, regulation or executive order to
close.
"Capital Stock" means, with respect to any person, any and all
shares, interests, participations, rights in or other equivalents or interests
in (however designated) such person's capital stock or other equity interests
or participations, including general and limited partnership interests, and any
rights (other than debt securities convertible into capital stock), warrants or
options exchangeable for or convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation to pay
rent or other amounts under a lease of (or other agreement conveying the right
to use) any property (whether real, personal or mixed) that is required to be
classified and accounted for as a capital lease obligation under GAAP; and, for
the purpose of the Indenture, the amount of such obligation at any date shall
be the capitalized amount thereof on the balance sheet at such date, determined
in accordance with GAAP consistently applied.
"Cash Equivalents" means, at any time: (i) any evidence of
Indebtedness with a maturity of 180 days or less issued, or directly and fully
guaranteed or insured, by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) certificates of deposit,
time deposits and bankers' acceptances with a maturity of 180 days or less of
any financial institution that is a
5
<PAGE> 18
member of the Federal Reserve System having combined capital and surplus and
undivided profits of not less than $500,000,000; (iii) commercial paper with a
maturity of 90 days or less issued by a corporation that is not an Affiliate of
the Company or a Subsidiary of the Company organized under the laws of any
state of the United States or the District of Columbia and rated at least A-l
by S&P or at least P-l by Moody's or at least an equivalent rating category of
another nationally recognized securities rating agency; and (iv) any money
market or other deposit accounts issued or offered by any domestic institution
in the business of accepting money market accounts or any commercial banking
institution described in clause (ii) above.
"Change of Control" means an event as a result of which: (a)
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of more than 50% of the
total outstanding Voting Stock of the Company; (b) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of the Company (together with any new directors whose
election to such Board or whose nomination for election by the shareholders of
the Company was approved by a vote of 66-2/3% of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of such Board of Directors then in office; (c)
the Company consolidates with, or merges with or into, any person or conveys,
transfers or leases all or substantially all of its assets to any person, or
any corporation consolidates with or merges into or with the Company in any
such event pursuant to a transaction in which the outstanding Voting Stock of
the Company is changed into or exchanged for cash, securities or other
property, other than any such transaction where the outstanding Voting Stock of
the Company is not changed or exchanged at all (except to the extent necessary
to reflect a change in the jurisdiction of incorporation of the Company) or
where (i) the outstanding Voting Stock of the Company is changed into or
exchanged for (1) Voting Stock of the surviving corporation which is not
Redeemable Capital Stock or (2) cash, securities and other property (other than
Capital Stock
6
<PAGE> 19
of the surviving corporation) in an amount which could be paid by the Company
as a Restricted Payment under the Indenture (and such amount shall be treated
as a Restricted Payment subject to Section 1011) and (ii) no "person" or
"group" owns immediately after such transaction, directly or indirectly, more
than 50% of the total outstanding Voting Stock of the surviving corporation; or
(d) the Company is liquidated or dissolved or adopts a plan of liquidation or
dissolution other than in a transaction which complies with the provisions of
Article Eight.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act or, if at any
time after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Common Stock" means, with respect to any person, any and all
shares, interests or other participation in, and other equivalents (however
designated and whether voting or nonvoting) of, such person's common stock,
whether outstanding at the Issue Date or issued after the Issue Date, and
includes, without limitation, all series and classes of such common stock.
"Company" means the person named as the "Company" in the first
paragraph of this Indenture, until a successor person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor person.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company (i) by its Chairman, its President
or any Vice President and (ii) by its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary, and delivered to the Trustee; provided,
however, that such written request or order may be signed by any two of the
officers and directors listed in clause (i) above in lieu of being signed by
one of such officers and directors listed in such clause (i) and one of the
officers listed in clause (ii) above.
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<PAGE> 20
"Consolidated EBITDA" means, with respect to any person for
any period, (i) the sum of, without duplication, the amount for such period,
taken as a single accounting period, of (a) Consolidated Net Income, (b)
Consolidated Non-cash Charges, (c) Consolidated Interest Expense, (d)
Consolidated Income Tax Expense and (e) any increase in the Employee
Liabilities of such person and its Restricted Subsidiaries for such period less
any decrease in the Employee Liabilities of such period, which have been
deducted to arrive at Consolidated Net Income less (ii) non-cash items
increasing Consolidated Net Income (other than in the ordinary course of
business); provided, however, that if, during such period, such person or any
of its Restricted Subsidiaries shall have consummated any Asset Sale or Asset
Acquisition, Consolidated EBITDA for such person and its Restricted
Subsidiaries for such period shall be adjusted (in the manner set forth in the
definition of the term "Consolidated Fixed Charge Coverage Ratio") to give pro
forma effect to the Consolidated EBITDA directly attributable to the assets
which are the subject of such Asset Sales or Asset Acquisitions during such
period.
"Consolidated Fixed Charge Coverage Ratio" means, with respect
to any person, the ratio of the aggregate amount of Consolidated EBITDA of such
person for the four full fiscal quarters for which financial information in
respect thereof is available immediately preceding the date of the transaction
(the "Transaction Date") giving rise to the need to calculate the Consolidated
Fixed Charge Coverage Ratio (such four full fiscal quarter period being
referred to herein as the "Four Quarter Period") to the aggregate amount of
Consolidated Fixed Charges of such person for the Four Quarter Period. In
addition to and without limitation of the foregoing, for purposes of this
definition "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to, without duplication, (a) the incurrence of any Indebtedness of
such person or any of its Restricted Subsidiaries during the period commencing
on the first day of the Four Quarter Period to and including the Transaction
Date (the "Reference Period"), including, without limitation, the incurrence of
the Indebtedness giving rise to the need to make such calculation, as if such
incurrence occurred on the first day of the Reference Period, and (b) any Asset
Sales or Asset Acquisi-
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<PAGE> 21
tions (including, without limitation, any Asset Acquisition giving rise to the
need to make such calculation as a result of such person or one of its
Restricted Subsidiaries (including any person who becomes a Subsidiary as a
result of the Asset Acquisition) incurring, assuming or otherwise being liable
for Acquired Indebtedness) occurring during the Reference Period, as if such
Asset Sale or Asset Acquisition occurred on the first day of the Reference
Period. Furthermore, in calculating "Consolidated Fixed Charges" for purposes
of determining the denominator (but not the numerator) of this "Consolidated
Fixed Charge Coverage Ratio," (i) interest on outstanding Indebtedness
determined on a fluctuating basis as of the Transaction Date and which will
continue to be so determined thereafter shall be deemed to have accrued at a
fixed rate per annum equal to the rate of interest on such Indebtedness in
effect on the Transaction Date, (ii) if interest on any Indebtedness actually
incurred on the Transaction Date may optionally be determined at an interest
rate based upon a factor of a prime or similar rate, a eurocurrency interbank
offered rate, or other rates, then the interest rate in effect on the
Transaction Date will be deemed to have been in effect during the Reference
Period and (iii) notwithstanding clauses (i) and (ii) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Rate Protection Obligations, shall
be deemed to have accrued at the rate per annum resulting after giving effect
to the operation of such agreements. In calculating the Consolidated Fixed
Charge Coverage Ratio, and giving pro forma effect to any incurrence of
Indebtedness during a Reference Period, pro forma effect shall be given to the
use of proceeds thereof to permanently repay or retire Indebtedness. If such
person or any of its Restricted Subsidiaries directly or indirectly guaranteed
Indebtedness of a third person, the above clauses shall give effect to the
incurrence of such guaranteed Indebtedness as if such person or such Restricted
Subsidiary had directly incurred or otherwise assumed such guaranteed
Indebtedness.
"Consolidated Fixed Charges" means, with respect to any person
for any period, the sum of, without duplication, the amounts for such period of
(i) Consolidated Interest Expense and (ii) the aggregate amount of dividends
and other distributions paid or accrued during such period in respect of
Redeemable Capital Stock of
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<PAGE> 22
such person and its Restricted Subsidiaries on a consolidated basis; provided,
however, that if, during such period, such person or any of its Restricted
Subsidiaries shall have made any Asset Sales or Asset Acquisitions,
Consolidated Fixed Charges for such person and its Restricted Subsidiaries for
such period shall be adjusted (in the manner set forth in the definition of the
term "Consolidated Fixed Charge Coverage Ratio") to give pro forma effect to
the Consolidated Fixed Charges directly attributable to the assets which are
the subject of such Asset Sales or Asset Acquisitions during such period.
"Consolidated Income Tax Expense" means, with respect to any
person for any period, the provision for federal, state, local and foreign
income taxes of such person and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP consistently
applied.
"Consolidated Interest Expense" means, with respect to any
person for any period, without duplication, the sum of (i) the interest expense
of such person and its Restricted Subsidiaries for Indebtedness for such period
as determined on a consolidated basis in accordance with GAAP consistently
applied, including, without limitation, (a) any amortization of debt discount,
(b) the net cost under Interest Rate Protection Obligations (including any
amortization of discounts), (c) the interest portion of any deferred payment
obligation which in accordance with GAAP is required to be reflected on an
income statement, (d) all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing, (e)
all accrued interest and (f) that portion of rental expense estimated to be
representative of the interest factor and (ii) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by such person and its Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP consistently
applied.
"Consolidated Net Income" means, with respect to any person,
for any period, the consolidated net income (or loss) of such person and its
Restricted Subsidiaries for such period as determined in accordance with GAAP
consistently applied adjusted, to the extent included in calculating such net
income, by excluding,
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<PAGE> 23
without duplication, (i) all extraordinary gains or losses (net of fees and
expenses relating to the transaction giving rise thereto) and the non-recurring
cumulative effect of accounting changes, (ii) the portion of net income (or
loss) of such person and its Restricted Subsidiaries allocable to minority
interests in unconsolidated persons to the extent that cash dividends or
distributions have not actually been received by such person or one of its
Restricted Subsidiaries, (iii) net income (or loss) of any person combined with
such person or one of its Restricted Subsidiaries on a "pooling of interests"
basis attributable to any period prior to the date of combination, (iv) gains
or losses in respect of any Asset Sales by such person or one of its Restricted
Subsidiaries (net of fees and expenses relating to the transaction giving rise
thereto), on an after-tax basis, (v) the net income of any Restricted
Subsidiary of such person to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary of that income
is not at the time permitted, directly or indirectly, by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulations applicable to that Restricted Subsidiary or
its stockholders, (vi) gains or losses realized upon the termination of any
employee pension benefit plan, on an after-tax basis and (vii) a non-recurring
charge relating to the write off of goodwill of the Company's Automotive
Diagnostics division, recorded on the Company's consolidated balance sheet in
accordance with GAAP, in an aggregate amount not to exceed $75,000,000.
"Consolidated Net Worth" means, with respect to any person at
any date, the consolidated stockholders' equity of such person less the amount,
if any, of such stockholders' equity attributable to Redeemable Capital Stock
or treasury stock of such person and its Restricted Subsidiaries, as determined
in accordance with GAAP consistently applied.
"Consolidated Non-cash Charges" means, with respect to any
person for any period, the aggregate depreciation, amortization and other
non-cash expenses (including, without limitation, non-cash reserves and
non-cash charges) of such person and its Restricted Subsidiaries reducing
Consolidated Net Income of such person and its Restricted Subsidiaries for such
period, deter-
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<PAGE> 24
mined on a consolidated basis in accordance with GAAP consistently applied (but
only to the extent such non-cash reserves, expenses and charges did not require
an accrual of a reserve for cash disbursements for any future periods).
"Corporate Trust Office" means the office of the Trustee at
which at any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is
located at 48 Wall Street, New York, New York 10286 ; Attention: Corporate
Trust Department.
"corporation" includes corporations, associations,
partnerships, companies and business trusts.
"covenant defeasance" has the meaning set forth in Section
1203.
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 307.
"defeasance" has the meaning specified in Section 1202.
"Designated Senior Indebtedness" means (i) all Senior
Indebtedness under the Bank Credit Agreement and (ii) any other Senior
Indebtedness which, at the time of determination, has an aggregate principal
amount outstanding, together with any commitments to lend additional amounts,
of at least $25,000,000 and is specifically designated by the Company, with the
consent of the agent for the Banks under the Bank Credit Agreement, in its sole
discretion, if such agreement is then in effect, in the instrument evidencing
such Senior Indebtedness or the agreement under which such Senior Indebtedness
arises as "Designated Senior Indebtedness."
"Employee Liabilities" means, with respect to any person, any
liability in respect of employee benefits that would be reflected on a
consolidated balance sheet of such person and its Restricted Subsidiaries
prepared in accordance with GAAP.
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"Event of Default" has the meaning specified in Section 501.
"Excess Proceeds" has the meaning set forth in Section 1013.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and rules and regulations thereunder.
"Existing Receivables Financing" means obligations of the
Company incurred or issued pursuant to the terms of those certain agreements,
dated as of April 30, 1991, between the Company and each of The First National
Bank of Chicago and Falcon Asset Securitization Corporation.
"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11
of the United States Code, as amended from time to time.
"GAAP" or "generally accepted accounting principles" means
generally accepted accounting principles in the United States set forth in the
Statements of Financial Accounting Standards and Interpretations, Accounting
Principles Board Opinions and AICPA Accounting Research Bulletins which are
applicable as of the Issue Date.
"Guarantee" has the meaning set forth in Section 1018.
"guarantee" means, as applied to any obligation, (i) a
guarantee (other than by endorsement of negotiable instruments for collection
in the ordinary course of business), direct or indirect, in any manner, of any
part or all of such obligation and (ii) an agreement, direct or indirect,
contingent or otherwise, the practical effect of which is to assure in any way
the payment or performance (or payment of damages in the event of
nonperformance) of all or any part of such obligation including, without
limiting the foregoing, the payment of amounts drawn down by letters of credit.
"Guarantor" means the issuer at any time of a Guarantee (so
long as such Guarantee remains outstanding).
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<PAGE> 26
"Guarantor Senior Indebtedness" means the principal of and
premium, if any, and interest on any Indebtedness of a Guarantor, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Guarantee of such Guarantor. Without limiting the generality of the foregoing,
"Guarantor Senior Indebtedness" shall also include the principal of and
premium, if any, and interest (including interest accruing after the filing of
a petition initiating any proceeding under any state or federal bankruptcy law,
whether or not such interest is an allowable claim in such proceeding) on, and
all other amounts owing by such Guarantor in respect of, (x) the Bank Credit
Agreement or any guarantee thereof and (y) all Interest Rate Protection
Obligations incurred to satisfy the requirements of the Bank Credit Agreement
or any guarantee thereof. Notwithstanding the foregoing, "Guarantor Senior
Indebtedness" shall not include (a) Indebtedness evidenced by the Guarantee of
such Guarantor, (b) Indebtedness that is expressly subordinate or junior in
right of payment to any Guarantor Senior Indebtedness of such Guarantor, (c)
Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of the Federal Bankruptcy Code, is by its terms without
recourse to such Guarantor, (d) any repurchase, redemption or other obligation
in respect of Redeemable Capital Stock of such Guarantor, (e) to the extent it
might constitute Indebtedness, amounts owing for goods, materials or services
purchased in the ordinary course of business or consisting of trade payables or
other current liabilities (other than any current liabilities owing under the
Bank Credit Agreement or any guarantee thereof or the current portion of any
long-term Indebtedness which would constitute Guarantor Senior Indebtedness but
for the operation of this clause (e)), (f) to the extent it might constitute
Indebtedness, amounts owed by such Guarantor for compensation to employees or
for services rendered to such Guarantor, (g) to the extent it might constitute
Indebtedness, any liability for federal, state, local or other taxes owed or
owing by such Guarantor, (h) Indebtedness of such Guarantor to a Subsidiary of
such Guarantor or any other Affiliate of such Guarantor or any of such
Affiliate's Subsidiaries and (i) that portion of any Indebtedness of such
Guaran-
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<PAGE> 27
tor which at the time of issuance is issued in violation of this Indenture.
"Guarantor Senior Subordinated Note Obligations" means, with
respect to any Guarantee, any amounts payable pursuant to the terms of such
Guarantee or Article Fourteen of this Indenture, including amounts received
upon the exercise of right of rescission or other rights of action (including
claims for damages) or otherwise, to the extent relating to the purchase price
of the Securities or amounts corresponding to such principal, premium, if any,
or interest on the Securities.
"Holder" means a person in whose name a Security is registered
in the Security Register.
"Incremental Receivables Financing" means obligations of the
Company incurred or issued pursuant to an increase in the Existing Receivables
Financing or pursuant to a separate securitized receivables facility incurred
or issued on commercially reasonable terms and conditions for similar financing
transactions and are negotiated on an arm's-length basis from an unaffiliated
leader.
"Indebtedness" means, with respect to any person, without
duplication, (a) all liabilities of such person for borrowed money or for the
deferred purchase price of property or services, excluding any trade payables
and other accrued current liabilities incurred in the ordinary course of
business, but including, without limitation, all obligations, contingent or
otherwise, of such person in connection with any letters of credit, banker's
acceptance or other similar credit transaction, (b) all obligations of such
person evidenced by bonds, notes, debentures or other similar instruments, (c)
all indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such person (even if
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), but
excluding trade accounts payable arising in the ordinary course of business,
(d) all Capitalized Lease Obligations of such person, (e) all Indebtedness
referred to in the preceding clauses of other persons and all dividends of
other persons, the payment of which is secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien upon property
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<PAGE> 28
(including, without limitation, accounts and contract rights) owned by such
person, even though such person has not assumed or become liable for the
payment of such Indebtedness (the amount of such obligations being deemed to be
the lesser of the value of such property or asset or the amount of the
obligation so secured), (f) all guarantees of Indebtedness referred to in this
definition by such person, (g) all Redeemable Capital Stock valued at the
greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued dividends, (h) all obligations under or in respect of currency exchange
contracts and Interest Rate Protection Obligations of such person, (i)
repurchase obligations or liabilities of such person with respect to accounts
receivable or notes receivable sold by such person, (j) obligations incurred
under or in connection with the Existing Receivables Financing or any
Incremental Receivables Financing, notwithstanding the manner in which such
obligations are characterized on a balance sheet of the Company prepared in
accordance with GAAP, provided that, for purposes of calculating financial
tests hereunder, such obligations shall be included only to the extent such
obligations are with recourse to the Company or any of its Restricted
Subsidiaries, (k) with respect to SPX Credit Corporation, obligations incurred
under or in connection with any SPX Credit Lease Financing, notwithstanding the
manner in which such obligations are characterized on a balance sheet of the
Company and its Restricted Subsidiaries prepared in accordance with GAAP,
provided that, for purposes of calculating financial tests hereunder, such
obligations shall be excluded as Indebtedness, and (l) any amendment,
supplement, modification, deferral, renewal, extension or refunding of any
liability of the types referred to in clauses (a) through (k) above. For
purposes hereof, (x) the "maximum fixed repurchase price" of any Redeemable
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Redeemable Capital Stock as if such
Redeemable Capital Stock were purchased on any date on which Indebtedness shall
be required to be determined pursuant to the Indenture, and if such price is
based upon, or measured by, the fair market value of such Redeemable Capital
Stock, such fair market value shall be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock, and (y) Indebtedness
is deemed to be incurred pursuant to a revolving credit facility each time an
advance is made thereunder.
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<PAGE> 29
"Indenture" means this instrument as originally executed
(including all exhibits and schedules hereto) and as it may from time to time
be supplemented or amended by one or more indentures supplemental hereto
entered into pursuant to the applicable provisions hereof.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities.
"Interest Rate Protection Obligations" means the obligations
of any person pursuant to any arrangement with any other person whereby,
directly or indirectly, such person is entitled to receive from time to time
periodic payments calculated by applying either a floating or a fixed rate of
interest on a stated notional amount in exchange for periodic payments made by
such person calculated by applying a fixed or a floating rate of interest on
the same notional amount and shall include, without limitation, interest rate
swaps, caps, floors, collars and similar agreements.
"Investment" means, with respect to any person, any direct or
indirect loan or other extension of credit, advance, guarantee or capital
contribution to (by means of any transfer of cash or other property to others
or any payment for property or services for the account or use of others), or
any purchase or acquisition by such person of any Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued by, any
other person. For the purpose of making any calculations under this Indenture
(i) Investment shall include the person's proportionate share of the fair
market value of the net assets of any Restricted Subsidiary at the time that
such Restricted Subsidiary is designated an Unrestricted Subsidiary and shall
exclude the person's proportionate share of the fair market value of the net
assets of any Unrestricted Subsidiary that is designated a Restricted
Subsidiary and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at fair market value at the time of such transfer;
provided that, in each case, the fair market value of an asset or property
shall be as determined by the Board of Directors of the Company in good faith.
For purposes of this Indenture, the change in designation of a Restricted
Subsidiary to an Unrestricted Subsidiary shall be an Investment. "Investments"
shall exclude extensions of trade credit on commercially reasonable terms
consistent
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<PAGE> 30
with the normal course of business of the Company and the Restricted
Subsidiaries.
"Issue Date" means the date on which the Securities are
originally issued under this Indenture.
"Lien" means any mortgage, charge, pledge, lien (statutory or
other), security interest, hypothecation, assignment for security, claim or
preference or priority or other encumbrance upon or with respect to any
property of any kind. A person shall be deemed to own subject to a Lien any
property which such person has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
"Maturity," when used with respect to any Security, means the
date on which the principal of (and premium, if any) and interest on such
Security become due and payable as therein or herein provided, whether at
Stated Maturity, Change of Control Payment Date, Accelerated Payment Date, any
payment date for an Excess Proceeds Offer or Redemption Date and whether by
declaration of acceleration, call for redemption or otherwise.
"Moody's" means Moody's Investors Services, Inc. and its
successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary of the Company)
net of (i) brokerage commissions and other fees and expenses (including,
without limitation, fees and expenses of legal counsel and investment bankers)
related to such Asset Sale, (ii) provisions of all taxes payable as a result of
such Asset Sale, (iii) amounts required to be paid and which have been paid, or
amounts required to be pledged and which are pledged to repay or secure
Indebtedness owed to any person (other than the Company or any Restricted
Subsidiary of the Company) owning a beneficial interest in the assets subject
to the Asset Sale (which, in the case of a Lien, is being pledged to
permanently reduce Indebtedness secured by such Lien) and (iv) appro-
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<PAGE> 31
priate amounts to be provided by the Company or any Restricted Subsidiary of
the Company, as the case may be, as a reserve required in accordance with GAAP
consistently applied against any liabilities associated with such Asset Sale
and retained by the Company or any Restricted Subsidiary of the Company, as the
case may be, after such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as reflected in an Officers' Certificate delivered to the
Trustee.
"Non-payment Default" means any event (other than a Payment
Default) the occurrence of which entitles one or more persons to accelerate the
maturity of any Designated Senior Indebtedness.
"Officers' Certificate" means a certificate signed by (i) the
Chairman, a Vice-chairman, the President, a Vice President or the Treasurer of
the Company and (ii) the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee; provided, however, that such certificate may be
signed by two of the officers and directors listed in clause (i) above in lieu
of being signed by one of such officers and directors listed in such clause (i)
and one of the officers listed in clause (ii) above.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Company, and who shall be acceptable to the Trustee.
Each such opinion (i) shall include the statements provided for in TIA Section
314(e) to the extent applicable and (ii) may state that the counsel rendering
such opinion have relied upon an Officers' Certificate with respect to factual
matters which are set forth in such opinion.
"Outstanding," when used with respect to the Securities,
means, as of the date of determination, all Securities theretofore
authenticated and delivered under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
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<PAGE> 32
(ii) Securities, or portions thereof, for whose payment,
redemption or purchase money in the necessary amount has been
theretofore deposited with the Trustee or any Paying Agent (other than
the Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for the
Holders of such Securities, and the Trustee or such Paying Agent is not
prohibited from paying such money to the Holders on that date pursuant
to the terms of Article Thirteen hereof;provided that, if such
Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor satisfactory to
the Trustee has been made;
(iii) Securities, except to the extent provided in Sections
1202 and 1203, with respect to which the Company has effected
defeasance as provided in Article Twelve; and
(iv) Securities in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to this
Indenture, other than any such Securities in respect of which there
shall have been presented to the Trustee proof satisfactory to it that
such Securities are held by a bona fide purchaser in whose hands the
Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
direction, consent, notice or waiver hereunder, and for the purpose of making
the calculations required by TIA Section 313, Securities owned by the Company
or any other obligor upon the Securities or any Affiliate of the Company or
such other obligor shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, direction, consent, notice or waiver, only
Securities which the Trustee knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company
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<PAGE> 33
or any other obligor upon the Securities or any Affiliate of the Company or
such other obligor.
"Paying Agent" means any person (including the Company acting
as Paying Agent) authorized by the Company to pay the principal of (and
premium, if any) or interest on any Securities on behalf of the Company.
"Payment Blockage Period" has the meaning set forth in Section
1303.
"Payment Default" means any default in the payment of
principal of (or premium, if any) or interest on Designated Senior Indebtedness
beyond any applicable grace period with respect thereto.
"Pari Passu Indebtedness" means any Indebtedness of the
Company that is pari passu in right of payment to the Securities.
"Pari Passu Offer" has the meaning set forth in Section 1013.
"Permitted Indebtedness" means
(1) Indebtedness of the Company under the Bank Credit
Agreement in an aggregate principal amount at any one time outstanding
not to exceed $225,000,000;
(2) Indebtedness of the Company (including, without
limitation, Indebtedness under the Bank Credit Agreement in excess of
the $225,000,000 permitted in clause (1) above) that is intended to
provide working capital financing or financing for general corporate
purposes as long as the incurrence of such Indebtedness would not
result in the aggregate outstanding Indebtedness incurred pursuant to
this clause (2) being in excess of (i) the sum of (x) 60% of the net
aggregate book value of inventory and (y) 85% of the aggregate book
value of all accounts and lease receivables (net of bad debt expense) of
the Company and its Restricted Subsidiaries on a consolidated basis, at
the time such Indebtedness is incurred, as determined in accordance with
GAAP minus (ii) $225,000,000;
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<PAGE> 34
(3) Indebtedness of the Company pursuant to the Securities
and Indebtedness of any Subsidiary pursuant to a Guarantee;
(4) Indebtedness of the Company outstanding on the date of
the Indenture other than Indebtedness pursuant to clauses (1), (12),
(13) and (14) hereof;
(5) Interest Rate Protection Obligations of the Company or
any Guarantor covering Indebtedness of the Company or any such
Guarantor;provided, however, that (i) any Indebtedness to which any such
Interest Rate Protection Obligations relate bears interest at
fluctuating interest rates and is otherwise permitted to be incurred
under this covenant and (ii) the notional amount of any such Interest
Rate Obligations does not exceed the principal amount of the
Indebtedness to which such Interest Rate Obligations relates and which
Indebtedness either is outstanding at the time the Interest Rate
Protection Obligation is incurred or such Indebtedness is incurred
within 90 days thereafter;
(6) Indebtedness of a Wholly Owned Restricted Subsidiary
of the Company issued to and held by (x) the Company or (y) another
Wholly Owned Restricted Subsidiary of the Company;provided, however,
that any Indebtedness of a Guarantor owing to a Wholly Owned Restricted
Subsidiary which is not a Guarantor shall be subordinated in right of
payment from and after such time as the obligations under the Guarantee
by such Wholly Owned Restricted Subsidiary shall become due and payable
(whether at Stated Maturity, by acceleration or otherwise) to the
payment and performance of such Wholly Owned Restricted Subsidiary's
obligations under its Guarantee; andprovided, further, that (a) any
disposition, pledge or transfer of any such Indebtedness to a person
(other than the Company or a Wholly Owned Restricted Subsidiary) shall
be deemed to be an incurrence of such Indebtedness by the obligor not
permitted by this clause; and (b) any transaction pursuant to which a
Wholly Owned Restricted Subsidiary, which has Indebtedness owing to the
Company or any other Wholly Owned Subsidiary, ceases to be a Wholly
Owned Subsidiary shall be deemed to be the incurrence of Indebtedness by
such Wholly Owned Re-
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<PAGE> 35
stricted Subsidiary that is not permitted by this clause;
(7) Indebtedness of the Company issued to and held by a
Wholly Owned Restricted Subsidiary of the Company which is unsecured
and subordinated in right of payment from and after such time as the
Securities shall become due and payable (whether at a Stated Maturity,
by acceleration or otherwise) to the payment and performance of the
Company's obligations under the Indenture and the Securities; provided,
however, that any subsequent transfer of such Indebtedness (other than
to the Company or a Wholly Owned Restricted Subsidiary) will be deemed,
in each case, to constitute the issuance of such Indebtedness by the
Company or of such Indebtedness by such Wholly Owned Restricted
Subsidiary that is not permitted by this clause;
(8) Indebtedness of the Company or any Restricted Subsidiary
incurred in respect of performance bonds, surety bonds and bankers'
acceptances provided in the ordinary course of business;
(9) Indebtedness of the Company or any Restricted Subsidiary
representing Capitalized Lease Obligations or incurred in connection
with the acquisition of fixed assets useful and intended to be used in
carrying on the business of the Company or any such Restricted
Subsidiary so long as the aggregate amount outstanding of such
Indebtedness incurred pursuant to this clause would not at any time
exceed $10,000,000;
(10) Indebtedness of the Company or any Restricted Subsidiary
arising from the honoring by a bank or other financial institution of a
check, draft or similar instrument inadvertently (except in the case of
daylight overdrafts) drawn against insufficient funds in the ordinary
course of business;provided that such Indebtedness is extinguished
within five business days of incurrence;
(11) Indebtedness of the Company or any Restricted Subsidiary
consisting of guaranties, indemnities or obligations in respect of
purchase price
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<PAGE> 36
adjustments in connection with the acquisition or disposition of assets
permitted under the Indenture;
(12) Indebtedness of the Company pursuant to the Existing
Receivables Financing;
(13) Indebtedness of the Company pursuant to an Incremental
Receivables Financing, so long as (i) at the time of such Indebtedness
is incurred and after giving effect thereto, no Default or Event of
Default has occurred and is continuing, and (ii) the aggregate amount of
such Indebtedness permitted under this clause (13) shall not exceed at
any one time outstanding an amount equal to (x) $50,000,000 minus (y)
the aggregate amount outstanding under the Existing Receivables
Financing minus (z) the aggregate amount outstanding of any Indebtedness
consisting of an SPX Credit Lease Financing incurred pursuant to clause
(14) below;
(14) Indebtedness of SPX Credit Corporation pursuant to an
SPX Credit Lease Financing, so long as (i) at the time such
Indebtedness is incurred and after giving effect thereto, no Default or
Event of Default has occurred and is continuing, and (ii) the aggregate
amount of such Indebtedness permitted under this clause (14) shall not
exceed at any one time outstanding an amount equal to (x) $50,000,000
minus (y) the aggregate amount outstanding under the Existing
Receivables Financing minus (z) the aggregate amount outstanding of any
Indebtedness consisting of an Incremental Receivables Financing pursuant
to clause (13) above;
(15) (i) Indebtedness of the Company, the proceeds of
which are used solely to refinance (whether by amendment, renewal,
extension or refunding) Indebtedness of the Company (including all or a
portion of the Securities) or any of its Restricted Subsidiaries and
(ii) Indebtedness of any Restricted Subsidiary of the Company the
proceeds of which are used solely to refinance (whether by amendment,
renewal, extension or refunding) Indebtedness of such Restricted
Subsidiary, in each case outstanding on the Issue Date and other than
the Indebtedness to be refinanced, redeemed or retired from the proceeds
of the offering of the Securities; provided, howev-
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<PAGE> 37
er, that (A) the principal amount of Indebtedness incurred pursuant to this
clause (15) (or, if such Indebtedness provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration of the maturity thereof, the original issue price of such
Indebtedness) shall not exceed the sum of the principal amount of Indebtedness
so refinanced (or, if the Indebtedness so refinanced provides for an amount
less than the principal amount thereof to be due and payable upon a declaration
of acceleration of the maturity thereof, the original issue price of such
Indebtedness plus any accretion value attributable thereto since the original
issuance of such Indebtedness) plus the amount of any premium required to be
paid in connection with such refinancing pursuant to the terms of such
Indebtedness or the amount of any premium reasonably determined by the Company
as necessary to accomplish such refinancing by means of a tender offer or
privately negotiated purchase, plus the amount of expenses in connection
therewith and (B) in the case of any refinancing of Indebtedness that is not
Senior Indebtedness, (1) such new Indebtedness is made subordinate to the
Securities in the same manner and at least to the same extent as the
Indebtedness being refinanced and (2) such new Indebtedness has an Average Life
to Stated Maturity and final Stated Maturity of principal that equals or
exceeds the Average Life to Stated Maturity and final Stated Maturity of
principal, respectively, of the Indebtedness being refinanced;
(16) Indebtedness of the Company (including without
limitation Indebtedness under the Bank Credit Agreement in excess of the
amount permitted by clause (1) and clause (2) above) in addition to that
described in clauses (1) through (15) above not to exceed $25,000,000
outstanding at any time in the aggregate; or
(17) Indebtedness of any Subsidiary of the Company
pursuant to a guarantee of the obligations of the Company under the Bank
Credit Agreement.
Any accounts receivables used for the purposes of computing
the amount of available Indebtedness under clause (2) above shall not be used
or pledged in connection with the incurrence of Indebtedness under clauses
(12), (13) and (14) above and vice versa.
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"Permitted Investment" means any of the following: (i)
Investments by the Company or any Wholly Owned Restricted Subsidiary of the
Company in another person, if as a result of such Investment such other person
is merged or consolidated with or into, or transfers or conveys all or
substantially all of its assets to the Company or such Wholly Owned
Restricted Subsidiary; (ii) Investments in short-term obligations of, or fully
guaranteed by, the United States of America; (iii) Investments in commercial
paper rated "P-l" or better by Moody's or "A-1" or better by S&P; (iv)
Investments in certificates of deposit issued by and time deposits with
commercial banks (whether domestic or foreign) in excess of $100,000,000; (v)
Investments in any mutual fund organized under the Investment Company Act of
1940 or money market fund organized under the laws of the United States of
America or any state thereof which invests only in instruments described in
clause (ii), (iii) or (iv) above or (vii) below; (vi) Investments representing
Capital Stock or obligations issued to the Company or any of its Restricted
Subsidiaries in settlement of claims against any other person by reason of a
composition or readjustment of debt or a reorganization of any debtor of the
Company or of such Restricted Subsidiary; (vii) Investments in Cash
Equivalents; (viii) loans and advances to employees and officers of the Company
and its Restricted Subsidiaries made in compliance with clause (ii) of the
second sentence under Section 1016; (ix) Investments by the Company or a Wholly
Owned Restricted Subsidiary in the Capital Stock of a Wholly Owned Restricted
Subsidiary; (x) Investments in any of the Securities; (xi) receivables
owing to the Company or any Restricted Subsidiary created in the ordinary
course of business; and (xii) Investments in any person in addition to that
described in clauses (i) through (xi) above not to exceed $10,000,000 in the
aggregate at any time outstanding.
"person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
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<PAGE> 39
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 306 in
exchange for a mutilated security or in lieu of a lost, destroyed or stolen
Security shall be deemed to evidence the same debt as the mutilated, lost,
destroyed or stolen Security.
"Preferred Stock" means, with respect to any person, any and
all shares, interests, participations or other equivalents (however designated)
of such person's preferred or preference stock, whether now outstanding or
issued after the Issue Date, and including, without limitation, all classes and
series of preferred or preference stock of such person.
"Public Equity Offering" means an underwritten public offering
of Capital Stock of the Company pursuant to a registration statement that has
been declared effective by the Commission pursuant to the Securities Act (other
than a registration statement on Form S-8 or any successor form thereto or
otherwise relating to equity securities issuable under any employee benefit
plan of such corporate entity); provided that the gross proceeds to the Company
therefrom are at least $50,000,000.
"Redeemable Capital Stock" means any class or series of
Capital Stock that, either by its terms, by the terms of any security into
which it is convertible or exchangeable or by contract or otherwise, is, or
upon the happening of an event or passage of time would be, required to be
redeemed prior to any Stated Maturity of the Securities or is redeemable at the
option of the holder thereof at any time prior to any Stated Maturity of the
Securities or, at the option of the holder thereof, is convertible into or
exchangeable for debt securities at any time prior to any Stated Maturity of
the Securities.
"Redemption Date," when used with respect to any Securities to
be redeemed, in whole or in part, means the date fixed for such redemption by
or pursuant to this Indenture.
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<PAGE> 40
"Redemption Price," when used with respect to any Security to
be redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registration Statement" means the Registration Statement on
Form S-3 of the Company, No. 33-52833, filed with the Commission on March 28,
1994, as amended at the time such Registration Statement was declared effective
by the Commission under the Securities Act.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the or (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
"Responsible Officer," when used with respect to the Trustee,
means the chairman or any vice-chairman of the board of directors, the chairman
or any vice- chairman of the executive committee of the board of directors, the
president, any vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any
trust officer or assistant trust officer, the controller or any assistant
controller or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above-designated officers or assigned
by the Trustee to administer corporate trust matters at its Corporate Trust
Office, and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Payment" has the meaning set forth under Section
1011.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"SPT" has the meaning set forth under Section 1011.
"SPX Credit Lease Financings" means secured or unsecured
obligations of SPX Credit Corporation which are in the nature of sales or
pledges of undivided interests in a pool of leases of SPX Credit Corporation
(including any such leases which have been transferred to SPX Credit
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<PAGE> 41
Corporation by the Company or any of its other Subsidiaries in the ordinary
course of business consistent with past practices) and which are (a)
non-recourse to the Company and its other Subsidiaries and (b) otherwise
incurred on commercially reasonable terms and conditions or for similar
financing transactions and are negotiated on an arm's-length basis from an
unaffiliated lender and (c) permitted under clause (14) of the definition of
Permitted Indebtedness.
"S&P" means Standard & Poor's Corporation and its successors.
"Securities Act" means the Securities Act of 1933, as amended,
from time to time, and rules and regulations thereunder.
"Security" and "Securities" have the meaning stated in the
first recital of this Indenture and more particularly mean any Securities
authenticated and delivered under this Indenture.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305.
"Senior Indebtedness" means the principal of, premium, if any,
and interest on any Indebtedness of the Company, whether outstanding on the
Issue Date or thereafter created, incurred or assumed, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Securities.
Without limiting the generality of the foregoing, "Senior Indebtedness" shall
also include all obligations of the Company, whether outstanding on the Issue
Date or thereafter created, incurred or assumed, under or in respect of the
Bank Credit Agreement, whether for principal, interest (including interest
accruing after the filing of a petition initiating any proceeding under any
state, federal or foreign bankruptcy laws whether or not allowable in such
proceeding), reimbursement of amounts drawn under letters of credit issued or
arranged for pursuant thereto, obligations owed to the Banks with respect to
Interest Rate Protection Obligations incurred to satisfy the requirements of
the Bank Credit Agreement or otherwise and reimbursement of other amounts,
guaran-
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<PAGE> 42
tees in respect thereof and all charges, fees, expenses and other amounts in
respect of the Bank Credit Agreement incurred by the Banks in respect of the
Bank Credit Agreement. Notwithstanding the foregoing, "Senior Indebtedness"
shall not include (a) Indebtedness evidenced by the Securities, (b)
Indebtedness that is expressly subordinate or junior in right of payment to any
Indebtedness of the Company, (c) Indebtedness which, when incurred and without
respect to any election under Section 1111(b) of the Federal Bankruptcy Code,
is by its terms without recourse to the Company, (d) any repurchase, redemption
or other obligation in respect of Redeemable Capital Stock, (e) to the extent
it might constitute Indebtedness, amounts owing for goods, materials or
services purchased in the ordinary course of business or consisting of trade
payables or other current liabilities (other than any current liabilities owing
under the Bank Credit Agreement or the current portion of any long-term
Indebtedness which would constitute Senior Indebtedness but for the operation
of this clause (e)), (f) to the extent it might constitute Indebtedness,
amounts owed by the Company for compensation to employees or for services
rendered to the Company, (g) to the extent it might constitute Indebtedness,
any liability for federal, state, local or other taxes owed or owing by the
Company, (h) Indebtedness of the Company to a Subsidiary of the Company or any
other Affiliate of the Company or any of such Affiliate's Subsidiaries and (i)
that portion of any Indebtedness which at the time of issuance is issued in
violation of this Indenture.
"Significant Subsidiary" shall have the same meaning as in
Rule 1.02(v) of Regulation S-X under the Securities Act, provided that each
Guarantor shall in all events be deemed a Significant Subsidiary.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity" means, when used with respect to any
Security or any installment of interest thereon, the date specified in such
Security as the fixed date on which any principal of such Security or such
installment of interest is due and payable and, when used with respect to any
other Indebtedness or any installments of interest thereon, means any date
specified in the instru-
30
<PAGE> 43
ment governing such Indebtedness as the fixed date on which the principal of
such Indebtedness, or such installment of interest thereon, is due and payable.
"Subordinated Indebtedness" means, with respect to the
Company, Indebtedness of the Company which is expressly subordinated in right
of payment to the Securities or, with respect to any Guarantor, Indebtedness of
such Guarantor which is expressly subordinated in right of payment to the
Guarantee of such Guarantor.
"Subsidiary" means, with respect to any person, (i) a
corporation a majority of whose Voting Stock is at the time, directly or
indirectly, owned by such person, by one or more Subsidiaries of such person or
by such person and one or more Subsidiaries of such person and (ii) any other
person (other than a corporation), including, without limitation, a joint
venture or partnership, in which such person, one or more Subsidiaries of such
person or such person and one or more Subsidiaries of such person, directly or
indirectly, at the date of determination thereof, has at least a majority
ownership interest entitled to vote in the election of directors, managers or
trustees thereof (or other person performing similar functions). For purposes
of this definition, any directors' qualifying shares or investments by foreign
nationals mandated by applicable law shall be disregarded in determining the
ownership of a Subsidiary.
"Surviving Entity" has the meaning set forth in Section 801.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15(519) which has become publicly available at least two Business Days prior
to the date fixed for redemption of the Securities following a Change of
Control (or, if such Statistical Release is no longer published, any publicly
available source of similar market data)) most nearly equal to the then
remaining Average Life to Stated Maturity of the Securities; provided, however,
that if the Average Life to Stated Maturity of the Securities is not equal to
the constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
31
<PAGE> 44
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the Average Life to Stated Maturity of the Securities is
less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act
of 1939, as amended and as in force at the date as of which this Indenture was
executed, except as provided in Section 905.
"Trustee" means the person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Unrestricted Subsidiary" means any Subsidiary of the Company
designated as such by the Company (a) no portion of the Indebtedness or any
other obligation (contingent or otherwise) of which (i) is guaranteed by the
Company or any other Subsidiary of the Company, (ii) is recourse to or
obligates the Company or any other Subsidiary of the Company in any way or
(iii) subjects any property or asset of the Company or any other Subsidiary of
the Company, directly or indirectly, contingently or otherwise, to the
satisfaction thereof, (b) which has no Indebtedness or any other obligation
that, if in default in any respect (including a nonpayment default), would
permit (upon notice, lapse of time or both) any holder of any other
Indebtedness of the Company or any Restricted Subsidiary to declare a default
on such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its Stated Maturity, (c) with which the Company or any other
Subsidiary of the Company has no contract, agreement, arrangement,
understanding or is subject to an obligation of any kind, whether written or
oral, other than a transaction on terms no less favorable to the Company or any
other Subsidiary of the Company than those which might be obtained at the time
from persons at arm's length who are not Affiliates of the Company and (d) with
which neither the Company nor any other Subsidiary of the Company has any
obligation (other than by the terms of the Indenture) (i) to subscribe for
32
<PAGE> 45
additional shares of Capital Stock or other equity interest therein or (ii) to
maintain or preserve such Subsidiary's financial condition or to cause such
Subsidiary to achieve certain levels of operating results; provided, however,
that in no event shall any Guarantor be an Unrestricted Subsidiary. The
Company may designate an Unrestricted Subsidiary as a Restricted Subsidiary by
written notice to the Trustee under this Indenture; provided, however, that the
Company shall not be permitted to designate any Unrestricted Subsidiary as a
Restricted Subsidiary unless (A) after giving pro forma effect to such
designation, the Company would be permitted to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under this Indenture and (B)
any Indebtedness or Liens of such Unrestricted Subsidiary would be permitted to
be incurred by a Restricted Subsidiary of the Company under this Indenture. A
designation of an Unrestricted Subsidiary as a Restricted Subsidiary may not
thereafter be rescinded.
"Voting Stock" means any class or classes of Capital Stock
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the board of directors,
managers or trustees of any person (irrespective of whether or not, at the
time, stock of any other class or classes shall have, or might have, voting
power by reason of the happening of any contingency).
"Wholly Owned Restricted Subsidiary" means (i) any Restricted
Subsidiary of the Company of which 100% of the outstanding Capital Stock is
owned by the Company or another Wholly Owned Restricted Subsidiary of the
Company and (ii) SPT. For purposes of this definition, any directors'
qualifying shares or investments by foreign nationals mandated by applicable
law shall be disregarded in determining the ownership of a Restricted
Subsidiary.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent, if any, provided for in this Indenture (including any covenant
compliance with which constitutes a
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<PAGE> 46
condition precedent) relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1008(a)) shall include:
(1) a statement that each individual signing such
certificate or opinion has read such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such
individual, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to whether or
not such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each
such individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
person or that they be so certified or covered by only one document, but one
such person may certify or give an opinion with respect to some matters and one
or more other such persons as to other matters,
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<PAGE> 47
and any such person may certify or give an opinion as to such matters in one or
several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or Opinion of Counsel may
be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Company
stating that the information with respect to such factual matters is in the
possession of the Company, unless such counsel know, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 104. Acts of Holders.
(a) Any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this Indenture
to be given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by an agent duly appointed in writing, and except as herein otherwise expressly
provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to TIA
Section 315) conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
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<PAGE> 48
(b) The fact and date of the execution by any person of
any such instrument or writing may be proved in any reasonable manner which
the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the
Security Register.
(d) If the Company shall solicit from the Holders
any request, demand, authorization, direction, notice, consent, waiver
or other Act, the Company may, at its option, by or pursuant to Board
Resolution, fix in advance a record date for the determination of Holders
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Company shall have no obligation to do
so. Notwithstanding TIA Section 316(c), any such record date shall be the
record date specified in or pursuant to such Board Resolution, which shall be a
date not more than 30 days prior to the first solicitation of Holders generally
in connection therewith and no later than the date such solicitation is
completed.
If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of record at the close
of business on such record date shall be deemed to be Holders for the purposes
of determining whether Holders of the requisite proportion of Securities then
Outstanding have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act, and for this
purpose the Securities then Outstanding shall be computed as of such record
date; provided that no such authorization, agreement or consent by the Holders
on such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than six months after
the record date.
(e) Any request, demand, authorization, direction,
notice, consent, waiver or other Act by the Holder of any Security
shall bind every future Holder of the same Security and the Holder of every
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, omitted or suffered
to be done by the Trustee, any Paying
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<PAGE> 49
Agent or the Company in reliance thereon, whether or not notation of such
action is made upon such Security.
SECTION 105. Notices, etc., to Trustee and Company.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to or filed with
(1) the Trustee by any Holder, the Banks, the holders
of Designated Senior Indebtedness or the Company shall be sufficient
for every purpose hereunder if made, given, furnished or delivered in
writing to or with the Trustee at its Corporate Trust Office, Attention:
Corporate Trust Department; or
(2) the Company by the Trustee or by any Holder shall
be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if made, given, furnished or delivered in writing to
the Company addressed to it at the address of its principal office
specified in the first paragraph of this Indenture, Attention:
President, or at any other address furnished in writing to the Trustee
by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to
Holders by the Company or the Trustee, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at his
address as it appears in the Security Register, not later than the latest date,
and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice nor any defect in any notice so mailed to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Any notice when deposited for mailing to a Holder in the
aforesaid manner shall be conclusively deemed to have been received by such
Holder, whether or not actually received by such Holder. Where this Inden-
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<PAGE> 50
ture provides for notice in any manner, such notice may be waived in writing by
the person entitled to receive such notice, either before or after the event,
and such waiver shall be the equivalent of such notice. Waivers of notice by
Holders shall be filed with the Trustee, but such filing shall not be a
condition precedent to the validity of any action taken in reliance upon such
waiver.
In case, by reason of the suspension of or irregularities in
regular mail service or by reason of any other cause, it shall be impracticable
to mail notice of any event as required by any provision of this Indenture,
then any method of giving such notice as shall be satisfactory to the Trustee
shall be deemed to be a sufficient giving of such notice.
SECTION 107. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 108. Conflict of Any Provision of Indenture with
Trust Indenture Act.
If and to the extent that any provision of this Indenture
limits, qualifies or conflicts with the duties imposed by Sections 310 to 318,
inclusive, of the Trust Indenture Act or conflicts with any provision (an
"incorporated provision") required by or deemed to be included in this
Indenture by operation of such Trust Indenture Act Sections, such imposed
duties or incorporated provision shall control. If any provision of this
Indenture modifies or excludes any provision of the Trust Indenture Act that
may be so modified or excluded, the latter provision shall be deemed to apply
to this Indenture as so modified or excluded, as the case may be.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company
shall bind its respective successors and assigns, whether so expressed or not.
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<PAGE> 51
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any person (other than the parties hereto and their
successors hereunder, any Paying Agent, the Holders and the holders of Senior
Indebtedness) any benefit or any legal or equitable right, remedy or claim
under this Indenture.
SECTION 112. Governing Law.
This Indenture and the Securities shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflict-of-laws rules thereof.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date
or Stated Maturity or Maturity of any Security shall not be a Business Day,
then (notwithstanding any other provision of this Indenture or of the
Securities) payment of interest or principal (and premium, if any) need not be
made on such date, but may be made on the next succeeding Business Day with the
same force and effect as if made on the Interest Payment Date, Redemption Date
or at the Stated Maturity or Maturity; provided that no interest shall accrue
for the period from and after such Interest Payment Date, Redemption Date,
Stated Maturity or Maturity, as the case may be, to the next succeeding
Business Day.
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<PAGE> 52
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
The Securities and the Trustee's certificate of authentication
shall be in substantially the forms set forth in this Article, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon
as may be required to comply with the rules of any securities exchange or as
may, consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution of the Securities. Any portion of
the text of any Security may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Security.
The definitive Securities shall be printed, lithographed or
engraved or may be produced by any combination of these methods or may be
produced in any other manner permitted by the rules of any securities exchange
on which the Securities may be listed, all as determined by the officers of the
Company executing such Securities, as evidenced by their execution of such
Securities.
SECTION 202. Form of Face of Security.
SPX CORPORATION
% Senior Subordinated Note due 2002
No. $
SPX Corporation, a Delaware corporation (herein called the
"Company," which term includes any successor person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
or registered assigns, the principal sum of Dollars on
, 2002, at the office or agency of the Company referred to below, and to pay
interest thereon on , 1994 and semi-annually thereafter, on and
in each year, from , 1994, or from the most recent Interest
Payment Date to
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<PAGE> 53
which interest has been paid or duly provided for, at the rate of % per
annum, until the principal hereof is paid or duly provided for. The interest
so payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in such Indenture, be paid to the person in whose name
this Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest, which shall be
the or (whether or not a Business Day),
as the case may be, next preceding such Interest Payment Date. Interest shall
be computed on the basis of a 360-day year of twelve 30-day months. Any such
interest not so punctually paid or duly provided for shall forthwith cease to
be payable to the Holder on such Regular Record Date, and such defaulted
interest, and (to the extent lawful) interest on such defaulted interest at the
rate borne by the Securities, may be paid to the person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
not less than ten days prior to such Special Record Date, or may be paid at any
time in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in said
Indenture. Payment of the principal of (and premium, if any) and interest on
this Security will be made at the office or agency of the Company maintained
for that purpose in The City of New York, or at such other office or agency of
the Company as may be maintained for such purpose, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that payment of
interest may be made at the option of the Company by check mailed to the
address of the person entitled thereto as such address shall appear on the
Security Register.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the
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<PAGE> 54
reverse hereof by manual signature, this Security shall not be entitled to any
benefit under the Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed under its corporate seal.
Dated: SPX CORPORATION
By
----------------------------
Attest:
- -------------------------------
Authorized Signature
SECTION 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of securities
of the Company designated as its % Senior Subordinated Notes due 2002 (herein
called the "Securities"), limited (except as otherwise provided in the
Indenture referred to below) in aggregate principal amount to $260,000,000,
which may be issued under an indenture (herein called the "Indenture") dated as
of , 1994 between the Company and The Bank of New York, trustee
(herein called the "Trustee," which term includes any successor trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties, obligations and immunities thereunder of the Company, the
Trustee and the Holders of the Securities, and of the terms upon which the
Securities are, and are to be, authenticated and delivered.
This Security may be entitled after the date hereof to certain
senior subordinated Guarantees made for the benefit of the Holders. Reference
is hereby made to Section 1018 of the Indenture and to Exhibit A to the
Indenture for the terms of any Guarantee.
The Securities are, to the extent and in the manner provided
in the Indenture, subordinate and subject in right of payment to the prior
payment in full of all
42
<PAGE> 55
Senior Indebtedness of the Company, whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder
of this Security, by accepting the same, (a) agrees to and shall be bound by
such provisions, (b) authorizes and directs the Trustee on his behalf to take
such action as may be necessary or appropriate to effectuate the subordination
as provided in the Indenture and (c) appoints the Trustee his attorney-in-fact
for such purpose.
The Securities are subject to redemption upon not less than 30
nor more than 60 days' notice, in amounts of $1,000 or an integral multiple of
$1,000 at any time on or after , 1998, as a whole or
in part, at the election of the Company, at a Redemption Price equal to the
percentage of the principal amount set forth below if redeemed during the
twelve-month period beginning , of the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
1998 %
------
1999 %
------
2000 and thereafter 100.00%
</TABLE>
together in the case of any such redemption with accrued interest, if any, to
the Redemption Date, all as provided in the Indenture.
The Securities are not entitled to the benefit of any
mandatory sinking fund.
In the case of any redemption of Securities, interest
installments whose Stated Maturity is on or prior to the Redemption Date will
be payable to the Holders of such Securities, or one or more Predecessor
Securities, of record at the close of business on the relevant Regular Record
Date referred to on the face hereof. Securities (or portions thereof) for
whose redemption and payment provision is made in accordance with the Indenture
shall cease to bear interest from and after the Redemption Date.
In the event of redemption of this Security in part only, a
new Security or Securities for the unre-
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<PAGE> 56
deemed portion hereof shall be issued in the name of the Holder hereof upon the
cancellation hereof.
Sections 1013 and 1014 of the Indenture provide that upon the
occurrence of a Change of Control and following any Asset Sale, and subject to
further limitations contained therein, the Company shall make an offer to
purchase certain amounts of the Securities at a purchase price and in
accordance with the procedures set forth in the Indenture.
In addition, up to 30% of the aggregate principal amount of
the Securities outstanding on the Issue Date will be redeemable prior
to ______________, 1996, at the option of the Company, within 45 days of the
sale of Capital Stock in a Public Equity Offering from the net proceeds of
such sale at a redemption price equal to % of the principal amount to be
redeemed, together with accrued and unpaid interest, if any, thereon to the
date of redemption.
If an Event of Default shall occur and be continuing, the
principal of all the Securities may be declared due and payable in the manner
and with the effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time
of (a) the entire indebtedness of the Company and any Guarantor on this
Security and (b) certain restrictive covenants and the related Defaults and
Events of Default, upon compliance by the Company with certain conditions set
forth therein, which provisions apply to this Security.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their
44
<PAGE> 57
consequences. Any such consent or waiver by or on behalf of the Holder of this
Security shall be conclusive and binding upon such Holder and upon all future
Holders of this Security and of any Security issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof whether or not
notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of (and
premium, if any) and interest on this Security at the times, place and rate,
and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is registerable on
the Security Register of the Company, upon surrender of this Security for
registration of transfer at the office or agency of the Company maintained for
such purpose in The City of New York, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to
the designated transferee or transferees.
The Securities are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
the Securities are exchangeable for a like aggregate principal amount of
Securities of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require payment of a
sum sufficient to pay all documentary, stamp or similar issue or transfer taxes
or other governmental charges payable in connection therewith.
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<PAGE> 58
Prior to the time of due presentment of this Security for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the person in whose name this Security is registered
as the owner hereof for all purposes, whether or not this Security be overdue,
and neither the Company, the Trustee nor any agent shall be affected by notice
to the contrary.
All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company
pursuant to Section 1013 or 1014 of the Indenture, check the appropriate box:
Section 1013 [ ]
Section 1014 [ ]
If you wish to have a portion of this Security purchased by
the Company pursuant to Section 1013 or 1014 of the Indenture, state the
amount:
$ ____________________
Date: ________________ Your Signature: ______________________
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee:_______________________
SECTION 204. Form of Trustee's Certificate of
Authentication.
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Securities referred to in
the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By ________________________
Authorized Signatory
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<PAGE> 59
ARTICLE THREE
THE SECURITIES
SECTION 301. Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $260,000,000,
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section
303, 304, 305, 306, 906, 1013, 1014 or 1108.
The Securities shall be known and designated as the " %
Senior Subordinated Notes due 2002" of the Company. Their Stated Maturity
shall be , 2002, and they shall bear interest at the rate
of % per annum from , 1994, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, payable on
, 1994 and semi-annually thereafter on and in each year,
and at said Stated Maturity, until the principal thereof is paid or duly
provided for.
The principal of (and premium, if any) and interest on the
Securities shall be payable at the office or agency of the Company maintained
for such purpose in The City of New York, or at such other office or agency of
the Company as may be maintained for such purpose; provided, however, that, at
the option of the Company, interest may be paid by check mailed to addresses of
the persons entitled thereto as such addresses shall appear on the Security
Register.
The Securities shall be redeemable as provided in Article
Eleven.
The Securities shall be subordinated in right of payment to
Senior Indebtedness as provided in Article Thirteen.
The Securities shall not be entitled to the benefits of any
sinking fund.
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<PAGE> 60
SECTION 302. Denominations.
The Securities shall be issuable only in registered form
without coupons and only in denominations of $1,000 and any integral multiple
thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by
its Chairman, its President or one of its Vice Presidents, under its corporate
seal reproduced thereon and attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Securities may be
manual or facsimile signatures and may be imprinted or otherwise reproduced on
the Securities.
Securities 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 of them have ceased
to hold such offices prior to the authentication and delivery of such
Securities or did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a Company Order for
the authentication and delivery of such Securities, and the Trustee in
accordance with such Company Order shall authenticate and deliver such
Securities.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on
such Security a certificate of authentication substantially in the form
provided for herein duly executed by the Trustee by manual signature of one of
its duly authorized signatories, and such certificate upon any Security shall
be conclusive evidence, and the only evidence, that such Security has been duly
authenticated and delivered hereunder and is entitled to the benefits of this
Indenture.
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<PAGE> 61
In case the Company, pursuant to Article Eight, shall be
consolidated or merged with or into any other person or shall convey, transfer,
lease or otherwise dispose of substantially all of its properties and assets to
any person, and the successor person resulting from such consolidation, or
surviving such merger, or into which the Company shall have been merged, or the
successor person which shall have received a conveyance, transfer, lease or
other disposition as aforesaid, shall have executed an indenture supplemental
hereto with the Trustee pursuant to Article Eight, any of the Securities
authenticated or delivered prior to such consolidation, merger, conveyance,
transfer, lease or other disposition may, from time to time, at the request of
the successor person, be exchanged for other Securities executed in the name of
the successor person with such changes in phraseology and form as may be
appropriate, but otherwise in substance of like tenor as the Securities
surrendered for such exchange and of like principal amount; and the Trustee,
upon Company Order of the successor person, shall authenticate and deliver
Securities as specified in such request for the purpose of such exchange. If
Securities shall at any time be authenticated and delivered in any new name of
a successor person pursuant to this Section in exchange or substitution for or
upon registration of transfer of any Securities, such successor person, at the
option of any Holder but without expense to such Holder, shall provide for the
exchange of all Securities at the time Outstanding held by such Holder for
Securities authenticated and delivered in such new name.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as conclusively evidenced
by their execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without
49
<PAGE> 62
unreasonable delay. After the preparation of definitive Securities, the
temporary Securities shall be exchangeable for definitive Securities upon
surrender of the temporary Securities at the office or agency of the Company
designated for such purpose pursuant to Section 1002, without charge to the
Holder. 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 a like principal amount of definitive securities
of authorized denominations. Until so exchanged, the temporary Securities
shall in all respects be entitled to the same benefits under this Indenture as
definitive Securities.
SECTION 305. Registration, Registration of Transfer and
Exchange.
The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency designated pursuant to Section 1002 being herein
sometimes referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Security
Register shall be in written form or any other form capable of being converted
into written form within a reasonable time. At all reasonable times, the
Security Register shall be open to inspection by the Trustee. The Trustee is
hereby initially appointed as security registrar (the "Security Registrar") for
the purpose of registering Securities and transfers of Securities as herein
provided.
Upon surrender for registration of transfer of any Security at
the office or agency of the Company designated pursuant to Section 1002, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
any authorized denomination or denominations of a like aggregate principal
amount.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denomination and of a like aggregate
principal amount, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surren-
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dered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange
is entitled to receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Securities surrendered upon such registration of transfer or
exchange.
Every Security presented or surrendered for registration of
transfer or for exchange or redemption shall (if so required by the Company or
the Security Registrar) be duly endorsed, or be accompanied by a written
instrument of transfer, in form satisfactory to the Company and the Security
Registrar, duly executed by the Holder thereof or his attorney duly authorized
in writing.
No service charge shall be made for any registration of
transfer or exchange or redemption of Securities, but the Company may require
payment of a sum sufficient to pay all documentary, stamp or similar issue or
transfer taxes or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 303, 304, 906, 1013, 1014 or 1108 not involving
any transfer.
The Company shall not be required (a) to issue, register the
transfer of or exchange any Security during a period beginning at the opening
of business (i) 15 days before the mailing of a notice of redemption of the
Securities selected for redemption under Section 1104 and ending at the close
of business on the day of such mailing or (ii) 15 days before an Interest
Payment Date and ending on the close of business on the Interest Payment Date,
or (b) to register the transfer of or exchange any Security so selected for
redemption in whole or in part, except the unredeemed portion of any Security
being redeemed in part.
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SECTION 306. Mutilated, Destroyed, Lost and Stolen
Securities.
If (i) any mutilated Security is surrendered to the Trustee,
or (ii) the Company and the Trustee receive evidence to their satisfaction of
the destruction, loss or theft of any Security, and there is delivered to the
Company and the Trustee such security or indemnity as may be required by them
to save each of them harmless, then, in the absence of notice to the Company or
the Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute and upon Company Order the Trustee shall authenticate and
deliver, in exchange for any such mutilated Security or in lieu of any such
destroyed, lost or stolen Security, a new Security of like tenor and principal
amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every replacement Security issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute a contractual
obligation of the Company, whether or not the destroyed, lost or stolen
Security shall be at any time enforceable by anyone, and shall be entitled to
all benefits of this Indenture equally and proportionately with any and all
other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
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SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to the
person in whose name such Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest at the office or agency of the Company maintained for such purpose
pursuant to Section 1002; provided, however, that each installment of interest
may at the Company's option be paid by mailing a check for such interest,
payable to or upon the written order of the person entitled thereto pursuant to
Section 308, to the address of such person as it appears in the Security
Register.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date shall
forthwith cease to be payable to the holder on the Regular Record Date by
virtue of having been such Holder, and such defaulted interest and (to the
extent lawful) interest on such defaulted interest at the rate borne by the
Securities (such defaulted interest and interest thereon herein collectively
called "Defaulted Interest") may be paid by the Company, at its election in
each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. 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 payment, such money when deposited to be held in trust for the
benefit of the persons entitled to such Defaulted Interest as in this
clause provided.
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Thereupon the Trustee shall fix a Special Record Date for the payment
of such Defaulted Interest which shall be not more than 15 days and not
less than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date, and in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be mailed, first-class postage
prepaid, to each Holder at his address as it appears on the Security
Register, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so mailed, such Defaulted
Interest shall be paid to the persons in whose names the Securities (or
their respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by
the Company to the Trustee of the proposed payment pursuant to this
clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
SECTION 308. Persons Deemed Owners.
Prior to the due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the person in whose name such Security is registered as the owner of
such Security for the purpose of receiving
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payment of principal of (and premium, if any) and (subject to Section 307)
interest on such Security and for all other purposes whatsoever, whether or not
such Security be overdue, and none of the Company, the Trustee or any agent of
the Company or the Trustee shall be affected by notice to the contrary.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption,
registration of transfer or exchange shall, if surrendered to any person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled
by it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and may deliver to the Trustee (or
to any other person for delivery to the Trustee) for cancellation any
Securities previously authenticated hereunder which the Company has not issued
and sold, and all Securities so delivered shall be promptly cancelled by the
Trustee. No Securities shall be authenticated in lieu of or in exchange for
any Securities cancelled as provided in this Section, except as expressly
permitted by this Indenture. All cancelled Securities held by the Trustee
shall be disposed of by the Trustee in accordance with its customary procedures
and certification of their disposal delivered to the Company unless by Company
Order the Company shall direct that cancelled Securities be returned to it.
SECTION 310. Computation of Interest.
Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of
further effect (except as to surviving rights of registration of transfer or
exchange of Securities herein
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expressly provided for) and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture when
(1) either
(a) all Securities theretofore authenticated
and delivered (other than (i) Securities which have been destroyed,
lost or stolen and which have been replaced or paid as provided in
Section 306 and (ii) Securities for whose payment money has
theretofore been deposited in trust with the Trustee or any Paying
Agent or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 1003) have been delivered to the Trustee for cancellation; or
(b) all such Securities not theretofore
delivered to the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their
Stated Maturity within one year, or
(iii) are to be called for redemption within
one year under arrangements satisfactory to the Trustee for
the giving of notice of redemption by the Trustee in the name,
and at the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the Trustee,
under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee, as trust funds in trust solely
for the benefit of Holders for that purpose an amount in U.S. dollars
sufficient to pay and discharge the entire indebtedness on such
Securities not theretofore delivered to the Trustee for cancellation,
for principal (and premium, if any) and
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interest to the date of such deposit (in the case of Securities which
have become due and payable) or to the Stated Maturity or Redemption
Date, as the case may be;
(2) the making of such Company Request does not constitute
a default under the Indenture or any other material agreement or
instrument to which the Company is a party or by which it is bound;
(3) the Company has paid or caused to be paid all other
sums payable hereunder by the Company; and
(4) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under Section 606 and
any Guarantor's obligations in respect thereof and, if money shall have been
deposited with the Trustee pursuant to subclause (b) of clause (1) of this
Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section
1003, all money deposited with the Trustee pursuant to Section 401 shall be
held in trust and applied by it, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as Paying Agent) as the Trustee may
determine, to the persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee. Money so held in trust shall not be subject to the provisions of
Article Thirteen of this Indenture.
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ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
The occurrence of any one of the following events will be an
"Event of Default":
(1) default in the payment of the principal of (or premium,
if any) when due and payable, on any of the Securities (at its Stated
Maturity, upon optional redemption, required purchase or otherwise),
whether or not such payment shall be prohibited by the provisions of
Article Thirteen hereof;
(2) default in the payment of an installment of interest
on any of the Securities, when due and payable, and such default
continues for a period of 30 days, whether or not such payment shall
be prohibited by the provisions of Article Thirteen hereof;
(3) the failure by the Company to make or consummate an
Offer in accordance with Sections 1013 or 1014;
(4) the failure by the Company to comply with its
obligations under Article Eight;
(5) the failure by the Company to perform or observe any
other term, covenant or agreement contained in the Securities or this
Indenture (other than a default specified in Section 501(1), 501(2),
501(3) or 501(4)) for a period of 30 days after written notice of such
failure requiring the Company to remedy the same shall have been given
(x) to the Company by the Trustee or (y) to the Company and the
Trustee by the holders of 25% in aggregate principal amount of the
Securities then Outstanding;
(6) (A) default or defaults under one or more agreements,
instruments, mortgages, bonds, debentures or other evidences of
Indebtedness under which the Company or any Restricted Subsidiary of the
Company then has outstanding indebtedness in excess of $10,000,000,
individually or in the aggregate,
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and either (i) such Indebtedness is already due and payable in full or
(ii) such default or defaults have resulted in the acceleration of the
maturity of such Indebtedness, or (B) failure to pay such Indebtedness
beyond any applicable grace period when such Indebtedness has been
required to be prepaid or repurchased (other than scheduled required
prepayment) prior to the Stated Maturity of such Indebtedness;
(7) one or more judgments, orders or decrees of any court
or regulatory or administrative agency of competent jurisdiction for
the payment of money in excess of $10,000,000, individually or in the
aggregate, shall be entered against the Company or any Restricted
Subsidiary of the Company or any of their respective properties and
shall not have been discharged or fully bonded, and either (1) any
creditor shall have commenced an enforcement proceeding upon such
judgment (other than a judgment that is stayed by pending appeal or
otherwise) or (2) there shall have been a period of 60 days after the
date on which any period for appeal has expired and during which a stay
of enforcement of such judgment, order or decree, shall not be in
effect;
(8) any Guarantee ceases to be in full force and effect
(other than as provided in Section 1018(b)) or is declared null and
void, or any Guarantor denies that it has any further liability under
any Guarantee, or gives notice to such effect (other than by reason
of the termination of this Indenture or the release of any such
Guarantee in accordance with this Indenture);
(9) a decree or order is entered by a court having
jurisdiction in the premises (i) for relief in respect of the Company
or any Significant Subsidiary or one or more Subsidiaries which, in the
aggregate, would constitute a Significant Subsidiary in an involuntary
case or proceeding under the Federal Bankruptcy Code or any other
federal or state bankruptcy, insolvency, reorganization or similar law
or (ii) adjudging the Company or any Significant Subsidiary or one or
more Subsidiaries which, in the aggregate, would constitute a
Significant Subsidiary as bankrupt or insolvent, or approv-
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ing as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company or any
Significant Subsidiary or one or more Subsidiaries which, in the
aggregate, would constitute a Significant Subsidiary under the Federal
Bankruptcy Code or any other similar applicable federal or state law for
the relief of debtors, or appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the
Company or any Significant Subsidiary or one or more Subsidiaries which,
in the aggregate, would constitute a Significant Subsidiary or of any
substantial part of any of their properties, or ordering the winding up
or liquidation of any of their affairs, and any such decree or order
remains unstayed and in effect for a period of 60 consecutive days; or
(10) the Company or any Significant Subsidiary or one or
more Subsidiaries which, in the aggregate, would constitute a
Significant Subsidiary institutes a voluntary case or proceeding under
the Federal Bankruptcy Code or any other similar applicable federal or
state law for the relief of debtors or any other case or proceedings to
be adjudicated as bankrupt or insolvent, or the Company or any
Significant Subsidiary or one or more Subsidiaries which, in the
aggregate, would constitute a Significant Subsidiary consents to the
entry of a decree or order for relief in respect of the Company or any
Significant Subsidiary or one or more Subsidiaries which, in the
aggregate, would constitute a Significant Subsidiary in any involuntary
case or proceeding under the Federal Bankruptcy Code or any other
similar applicable federal or state law for the relief of debtors or to
the institution of bankruptcy or insolvency proceedings against the
Company or any Significant Subsidiary or one or more Subsidiaries which,
in the aggregate, would constitute a Significant Subsidiary or the
Company or any Significant Subsidiary or one or more Subsidiaries which,
in the aggregate, would constitute a Significant Subsidiary files a
petition or answer or consent seeking reorganization or relief under the
Federal Bankruptcy Code or any other similar applicable federal or state
law for the relief of debtors, or consents to the filing of any such
petition or to
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the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator (or other similar official)
of any of the Company or any Significant Subsidiary or one or more
Subsidiaries which, in the aggregate, would constitute a Significant
Subsidiary or of any substantial part of its property, or makes an
assignment for the benefit of creditors, or is or are unable to pay
debts generally as they come due, or admits in writing its or their
inability to pay its or their debts generally as they become due or
takes corporate action in furtherance of any such action.
SECTION 502. Acceleration of Maturity; Rescission and
Annulment.
If an Event of Default (other than as specified in Section
501(9) or 501(10) with respect to the Company or any Significant Subsidiary)
shall occur and be continuing, the Trustee, by notice to the Company, or the
Holders of at least 25% in aggregate principal amount of the Securities then
Outstanding, by notice to the Trustee and the Company, may declare the
principal of, premium, if any, and accrued and unpaid interest, if any, on all
of the Outstanding Securities due and payable immediately, upon which
declaration, all amounts payable in respect of the Securities shall be
immediately due and payable. If an Event of Default specified in Section
501(9) or 501(10) with respect to the Company or any Significant Subsidiary
occurs and is continuing, then the principal of, premium, if any, and accrued
and unpaid interest, if any, on all of the Outstanding 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 holder of Securities.
At any time after a declaration of acceleration has been made
and before a judgment or decree for payment of money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in aggregate principal amount of the Securities Outstanding, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if:
(1) the Company has paid or deposited with the Trustee a
sum sufficient to pay:
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(A) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel,
(B) all overdue interest on all Outstanding
Securities,
(C) all unpaid principal of and premium, if
any, on any Outstanding Securities which has become due
otherwise than by such declaration of acceleration, and
interest on such unpaid principal at the rate borne by the
Securities, and
(D) to the extent that payment of such
interest is lawful, interest upon overdue interest and overdue
principal at the rate borne by the Securities which has become
due otherwise than by such declaration of acceleration;
(2) the rescission would not conflict with any judgment or
decree of a court of competent jurisdiction; and
(3) all Events of Default, other than the non-payment of
amounts of principal of, premium, if any, and interest on Securities
that have become due solely by such declaration of acceleration, have
been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Company covenants that if
(a) default is made in the payment of any installment of
interest on any Security when such interest becomes due and payable and such
default continues for a period of 30 days, or
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(b) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee for the
benefit of the holders of such Securities, the whole amount then due and
payable on such Securities for principal (and premium, if any) and interest,
and interest on any overdue principal (and premium, if any) and, to the extent
that payment of such interest shall be legally enforceable, upon any overdue
installment of interest, at the rate borne by the Securities; and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Securities
and collect the moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other obligor upon the
Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate private or judicial proceedings as the
Trustee shall deem most effectual to protect and enforce any such rights.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition
or other judicial proceeding relative to the Company or any other obligor upon
the Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the
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Trustee shall have made any demand on the Company for the payment of overdue
principal, premium, if any, or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in
respect of the Securities and to file such other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursement and advances of the Trustee, its agents and counsel) and of
the Holders allowed in such judicial proceeding; and
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay
the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition or other
similar arrangement affecting the Securities or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims without Possession
of Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceed-
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ing relating thereto, and any such proceeding instituted by the Trustee shall
be brought in its own name and as trustee of an express trust, and any recovery
of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel be for the ratable benefit of the holders of the Securities in
respect of which such judgment has been recovered.
SECTION 506. Application of Money Collected.
Subject to Article Thirteen, any money collected by the
Trustee pursuant to this Article shall be applied in the following order, at
the date or dates fixed by the Trustee and, in case of the distribution of such
money on account of principal (or premium, if any) or interest, upon
presentation of the Securities and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 606;
SECOND: To the payment of the amounts then due and unpaid for
principal of (any premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for
principal (and premium, if any) and interest, respectively; and
THIRD: The balance, if any, to the Company.
SECTION 507. Limitation on Suits.
No Holder of any Securities shall have any right to institute
any proceeding, judicial or otherwise, with respect to their Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
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(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 30 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 30-day period by the Holders of a
majority or more in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest.
Notwithstanding any other provision in this Indenture, the
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment, as provided herein and in such Security of
the principal of (and premium, if any) and interest on, such Security on the
respective Stated Maturities expressed in such Security (or, in the case of
redemption, on the Redemption Date) and to institute suit for the enforcement
of any such payment, and such rights shall not be impaired without the consent
of such Holder.
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SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 306, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time
to time, and as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
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SECTION 512. Control by Holders.
The Holders of not less than a majority in principal amount of
the Outstanding Securities shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule
of law or with this Indenture,
(2) subject to the provisions of TIA Section 315, the
Trustee may take any other action deemed proper by the Trustee which
is not inconsistent with such direction, and
(3) the Trustee need not take any action which involves it
in personal liability or is unjustly prejudicial to the Holders not
consenting.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal
amount of the Outstanding Securities may on behalf of the Holders of all the
Securities waive any past Default or Event of Default hereunder and its
consequences, except a Default or Event of Default
(1) in the payment of the principal of (or premium, if any)
or interest on any Security, or
(2) in respect of a covenant or provision hereof which
under Article Nine cannot be modified or amended without the consent
of the Holder of each Outstanding Security affected.
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 Event of Default or impair any right consequent
thereon.
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SECTION 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any
Security by his acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, 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, suffered or omitted by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than 10% in principal amount of the
Outstanding Securities, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of (or premium, if any) or interest
on any Security on or after the respective Stated Maturities expressed in such
Security (or, in the case or redemption, on or after the Redemption Date).
SECTION 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do
so) that it will 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 covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.
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ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing
and is known to the Trustee, the Trustee shall transmit in the manner and to
the extent provided in TIA Section 313(c), notice of such Default hereunder
known to the Trustee within 60 days after such occurrence, unless such Default
shall have been cured or waived; provided, however, that, except in the case of
a Default in the payment of the principal of (or premium, if any) or interest
on any Security, the Trustee shall be protected in withholding such notice if
and so long as the board of directors, the executive committee or a trust
committee of directors and/or Responsible Officers of the Trustee in good faith
determines that the withholding of such notice is in the interest of the
Holders.
SECTION 602. Certain Rights of Trustee.
Subject to the provisions of TIA Section 315(a) through 315(d):
(1) the Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(2) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request or Company
Order and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifical-
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ly prescribed) may, in the absence of bad faith on its part, rely upon
an Officers' Certificate;
(4) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(5) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the
request or direction of any of the Holders pursuant to this Indenture,
unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or
direction;
(6) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company,
personally or by agent or attorney;
(7) the Trustee may execute any of the trusts or power
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder; and
(8) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Indenture.
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The Trustee shall not be required to expend or risk its own
funds or otherwise incur any 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 for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
SECTION 603. Trustee Not Responsible for Recitals or
Issuance of Securities.
The recitals contained herein and in the Securities, except
for the Trustee's certificates of authentication, shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities, except that the Trustee
represents that it is duly authorized to execute and deliver this Indenture,
authenticate the Securities and perform its obligations hereunder and that the
statements made by it in a Statement of Eligibility and Qualification of Form
T-l supplied to the Company are true and accurate, subject to the
qualifications set forth therein. The Trustee shall not be accountable for the
use or application by the Company of Securities or the proceeds thereof.
SECTION 604. May Hold Securities.
The Trustee, any Paying Agent, any Security Registrar or any
other agent of the Company or of the Trustee, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to TIA
Sections 310(b) and 311, may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Paying Agent, Security Registrar
or such other agent.
SECTION 605. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed with the Company.
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SECTION 606. Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with the
acceptance or administration of this trust, including the costs and
expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
The obligations of the Company under this Section to
compensate the Trustee, to pay or reimburse the Trustee for expenses,
disbursements and advances and to indemnify and hold harmless the Trustee shall
constitute additional indebtedness hereunder and shall survive the satisfaction
and discharge of this Indenture. As security for the performance of such
obligations of the Company, the Trustee shall have a claim prior to the
Securities upon all property and funds held or collected by the Trustee as
such, except funds held in trust for the payment of principal of (and premium,
if any) or interest on particular Securities.
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SECTION 607. Conflicting Interests. The Trustee shall
comply with the provisions of Section 310(b) of the TIA.
SECTION 608. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1) and shall have a
combined capital and surplus of at least $20,000,000 and have its Corporate
Trust Office in The City of New York (or if its Corporate Trust Office shall
not be located in The City of New York, which shall maintain an office in The
City of New York where the Securities may be presented or surrendered and
notices and demands hereunder may be served or made). If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of Columbia supervising
or examining authority, then for the purposes of this Section, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
SECTION 609. Resignation and Removal; Appointment of
Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 610.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If the instrument of acceptance by a successor
Trustee required by Section 610 shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
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(c) The Trustee may be removed at any time by an Act of the
Holders of not less than a majority in principal amount of the Outstanding
Securities, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of
TIA Section 310(b), or
(2) the Trustee shall cease to be eligible under Section
608, or
(3) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner
hereinafter provided, the Company or Holders of at least 10% in principal
amount of the Securities then Outstanding may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
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(f) The Company shall give notice of each resignation and
each removal of the Trustee and each appointment of a successor Trustee to the
Holders of Securities in the manner provided for in Section 106. Each notice
shall include the name of the successor Trustee and the address of its
Corporate Trust Office.
SECTION 610. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on request of
the Company or the successor Trustee, such retiring Trustee shall, upon payment
of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder. Upon request of any such
successor Trustee, the Company shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all
such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 611. Merger, Conversion, Consolidation or
Succession to Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be otherwise qualified and eligible
under this Article, without the execution or filing of
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any paper or any further act on the part of any of the parties hereto. In case
any Securities shall have been authenticated, but not delivered, by the Trustee
then in office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Securities
so authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities; and in case at that time any of the Securities
shall not have been authenticated, any successor Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of
the successor 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; provided, however, that the
right to adopt the certificate of authentication of any predecessor Trustee or
to authenticate Securities in the name of any predecessor Trustee shall apply
only to its successor or successors by merger, conversion or consolidation.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Disclosure of Names and Addresses of Holders.
Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that none of the Company or the Trustee
or any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
in accordance with TIA Section 312, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under TIA Section
312.
SECTION 702. Reports by Trustee.
Within 60 days after June 15 of each year commencing with the
first June 15 after the first issuance of Securities, the Trustee shall
transmit to the Holders, in the manner and to the extent provided in TIA
Section
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313(c), a brief report dated as of such May 15 if required by TIA Section
313(a).
SECTION 703. Reports by Company.
The Company will file, to the extent permitted under the Exchange Act,
with the Commission the annual reports, quarterly reports and other documents
required to be filed with the Commission pursuant to Sections 13 and 15 of the
Exchange Act, whether or not the Company has a class of securities registered
under the Exchange Act. The Company will file with the Trustee, and provide to
each holder of the Securities copies of such reports and documents within 15
days after it files them with the Commission or, if filing such documents by
the Company with the Commission is not permitted under the Exchange Act, within
15 days after it would otherwise have been required to file such reports and
documents if permitted, in each case at the Company's cost.
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ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, etc., Only on Certain
Terms.
(a) The Company will not, in any transaction or series of
transactions, merge or consolidate with or into, or sell, assign, convey,
transfer, lease or otherwise dispose of all or substantially all of its
properties and assets as an entirety to, any person or persons, and the Company
will not permit any of its Restricted Subsidiaries to enter into any such
transaction or series of transactions if such transaction or series of
transactions, in the aggregate, would result in a sale, assignment, conveyance,
transfer, lease or other disposition of all or substantially all of the
properties and assets of the Company or of the Company and its Restricted
Subsidiaries, taken as a whole, to any other person or persons, unless at the
time and after giving effect thereto:
(i) either (A)(1) if the transaction or series of
transactions is a merger or consolidation involving the Company, the
Company shall be the surviving person of such merger or consolidation
or (2) if the transaction or transactions is a merger or consolidation
involving a Restricted Subsidiary of the Company, such Restricted
Subsidiary shall be the surviving person and such surviving person
shall be a Restricted Subsidiary of the Company or (B)(1) the person
formed by such consolidation or into which the Company or such
Restricted Subsidiary is merged or to which the properties and assets
of the Company or such Restricted Subsidiary, as the case may be,
substantially as an entirety, are transferred (any such surviving
person or transferee person being the "Surviving Entity") shall be a
corporation organized and existing under the laws of the United States
of America, any state thereof or the District of Columbia and (2)(x)
in case of a transaction involving the Company, the Surviving Entity
shall expressly assume by a supplemental indenture executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Securities and this Indenture,
and in each case, the Indenture shall remain in full force and
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effect or (y) in the case of a transaction involving a Restricted
Subsidiary that is a Guarantor, the Surviving Entity shall expressly
assume by a supplemental indenture executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of
such Restricted Subsidiary under its Guarantee and related
supplemental indenture, and in each case, such Guarantee and
supplemental indenture shall remain in full force and effect;
(ii) immediately before and immediately after giving effect
to such transaction or series of transactions on a pro forma basis
(including, without limitation, any Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such
transaction or series of transactions), no Default or Event of Default
shall have occurred and be continuing and the Company, or the
Surviving Entity, as the case may be, after giving effect to such
transaction or series of transactions on a pro forma basis, could
incur $1.00 of additional Indebtedness under Section 1010 (assuming a
market rate of interest with respect to such additional Indebtedness);
and
(iii) immediately after giving effect to such transaction,
the Surviving Entity shall have a Consolidated Net Worth in an amount
which is not less than the Consolidated Net Worth of the Company or
such Restricted Subsidiary, as the case may be, immediately prior to
such transaction;
provided that a Wholly Owned Restricted Subsidiary may consolidate with, or
merge with or into, or convey, transfer or lease all or substantially all its
assets to, the Company or another Wholly Owned Restricted Subsidiary.
In connection with any consolidation, merger, transfer, lease
or other disposition contemplated hereby, the Company shall deliver, or cause
to be delivered, to the Trustee, in form and substance satisfactory to the
Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger, transfer, lease or other disposition and the
supplemental indenture, if any, in respect thereof comply with the requirements
under this Indenture. In addition, each
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Guarantor, if any, unless it is the other party to the transaction or unless
its Guarantee will be released and discharged in accordance with its terms as a
result of the transaction, will be required to confirm, by supplemental
indenture, that its Guarantee of the Securities will apply to the obligations
of the Company or the Surviving Entity under this Indenture.
(b) A Guarantor shall not, and the Company shall not permit
a Guarantor to, consolidate with or merge with or into any person unless:
(i) except in the circumstances where the Guarantee of the
Guarantor is to be released in accordance with Section 1407, such
Guarantor or, if the merger or consolidation involves the Company, the
Company shall be the continuing person or the resulting or surviving
person (the "surviving entity") and shall be a corporation organized
and existing under the laws of the United States or any State thereof
or the District of Columbia:
(ii) except in the circumstances where the Guarantee of the
Guarantor is to be released in accordance with Section 1407 or where
the Company is the surviving entity, the surviving entity shall
expressly assume, by a supplemental indenture executed and delivered
to the Trustee, in form and substance reasonably satisfactory to the
Trustee, all of the obligations of such Guarantor under this
Indenture, as modified by such supplemental indenture, and its
Guarantee; and
(iii) the Company shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each stating that
such consolidation or merger, and if a supplemental indenture is
required in connection with such transaction or series of
transactions, such supplemental indenture complies with this Section
801(b) and that all conditions precedent provided for in this
Indenture relating to the transaction or series of transactions have
been satisfied.
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SECTION 802. Successor Substituted.
Upon any consolidation of the Company with or merger of the
Company with or into any other corporation or any conveyance, transfer or lease
of the properties and assets of the Company substantially as an entirety to any
person in accordance with Section 801, the Surviving Entity shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if such Surviving Entity had been
named as the Company herein, and in the event of any such conveyance or
transfer, the Company (which term shall for this purpose mean the person named
as the "Company" in the first paragraph of this Indenture or any Surviving
Entity which shall theretofore become such in the manner described in Section
801), except in the case of a lease, shall be discharged of all obligations and
covenants under this Indenture and the Securities and may be dissolved and
liquidated.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures without Consent of
Holders.
Without the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another person to the
Company and the assumption by any such successor of the covenants of
the Company contained herein and in the Securities;
(2) to add to the covenants of the Company for the benefit
of the Holders or to surrender any right or power herein conferred
upon the Company;
(3) to add any additional Events of Default;
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(4) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee pursuant to the
requirements of Section 610;
(5) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be inconsistent
with the provisions of this Indenture; provided that such action shall
not adversely affect the interests of the Holders;
(6) to add any Subsidiary as a Guarantor pursuant to the
terms of Article Fourteen;
(7) to secure the Securities pursuant to the requirements
of Section 1012 or otherwise;
(8) to make any other change that does not adversely affect
the rights of any Holder; or
(9) to comply with the TIA.
Notwithstanding the above, the Trustee and the Company may not
make any change that adversely affects the legal rights of any Holders
hereunder. The Company shall be required to deliver to the Trustee an Opinion
of Counsel stating that any such change under this Section 901 does not
adversely affect the rights of any Holder.
SECTION 902. Supplemental Indentures with Consent of
Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders
delivered to the Company and the Trustee, the Company, when authorized by a
Board Resolution and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby:
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(1) reduce the principal amount outstanding of or extend
the fixed maturity of any Security or alter the redemption provisions
with respect thereto;
(2) make the principal of, premium, if any, or interest on
any Security payable in money other than that stated in the Security;
(3) reduce the percentage in outstanding aggregate
principal amount of Securities the Holders of which must consent to an
amendment, supplement or waiver of any provision of this Indenture,
the Securities or any Guarantee;
(4) impair the right to institute suit for the enforcement
of any payment on or with respect to the Securities;
(5) waive a default in the payment of the principal of,
premium, if any, or interest on, or redemption or an offer to purchase
required hereunder with respect to, any Security;
(6) amend, change or modify the obligation of the Company
to make and consummate a Change of Control Offer in the event of a
Change of Control or make and consummate the offer with respect to any
Asset Sale or modify any of the provisions or definitions with respect
thereto;
(7) reduce or change the rate or time for payment of
interest on any Security;
(8) modify or change any provision of this Indenture
affecting the subordination of the Securities or any Guarantee in a
manner adverse to the Holders;
(9) release any Guarantor from any of its obligations under
its Guarantee or this Indenture other than in compliance with Section
1407 of Exhibit A hereto; or
(10) modify this Section 902 or Section 508 or Section 513.
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It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and (subject to TIA Section 315(a) through 315(d) and Section 602
hereof) shall be fully protected in relying upon, an Opinion of Counsel stating
that the execution of such supplemental indenture is authorized or permitted by
this Indenture. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes;
and every Holder of Securities theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to the Article
shall conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental
Indentures.
Securities authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee,
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bear a notation in form approved by the Trustee as to any matter provided for
in such supplemental indenture. If the Company shall so determine, new
Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
SECTION 907. Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee of
any supplemental indenture pursuant to the provisions of Section 902, the
Company shall give notice thereof to the Holders of each Outstanding Security
affected, in the manner provided for in Section 106, setting forth in general
terms the substance of such supplemental indenture.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, If Any, and
Interest.
The Company covenants and agrees for the benefit of the
Holders that it will duly and punctually pay the principal of (and premium, if
any) and interest on the Securities in accordance with the terms of the
Securities and this Indenture.
The Company shall pay interest on overdue principal at the
rate borne by the Securities; it shall pay interest on overdue installments of
interest at the same rate to the extent lawful.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in The City of New York an office or
agency where Securities may be presented or surrendered for payment, where
Securities may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Company in respect of the Securities
and this Indenture may be
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served. The Corporate Trust Office of the Trustee shall be such office or
agency of the Company, unless the Company shall designate and maintain some
other office or agency for one or more of such purposes. The Company will give
prompt written notice to the Trustee of any change in the location of any such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations,
surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies (in or outside of The City of New York) where the
Securities may be presented or surrendered for any or all such purposes and may
from time to time rescind any such designation; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obliga- tion to maintain an office or agency in The City of New York for such
purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and any change in the location of any such other
office or agency.
SECTION 1003. Money for Security Payments to Be Held in
Trust.
Subject to Article Thirteen, if the Company shall at any time
act as its own Paying Agent, it will, on or before each due date of the
principal of (and premium, if any) or interest on any of the Securities,
segregate and hold in trust for the benefit of the persons entitled thereto a
sum sufficient to pay the principal (and premium, if any) or interest so
becoming due until such sums shall be paid to such persons or otherwise
disposed of as herein provided and will promptly notify the Trustee of its
action or failure so to act.
Subject to Article Thirteen, whenever the Company shall have
one or more Paying Agents for the Securities, it will, on or before each due
date of the principal of (and premium, if any) or interest on, any Securities,
deposit with a Paying Agent a sum sufficient to pay the principal (and premium,
if any) or interest so
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becoming due, such sum to be held in trust for the benefit of the persons
entitled to such principal, premium or interest, and, unless such Paying Agent
is the Trustee, the Company will promptly notify the Trustee of such action or
any failure so to act.
The Company will cause each Paying Agent (other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will, subject to Article Thirteen:
(1) hold all sums held by it for the payment of the
principal of (and premium, if any) or interest on Securities in trust
for the benefit of the persons entitled thereto until such sums shall
be paid to such persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company
(or any other obligor upon the Securities) in the making of any
payment of principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
Subject to Article Thirteen, the Company may at any time, for
the purpose of obtaining the satisfaction and discharge of this Indenture or
for any other purpose, pay, or by Company Order direct any Paying Agent to pay,
to the Trustee all sums held in trust by the Company or such Paying Agent, such
sums to be held by the Trustee upon the same trusts as those upon which such
sums were held by the Company or such Paying Agent; and, upon such payment by
any Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such sums.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of (and
premium, if any) or interest on any Security and remaining unclaimed for two
years after such principal (and premium, if any) or interest has become due and
payable shall be paid to the
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Company on Company Request, or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Security shall thereafter,
as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such
trust money, and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general circulation
in the Borough of Manhattan, The City of New York, notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such publication, any unclaimed balance of
such money then remaining will be repaid to the Company.
SECTION 1004. Corporate Existence.
Subject to Article Eight, the Company will do or cause to be
done all things necessary to preserve and keep in full force and effect the
corporate existence, rights (charter and statutory) and franchises of the
Company and each Subsidiary; provided, however, that the Company shall not be
required to preserve any such existence (except of the Company), right or
franchise 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 as a whole and that the loss thereof is not
disadvantageous in any material respect to the Holders.
SECTION 1005. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all taxes, assessments
and governmental charges levied or imposed upon the Company or any Restricted
Subsidiary or upon the income, profits or property of the Company or any
Restricted Subsidiary and (b) all lawful claims for labor, materials and
supplies, which, if unpaid, might by law become a lien upon the property of the
Company or any Restricted Subsidiary; provided, however, that the Company shall
not be required
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to pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings.
SECTION 1006. Maintenance of Properties.
The Company will cause all properties owned by the Company or
any Restricted Subsidiary or used or held for use in the conduct of its
business or the business of any Restricted Subsidiary to be maintained and kept
in good condition, repair and working order and supplied with all necessary
equipment and will 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 shall prevent the Company from
discontinuing the maintenance of any of such properties if such discontinuance
is, in the judgment of the Company, desirable in the conduct of its business or
the business of any Restricted Subsidiary and not disadvantageous in any
material respect to the Holders.
SECTION 1007. Insurance.
The Company will at all times keep all of its and its
Restricted Subsidiaries' properties which are of an insurable nature insured
with insurers, believed by the Company to be responsible, against loss or
damage to the extent that property of similar character is usually so insured
by corporations similarly situated and owning like properties.
SECTION 1008. Compliance Certificate.
The Company shall deliver to the Trustee within 60 days after
the end of each of the Company's first three fiscal quarters and within 120
days after the end of each of the Company's fiscal years an Officers'
Certificate stating whether or not the signers know of any Default or Event of
Default under this Indenture by the Company that occurred during such fiscal
period. If they do know of such a Default or Event of Default, the certificate
shall describe any such Default or Event of Default and its status. The first
certificate to be
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delivered pursuant to this Section 1008(a) shall be for the first fiscal
quarter of the Company ending after the Issue Date. The Company shall also
deliver a certificate to the Trustee at least annually from its principal
executive, financial or accounting officer as to his or her knowledge of the
Company's compliance with all conditions and covenants under this Indenture,
such compliance to be determined without regard to any period of grace or
requirement of notice provided herein.
SECTION 1009. Notice of Default.
The Company shall deliver to the Trustee within ten days after
the Company becomes aware or should reasonably have become aware of the
occurrence of any event which is, or after notice or lapse of time or both
would become, an Event of Default, an Officers' Certificate specifying such
Default or Event of Default, the period of existence thereof and what action
the Company is taking or proposes to take with respect thereto.
SECTION 1010. Limitation on Indebtedness.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or in any other manner become directly or indirectly liable
(in each case, to "incur") for the payment of any Indebtedness (including any
Acquired Indebtedness but excluding Permitted Indebtedness); provided, however,
that (i) the Company will be permitted to incur Indebtedness (including
Acquired Indebtedness), contingently or otherwise, if at the time of such
incurrence, and after giving pro forma effect thereto, the Consolidated Fixed
Charge Coverage Ratio of the Company and its Restricted Subsidiaries is at
least equal to 2.0 to 1.0 through __________, 1996 and 2.25 to 1 thereafter and
(ii) in the case of Subordinated Indebtedness, such Indebtedness has no
scheduled principal payment on or prior to the Stated Maturity for the final
scheduled principal payment of the Securities.
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SECTION 1011. Limitation on Restricted Payments.
(a) 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
distribution or payment on or in respect of Capital Stock of the
Company or any payment made to the direct or indirect holders (in
their capacities as such) of Capital Stock of the Company (other than
dividends or distributions payable solely in Capital Stock (other than
Redeemable Capital Stock) or rights to purchase Capital Stock of the
Company (other than Redeemable Capital Stock));
(ii) purchase, redeem, defease or otherwise acquire or
retire for value, directly or indirectly, any Capital Stock of the
Company or any Affiliate of the Company (other than any such Capital
Stock of any Wholly Owned Restricted Subsidiary of the Company);
(iii) make any principal payment on, or purchase, defease,
repurchase, redeem or otherwise acquire or retire for value, prior to
any scheduled maturity (unless within one year of maturity), scheduled
repayment, scheduled sinking fund payment or other Stated Maturity,
any Subordinated Indebtedness;
(iv) make any Investment (other than any Permitted
Investment) in any person, including any Unrestricted Subsidiary
(other than in the Company, a Wholly Owned Restricted Subsidiary of
the Company or a person that becomes a Wholly Owned Restricted
Subsidiary as a result of such Investment); or
(v) declare or pay any dividend or make any other
distribution on or in respect of any Capital Stock of any Subsidiary
to the direct or indirect holders (in their capacities as such) of
Capital Stock of the Subsidiary (other than with respect to Capital
Stock held by the Company or any of its Wholly Owned Restricted
Subsidiaries) or any purchase, redemption or other acquisition or
retirement
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for value, of any Capital Stock of any Restricted Subsidiary (other
than any such Capital Stock held by the Company or any Wholly Owned
Restricted Subsidiary);
(such payments, dividends, distributions, purchases, defeasances, repurchases,
redemptions, acquisitions, retirements or Investments described in the
preceding clauses (i) through (v) are collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to the proposed
Restricted Payment (the amount of any such Restricted Payment, if other than in
cash, being as determined by the Board of Directors of the Company, whose
determination shall be conclusive and evidenced by a Board Resolution), (A) no
Default or Event of Default shall have occurred and be continuing, (B) the
aggregate amount of all Restricted Payments declared or made from and after the
date immediately following the Issue Date would not exceed the sum of (1) 50%
of the aggregate Consolidated Net Income of the Company accrued on a cumulative
basis during the period (treated as one accounting period) beginning on
December 31, 1993 and ending on the last day of the fiscal quarter of the
Company immediately preceding the date of such proposed Restricted Payment (or,
if such aggregate cumulative Consolidated Net Income of the Company for such
period shall be a deficit, minus 100% of such deficit) plus (2) the aggregate
net cash proceeds received by the Company after the Issue Date from the
issuance or sale (other than to any of its Restricted Subsidiaries) of Capital
Stock (excluding Redeemable Capital Stock but including Capital Stock issued
upon the conversion of convertible Indebtedness or in exchange for outstanding
Indebtedness (to the extent such Indebtedness is originally sold for cash) or
from the exercise of options, warrants or rights to purchase Capital Stock
(other than Redeemable Capital Stock)) of the Company to any person (other than
to a Restricted Subsidiary of the Company) (except, in each case, to the extent
such proceeds are used to purchase, redeem or otherwise retire Capital Stock or
Subordinated Indebtedness as set forth below), plus (3) in the case of the
disposition or repayment of any Investment constituting a Restricted Payment
made after the Issue Date (excluding any Investment made pursuant to clause (v)
of the following paragraph, an amount equal to the lesser of the return of
capital with respect to such
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Investment and the cost of such Investment, in either case, less the cost of
the disposition of such Investment and (C) the Company could incur $1.00 of
additional Indebtedness under Section 1010. For purposes of the preceding
clause (B)(2), the value of the aggregate net proceeds received by the Company
upon the issuance of Capital Stock, either upon the conversion of convertible
Indebtedness or in exchange for outstanding Indebtedness or upon the exercise
of options, warrants or rights will be the net cash proceeds received upon the
issuance of such Indebtedness, options, warrants or rights plus the incremental
amount received by the Company upon the conversion, exchange or exercise
thereof.
(b) None of the foregoing provisions will prohibit: (i) the
payment of any dividend within 90 days after the date of its declaration, if at
the date of declaration such payment would be permitted by the foregoing
paragraph (a); (ii) the redemption, repurchase or other acquisition or
retirement of any shares of any class of Capital Stock of the Company or any
Restricted Subsidiary of the Company in exchange for (including any such
exchange pursuant to a conversion right or privilege in connection with which
cash is paid in lieu of fractional shares or scrip), or out of the net cash
proceeds of, a substantially concurrent issue and sale of other shares of
Capital Stock (other than Redeemable Capital Stock) of the Company to any
person (other than to a Restricted Subsidiary of the Company); provided,
however, that such net cash proceeds are excluded from clause (B)(2) of the
preceding paragraph (a); (iii) any redemption, defeasance, repurchase or other
acquisition or retirement for value (each for purposes of this clause, a
"refinancing") of Pari Passu Indebtedness or Subordinated Indebtedness by
exchange for, or out of the net cash proceeds of, a substantially concurrent
issue and sale of (1) Capital Stock (other than Redeemable Capital Stock) of
the Company; provided, however, that any such net cash proceeds are excluded
from clause (B)(2) of the preceding paragraph (a); or (2) new Indebtedness of
the Company so long as such Indebtedness (A) is pari passu with or expressly
subordinated in right of payment to the Securities in the same manner and at
least to the same extent as the Securities are subordinated to Senior
Indebtedness, (B) has a principal amount that does not exceed the principal
amount so refinanced plus the amount of any premium required to be paid in
connection with such
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refinancing pursuant to the terms of the Indebtedness refinanced or the amount
of any premium reasonably determined by the Company as necessary to accomplish
such refinancing, plus the amount of fees and expenses of the Company incurred
in connection with such refinancing; provided that for purposes of this clause,
the principal amount of any Indebtedness shall be deemed to mean the principal
amount thereof or if such indebtedness provides for an amount less than the
principal amount thereof upon a declaration of acceleration thereof, such
lesser amount as of the date of determination, (C) has a Stated Maturity for
the final scheduled principal payment of such Indebtedness on or later than the
Stated Maturity for the final scheduled principal payment of the Securities and
(D) has an Average Life to Stated Maturity that equals or exceeds the Average
Life to Stated Maturity of the Securities; (iv) the redemption or repurchase of
the limited partnership interests of Sealed Power Technologies Limited
Partnership ("SPT") owned by certain employees of SPT on the Issue Date for an
aggregate amount not to exceed $3,000,000; (v) so long as no Default of Event
or Default shall have occurred and be continuing, the making of (x) Investments
constituting Restricted Payments and (y) other Restricted Payments such that,
after giving effect thereto, the sum of the aggregate outstanding amount of
such Investments (valued at their cost) referred to in clause (x) made after
the Issue Date and the aggregate amount of such other Restricted Payments
referred to in clause (y) made after the Issue Date would not exceed
$10,000,000; or (vi) Investments constituting Restricted Payments made as a
result of the receipt of non-cash consideration from any Asset Sale made
pursuant to and in compliance with Section 1014. In computing the amount of
Restricted Payments for the purposes of clause (B) of the preceding paragraph,
Restricted Payments made under (i) and (vi) shall be included.
SECTION 1012. Limitation on Liens.
The Company will not and will not permit any Restricted
Subsidiary to create, incur, assume or suffer to exist any Lien of any kind
upon any of its property or assets, now owned or hereafter acquired, to secure
any Pari Passu Indebtedness or Subordinated Indebtedness unless prior to or
contemporaneously therewith the Securities are secured equally and ratably;
provided that (1) if such secured Indebtedness is Pari Passu Indebtedness,
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the Lien securing such Pari Passu Indebtedness shall rank equally and ratably
with the Lien securing the Securities and (2) if such secured Indebtedness is
Subordinated Indebtedness, the Lien securing such Subordinated Indebtedness
shall be subordinate and junior to the Lien securing the Securities at least to
the same extent as such Subordinated Indebtedness is subordinated to the
Securities. The foregoing shall not apply to any Lien securing Acquired
Indebtedness of the Company; provided that any such Lien only extends to the
assets that were subject to such Lien prior to the related acquisition by the
Company and was not created, incurred or assumed in contemplation of such
transaction. The foregoing shall not apply to the incurrence of Indebtedness
pursuant to clause (9), (12), (13) or (14) of the definition of "Permitted
Indebtedness."
SECTION 1013. Purchase of Securities upon Change of Control.
Upon the occurrence of a Change of Control, the Company shall
be obligated to make an offer to purchase (a "Change of Control Offer") and
shall, subject to the provisions described below, purchase, on a Business Day
(the "Change of Control Purchase Date") not more than 60 nor less than 30 days
following the occurrence of the Change of Control, all of the then Outstanding
Securities at a purchase price (the "Change of Control Purchase Price") equal
to 101% of the principal amount thereof plus accrued and unpaid interest, if
any, to the Change of Control Purchase Date; provided, however, that
notwithstanding the occurrence of a Change of Control, the Company shall not
be obligated to make a Change of Control Offer in the event that it has
exercised its right to redeem all of the Securities as described in Section
1101 and the form of Securities in Section 203 within 30 days after the
occurrence of such Change of Control. The Company shall, subject to the
provisions described below, be required to purchase all Securities properly
tendered into the Change of Control Offer and not withdrawn. Prior to the
mailing of the notice to holders provided for below, the Company shall have (x)
terminated all commitments and repaid in full all Indebtedness under the Bank
Credit Agreement, or offered to terminate such commitments and repay in full
such Indebtedness and have in fact terminated the commitments of and repaid all
Indebtedness of any lender under the Bank Credit Agreement who
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accepts such offer or (y) obtained the requisite consents under the Bank Credit
Agreement to permit the purchase of the Securities as provided for in this
Section. If a notice has been mailed when such condition precedent has not
been satisfied, the Company shall have no obligation to (and shall not) effect
the purchase of Securities until such time as such condition precedent is
satisfied. Failure to mail the notice on the date specified below or to have
satisfied the foregoing condition precedent by the date that the notice is
required to be mailed shall in any event constitute a covenant Default under
clause (3) of Section 501.
Notice of a Change of Control Offer shall be mailed by the
Company not later than the 30th day after the Change of Control to the Holders
of Securities at their last registered addresses with a copy to the Trustee and
the Paying Agent. The Change of Control Offer shall remain open from the time
of mailing for at least 20 Business Days and until 5:00 p.m., New York City
time, on the Business Day immediately prior to the Change of Control Purchase
Date. The notice, which shall govern the terms of the Change of Control Offer,
shall include such disclosures as are required by law and shall state:
(a) that the Change of Control Offer is being made pursuant
to this Section 1013 and that all Securities validly tendered into the
Change of Control Offer and not withdrawn shall be accepted for
payment;
(b) the Change of Control Purchase Price (including the
amount of accrued interest, if any) for each Security, the Change of
Control Purchase Date and the date on which the Change of Control
Offer expires;
(c) that any Security not tendered for payment will
continue to accrue interest in accordance with the terms thereof;
(d) that, unless the Company shall default in the payment
of the Change of Control Purchase Price, any Security accepted for
payment pursuant to the Change of Control Offer shall cease to accrue
interest after the Change of Control Purchase Date;
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(e) that Holders electing to have Securities purchased
pursuant to a Change of Control Offer will be required to surrender
their Securities to the Paying Agent at the address specified in the
notice prior to 5:00 p.m., New York City time, on the Change of
Control Purchase Date and must complete any form letter of
transmittal proposed by the Company and acceptable to the Trustee and
the Paying Agent;
(f) that Holders of Securities will be entitled to withdraw
their election if the Paying Agent receives, not later than 5:00 p.m.,
New York City time, on the Business Day before the Change of Control
Purchase Date, or such longer period as may be required by law, a
tested telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of Securities the Holder delivered
for purchase, the Security certificate number (if any) and a statement
that such holder is withdrawing its election to have such Securities
purchased;
(g) that Holders whose Securities are purchased only in
part will be issued Securities equal in principal amount to the
unpurchased portion of the Securities surrendered;
(h) the instructions that Holders must follow in order to
tender their Securities; and
(i) information concerning the business of the Company, the
most recent annual and quarterly reports of the Company filed with the
Commission pursuant to the Exchange Act (or, if the Company is not then
required to file any such reports with the Commission, the comparable
reports prepared pursuant to Section 1009), a description of material
developments in the Company's business, historical financial
information after giving effect to such Change of Control and such
other information concerning the circumstances and relevant facts
regarding such Change of Control and Change of Control Offer as would
be material to a Holder of Securities in connection with the decision
of such Holder as to whether or not it should tender Securities
pursuant to the Change of Control Offer, including informa-
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tion regarding the persons acquiring control and such persons'
business plans going forward.
On the Change of Control Purchase Date, the Company shall (i)
accept for payment Securities or portions thereof validly tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent money, in
immediately available funds, sufficient to pay Change of Control Purchase Price
of all Securities or portions thereof so tendered and accepted, and (iii)
deliver to the Trustee the Securities so accepted together with an Officers'
Certificate setting forth the Securities or portions thereof tendered to and
accepted for payment by the Company. The Paying Agent shall promptly mail or
deliver to the Holders of Securities so accepted payment in an amount equal to
the Change of Control Purchase Price, and the Trustee shall promptly
authenticate and mail or deliver to such Holders a new Security equal in
principal amount to any unpurchased portion of the Security surrendered. Any
Securities not so accepted shall be promptly mailed or delivered by the Company
to the Holder thereof. The Company shall publicly announce the results of the
Change of Control Offer not later than the first Business Day following the
Change of Control Purchase Date.
The Company shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements applicable to a Change of Control Offer made by the Company and
purchases all Securities validly tendered and not withdrawn under such Change
of Control Offer.
The Company shall comply, to the extent applicable, with the
requirements of Rule 14e-1 under the Exchange Act, and any other securities
laws or regulations in connection with the repurchase of Securities pursuant to
a Change of Control Offer.
SECTION 1014. Disposition of Proceeds of Asset Sales.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, make any Asset Sale unless (i) the Company or such
Restricted Subsid-
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iary, as the case may be, receives consideration at the time of such Asset Sale
at least equal to the fair market value, as determined in good faith by the
Board of Directors of the Company, of the shares or assets sold or otherwise
disposed of and (ii) at least 85% of such consideration consists of cash and
Cash Equivalents. To the extent that the Net Cash Proceeds of any Asset Sale
are not required by the terms of any Senior Indebtedness to be applied to
prepay Senior Indebtedness (and thereby permanently reduce the commitments or
amounts available to be reborrowed under such Senior Indebtedness as required
by the terms thereof), or are not so applied, the Company or a Restricted
Subsidiary, as the case may be, may apply the Net Cash Proceeds from such Asset
Sale, within 360 days of such Asset Sale, to an investment in properties and
assets other than working capital that replace the properties and assets that
were the subject of such Asset Sale or in properties and assets other than
working capital that will be used in the business of the Company and its
Restricted Subsidiaries existing on the Issue Date or in businesses reasonably
related thereto ("Replacement Assets") so long as the Company or such
Restricted Subsidiary has notified the Trustee in writing within 270 days of
such Asset Sale that it has determined to apply the Net Cash Proceeds from such
Asset Sale to an investment in such Replacement Assets. Any Net Cash Proceeds
from any Asset Sale not applied as provided in the preceding two sentences
within 360 days of such Asset Sale constitute "Excess Proceeds" subject to
disposition as provided in paragraph (b) below.
(b) When the aggregate amount of Excess Proceeds equals
$10,000,000 or more, the Company shall apply the Excess Proceeds to the
repayment of the Securities and any Pari Passu Indebtedness required to be
repaid or repurchased under the instrument governing such Pari Passu
Indebtedness as follows: (i) the Company shall make an offer to purchase (an
"Asset Sale Offer") to all Holders of the Securities in accordance with
paragraph (e) of this Section in the maximum principal amount (expressed as a
multiple of $1,000) of Securities that may be purchased out of an amount (the
"Securities Amount") equal to the product of such Excess Proceeds multiplied by
a fraction, the numerator of which is the Outstanding principal amount of the
Securities, and the denominator of which is the sum of the Outstanding
principal amount of the Securities and the outstanding prin-
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cipal amount of such Pari Passu Indebtedness (subject to proration in the event
such Securities Amount is less than the aggregate Asset Sale Offer Price of all
Securities tendered) and (ii) to the extent required by such Pari Passu
Indebtedness to permanently reduce the principal amount of such Pari Passu
Indebtedness, the Company shall make an offer to purchase or otherwise
repurchase or redeem Pari Passu Indebtedness (a "Pari Passu Offer") in an
amount (the "Pari Passu Debt Amount") equal to the excess of the Excess
Proceeds over the Securities Amount; provided that in no event shall the
Company be required to make a Pari Passu Offer in a Pari Passu Debt Amount
exceeding the principal amount of such Pari Passu Indebtedness plus the amount
of any premium required to be paid to repurchase such Pari Passu Indebtedness.
The offer price shall be payable in cash in an amount equal to 100% of the
principal amount of the Securities to be purchased plus accrued and unpaid
interest, if any, thereon (the "Asset Sale Offer Price") to the date (the
"Asset Sale Offer Date") such Asset Sale Offer is consummated, in accordance
with the procedures set forth in paragraph (e) of this Section. To the extent
that the aggregate Asset Sale Offer Price of the Securities tendered pursuant
to the Asset Sale Offer is less than the Securities Amount relating thereto or
the aggregate amount of Pari Passu Indebtedness that is purchased is less than
the Pari Passu Debt Amount (the amount of such shortfall, if any, in either
case constituting a "Deficiency"), the Company shall use such Deficiency in any
manner. Upon completion of the purchase of all the Securities tendered
pursuant to an Asset Sale Offer and repurchase of the Pari Passu Indebtedness
pursuant to a Pari Passu Offer, the amount of Excess Proceeds, if any, shall be
reset at zero.
(c) Whenever the Excess Proceeds received by the Company
exceed $5,000,000, such Excess Proceeds shall, prior to the purchase of
Securities or any Pari Passu Indebtedness described in paragraph (b) above, be
set aside by the Company in a separate account pending (i) deposit with the
depositary or a Paying Agent of the amount required to purchase the Securities
or Pari Passu Indebtedness tendered in an Asset Sale Offer or a Pari Passu
Offer, respectively, (ii) delivery by the Company of the Asset Sale Offer Price
to the holders of the Securities or Pari Passu Indebtedness tendered in an
Asset Sale Offer or a Pari Passu Offer, respectively, and (iii) application, as
set forth above, of Excess Proceeds in
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the business of the Company and its Restricted Subsidiaries. Such Excess
Proceeds may be invested in Cash Equivalents; provided that the maturity date
of any such investment shall not be later than (A) in the event the amount of
Excess Proceeds equals $7,000,000 or more, the Asset Sale Offer Date, or (B) in
any other event, six months. The Company shall be entitled to any interest or
dividends accrued, earned or paid on such Cash Equivalents; provided that the
Company shall not be entitled to such interest, and shall not withdraw such
interest from the separate account, if an Event of Default has occurred and is
continuing.
(d) The Company will not, and will not permit any
Restricted Subsidiary to, create or permit to exist or become effective any
restriction (other than restrictions existing under (i) Indebtedness as in
effect on the Issue Date as such Indebtedness may be refinanced or replaced
from time to time or (ii) any Senior Indebtedness existing on the Issue Date or
thereafter, provided that such restrictions contained in such refinanced
Indebtedness are no less favorable to the Holders of Securities than those
existing on the date of the Indenture) that would materially impair the ability
of the Company to make an Asset Sale Offer or, if such Asset Sale Offer is
made, to pay for the Securities tendered for purchase.
(e) Notice of an Asset Sale Offer shall be mailed by the
Company to all Holders of Securities not less than 20 Business Days nor more
than 40 Business Days before the Asset Sale Purchase Date at their last
registered address with a copy to the Trustee and the Paying Agent. The Asset
Sale Offer shall remain open from the time of mailing for at least 20 Business
Days and until at least 5:00 p.m., New York City time, on the Asset Sale
Purchase Date. The notice, which shall govern the terms of the Asset Sale
Offer, shall include such disclosures as are required by law and shall state:
(1) that the Asset Sale Offer is being made pursuant to
this Section 1014;
(2) the Asset Sale Offer Price (including the amount of
accrued interest, if any) for each Security, the Asset Sale Purchase
Date and the date on which the Asset Sale Offer expires;
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(3) that any Security not tendered or accepted for payment
will continue to accrue interest in accordance with the terms thereof;
(4) that, unless the Company shall default in the payment
of the Asset Sale Offer Price, any Security accepted for payment
pursuant to the Asset Sale Offer shall cease to accrue interest after
the Asset Sale Purchase Date;
(5) that Holders electing to have Securities purchased
pursuant to an Asset Sale Offer will be required to surrender their
Securities to the Paying Agent at the address specified in the notice
prior to 5:00 p.m., New York City time, on the Asset Sale Purchase
Date and must complete any form letter of transmittal proposed by the
Company and acceptable to the Trustee and the Paying Agent;
(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New
York City time, on the Business Day before the Asset Sale Purchase
Date, or such longer period as may be required by law, a tested telex,
facsimile transmission or letter setting forth the name of the Holder,
the principal amount of Securities the Holder delivered for purchase,
the Security certificate number (if any) and a statement that such
Holder is withdrawing its election to have such Securities purchased;
(7) that if Securities in a principal amount in excess of
the Holder's pro rata share of the amount of Excess Proceeds are
tendered pursuant to the Asset Sale Offer, the Company shall purchase
Securities on a pro rata basis among the Securities tendered (with
such adjustments as may be deemed appropriate by the Company so that
only Securities in denominations of $1,000 or integral multiples of
$1,000 shall be acquired);
(8) that Holders whose Securities are purchased only in
part will be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered;
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(9) the instructions that Holders must follow in order to
tender their Securities; and
(10) information concerning the business of the Company,
the most recent annual and quarterly reports of the Company filed with
the Commission pursuant to the Exchange Act (or, if the Company is not
required or permitted to file any such reports with the Commission,
the comparable reports prepared pursuant to Section 1009), a
description of material developments in the Company's business, pro
forma historical financial information after giving effect to such
Asset Sale and Asset Sale Offer and information concerning the
circumstances and relevant facts regarding such Asset Sale and Asset
Sale Offer as would be material to a Holder of the Securities in
connection with the decision of such Holder as to whether or not it
should tender Securities pursuant to the Asset Sale Offer.
(f) On the Asset Sale Purchase Date, the Company shall (i)
accept for payment, on a pro rata basis, Securities or portions thereof
tendered pursuant to the Asset Sale Offer, (ii) deposit with the Paying Agent
money, in immediately available funds, in an amount sufficient to pay the Asset
Sale Offer Price of all Securities or portions thereof so tendered and accepted
and (iii) deliver to the Trustee the Securities so accepted together with an
Officers' Certificate setting forth the Securities or portions thereof tendered
to and accepted for payment by the Company. The Paying Agent shall promptly
mail or deliver to Holders of Securities so accepted payment in an amount equal
to the Asset Sale Offer Price, and the Trustee shall promptly authenticate and
mail or deliver to such Holders a new Security equal in principal amount to any
unpurchased portion of the Security surrendered. Any Securities not so
accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce the results of the Asset Sale
Offer not later than the first Business Day following the Asset Sale Purchase
Date. To the extent that the aggregate principal amount of Securities tendered
pursuant to an offer to purchase is less than the Excess Proceeds, the Company
may use such Deficiency in any manner. Upon completion of such an offer to
purchase, the amount of Excess Proceeds shall
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be reset to zero. For purposes of this Section 1014, the Trustee shall act as
Paying Agent.
(g) The Company shall comply, to the extent applicable,
with the requirements of Rule 14e-1 under the Exchange Act, and any other
securities laws or regulations in connection with the repurchase of Securities
pursuant to the Asset Sale Offer.
SECTION 1015. Limitation on Issuance and Sale of Capital
Stock by Restricted Subsidiaries.
The Company (i) will not permit any of its Restricted
Subsidiaries to issue any Capital Stock (other than to the Company or a Wholly
Owned Restricted Subsidiary of the Company) and (ii) will not permit any person
(other than the Company or a Wholly Owned Restricted Subsidiary of the Company)
to own any Capital Stock of any Restricted Subsidiary of the Company other than
with respect to (A) the limited partnership interests of SPT owned by certain
employees of SPT on the Issue Date and (B) the general and limited partnership
interests of SP Europe, so long as the Company shall be a general partner and
own at least 51% of the combined general and limited partnership interests
thereof.
SECTION 1016. Limitation on Transactions with Affiliates.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into or suffer to
exist any transaction or series of related transactions (including, without
limitation, the sale, transfer, disposition, purchase, exchange or lease of
assets, property or services) with, or for the benefit of, any Affiliate of the
Company (other than a Wholly Owned Restricted Subsidiary of the Company) or any
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act)
of 10% or more of the Company's Common Stock at any time outstanding
("Interested Persons"), except (i) on terms that are no less favorable to the
Company, or its Restricted Subsidiary, as the case may be, than those which
could have been obtained in a comparable transaction or transactions on an
arm's-length basis at such time from persons who are not Affiliates of the
Company or Interested Persons, (ii) with respect to a transaction or series of
transactions
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involving aggregate payments or value equal to or greater than $10,000,000, (A)
the Company has obtained a written opinion from a nationally recognized
investment banking firm stating that the terms of such transaction or series of
transactions are fair to the Company or its Restricted Subsidiary, as the case
may be, from a financial point of view or such transaction or series of
transactions shall have been approved by a majority of the disinterested
members of the Board of Directors of the Company and (B) the Company shall have
delivered an Officers' Certificate to the Trustee certifying that such
transaction or series of transactions comply with the preceding clause (i), and
(iii) with respect to any transaction or series of transactions involving
aggregate payments or value equal to or greater than $1,000,000 and less than
$10,000,000, the Company shall have complied with the condition set forth in
clause (ii)(B) above. This covenant will not restrict the Company from (i)
paying reasonable and customary regular fees to directors of the Company who
are not employees of the Company, (ii) making loans or advances to employees
and officers of the Company and its Restricted Subsidiaries for bona fide
business purposes of the Company in the ordinary course of business consistent
with past practice, (iii) the payment of dividends in respect of the Company or
any Restricted Subsidiary permitted under Section 1011 or (iv) transactions
provided for under agreements in existence on the date of this Indenture and
listed on Schedule A hereto.
SECTION 1017. Limitation on 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 (a) pay dividends, in
cash or otherwise, or make any other distributions on or in respect of its
Capital Stock or any other interest or participation in, or measured by, its
profits, (b) pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company, (c) make loans or advances to
the Company or any other Restricted Subsidiary of the Company (d) transfer any
of its properties or assets to the Company or any other Restricted Subsidiary
of the Company or (e) guarantee any Indebtedness of the Company or any
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other Restricted Subsidiary of the Company, except for such encumbrances or
restrictions existing under or by reason of (i) any agreement or other
instrument of a person acquired by the Company or any Restricted Subsidiary of
the Company in existence at the time of such acquisition (but not created in
contemplation thereof), 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, (ii) any encumbrance or
restriction in the Bank Credit Agreement or any other agreement as in effect on
the date of this Indenture and listed on Schedule B hereto and (iii) any
encumbrance or restriction pursuant to any agreement that extends, refinances,
renews or replaces any agreement described in clause (i) and (ii) above, which
is not materially more restrictive or less favorable to the Holders than those
existing under the agreement being extended, refinanced, renewed or replaced.
SECTION 1018. Limitation on Guarantees by Restricted
Subsidiaries.
(a) The Company will not permit any Restricted Subsidiary,
directly or indirectly, to assume, guarantee or in any other manner become
liable with respect to any Indebtedness of the Company or any Guarantor, unless
such Restricted Subsidiary is a Guarantor or simultaneously executes and
delivers a supplemental indenture providing for the guarantee of payment of the
Securities by such Restricted Subsidiary pursuant to the terms of Exhibit A
hereto and such guarantee shall be subordinated to the Guarantor Senior
Indebtedness of such Restricted Subsidiary in the manner and to the extent set
forth in such Exhibit A; provided, however, that in the case of any guarantee
of any Guarantor with respect to Senior Indebtedness, the guarantee of the
payment of the Securities by such Guarantor to be provided in accordance
herewith shall be subordinated to the guarantee with respect to such Senior
Indebtedness in the same manner and to the same extent as the Securities are
subordinated to such Senior Indebtedness. The supplemental indenture shall
supplement this Indenture by, among other things, creating an additional
Article Fourteen applicable to such Restricted Subsidiary and any other
Guarantor in the form set forth in Exhibit A hereto, and in connection with the
execution and delivery of the supplemental indenture,
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such Restricted Subsidiary shall execute and deliver to the Trustee a Guarantee
substantially in the form of Exhibit B hereto. Such Article Fourteen shall not
become effective until the provisions of Section 1403 have been complied with.
Each guarantee created pursuant to the provisions described above is referred
to as a "Guarantee," and the issuer of each such Guarantee, so long as the
Guarantee remains outstanding, is referred to as a "Guarantor."
(b) Notwithstanding the foregoing, in the event that a
Guarantor is released from all obligations which pursuant to the first sentence
of Section 1018(a) above obligate it to become a Guarantor, such Guarantor
shall be released from all obligations under its Guarantee (provided that the
provisions of the first sentence of the Section 1018(a) shall apply anew in the
event that such Guarantor subsequent to being released incurs any obligations
that pursuant to such sentence obligate it to become a Guarantor). In
addition, upon any sale or disposition (by merger or otherwise) of any
Guarantor by the Company or a Restricted Subsidiary of the Company to any
person that is not an Affiliate of the Company or any of its Restricted
Subsidiaries which is otherwise in compliance with the terms of this Indenture,
such Guarantor will be deemed to be released from all obligations under its
Guarantee; provided, however, that each such Guarantor is sold or disposed of
in accordance with Section 1014; provided further that the foregoing proviso
shall not apply to the sale or disposition of a Guarantor in a foreclosure to
the extent that such proviso would be inconsistent with the requirements of the
Uniform Commercial Code.
SECTION 1019. Restriction on Transfer of Assets.
The Company will not sell, convey, transfer or otherwise
dispose of its assets or property to any of its Subsidiaries, except for
transactions permitted by Section 1011 and sales, conveyances, transfers or
other dispositions (a) made in the ordinary course of business or (b) made to
any Wholly Owned Restricted Subsidiary, if such Wholly Owned Restricted
Subsidiary (x) simultaneously with such sale, conveyance, transfer or disposal
executes and delivers a supplemental indenture to this Indenture providing for
the guarantee of payment of the
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Securities by such Wholly Owned Restricted Subsidiary pursuant to the terms of
Exhibit A hereto and (y) waives, and will not in any manner whatsoever claim or
take the benefit or advantage of, any rights of reimbursement, indemnity or
subrogation or any rights against the Company or any other Subsidiary as a
result of any payment by such Wholly Owned Restricted Subsidiary under its
guarantee. Such a guarantee shall be unconditional (except for a customary
savings clause with respect to fraudulent conveyance or fraudulent transfer
laws) and shall be subordinated to the Guarantor Senior Indebtedness of such
Wholly Owned Restricted Subsidiary in the manner and to the extent set forth in
such Exhibit A.
SECTION 1020. Limitation on Certain Other Subordinated
Indebtedness.
The Company will not issue, directly or indirectly, any
Indebtedness which is subordinated or junior in ranking in any respect to
Senior Indebtedness unless such Indebtedness is expressly pari passu with or
subordinated in right of payment to the Securities.
SECTION 1021. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with
any term, provision or condition set forth in Sections 1010 through 1012,
inclusive, and Sections 1015 through 1018, inclusive, if before or after the
time for such compliance the Holders of at least a majority in principal amount
of the Outstanding Securities, by Act of such Holders, waive such compliance in
such instance with such term, provision or condition, but no such waiver shall
extend to or affect such term, provision or condition except to the extent so
expressly waived, and until such waiver shall become effective, the obligations
of the Company and the duties of the Trustee in respect of any such term,
provision or condition shall remain in full force and effect.
SECTION 1022. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or
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any usury law or other law which would prohibit or forgive the Company from
paying all or any portion of the principal of or interest on the Securities as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or which may affect the covenants or the performance of this Indenture and (to
the extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Right of Redemption.
The Securities may be redeemed, at the election of the
Company, as a whole or from time to time in part, at any time after
_________________, 1998, subject to the conditions and at the Redemption Prices
specified in the form of Security, together with accrued and unpaid interest,
if any, to the Redemption Date.
In addition, up to 30% of the aggregate principal amount of
the Securities outstanding on the Issue Date will be redeemable prior to
____________, 1996, at the option of the Company, within 45 days of the sale of
Capital Stock in a Public Equity Offering from the net proceeds of such sale at
a redemption price equal to __% of the principal amount to be redeemed,
together with accrued and unpaid interest, if any, thereon to the date of
redemption.
SECTION 1102. Applicability of Article.
Redemption of Securities at the election of the Company or
otherwise, as permitted or required by any provision of this Indenture, shall
be made in accordance with such provision and this Article.
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SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant
to Section 1101 shall be evidenced by a Board Resolu- tion. In case of any
redemption at the election of the Company, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee of such Redemption
Date and of the principal amount of Securities to be redeemed and shall deliver
to the Trustee such documentation and records as shall enable the Trustee to
select the Securities to be redeemed pursuant to Section 1104.
SECTION 1104. Selection by Trustee of Securities to Be
Redeemed.
If less than all the Securities are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities
not previously called for redemption, 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 then listed on a national securities
exchange, on a pro rata basis, by lot or by such method as the Trustee shall
deem fair and appropriate and which may provide for the selection for
redemption of portions of the principal of Securities; provided, however, that
no such partial redemption shall reduce the portion of the principal amount of
a Security not redeemed to less than $1,000.
The Trustee shall promptly notify the Company and the Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to redemption of Securities shall
relate, in the case of any Security redeemed or to be redeemed only in part, to
the portion of the principal amount of such Security which has been or is to be
redeemed.
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SECTION 1105. Notice of Redemption.
Notice of redemption shall be given in the manner provided for
in Section 106 not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed at his address appearing in
the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all Outstanding Securities are to be
redeemed, the identification (and, in the case of a partial
redemption, the principal amounts) of the particular Securities to be
redeemed,
(4) that on the Redemption Date the Redemption Price
(together with accrued interest, if any, to the Redemption Date
payable as provided in Section 1107) will become due and payable upon
each such Security, or the portion thereof, to be redeemed, and that
interest thereon will cease to accrue on and after said date, and
(5) the place or places where such Securities are to be
surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the
election of the Company shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
On or prior to any Redemption Date, the Company shall deposit
with the Trustee or with a Paying Agent (or, if the Company is acting as its
own Paying Agent, segregate and hold in trust as provided in Section 1003) an
amount of money in same-day funds (or New York Clearing House funds if such
deposit is made prior to the applicable Redemption Date) sufficient to pay the
Redemption Price of, and accrued interest on, all the Securi-
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ties or portions thereof which are to be redeemed on that date.
SECTION 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified (together with accrued
interest, if any, to the Redemption Date), and from and after such date (unless
the Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security
shall be paid by the Company at the Redemption Price, together with accrued
interest, if any, to the Redemption Date; provided, however, that installments
of interest whose Stated Maturity is on or prior to the Redemption Date shall
be payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal (and premium, if any)
shall, until paid, bear interest from the Redemption Date at the rate borne by
the Securities.
SECTION 1108. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be
surrendered at the office or agency of the Company maintained for such purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Security so
surrendered.
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ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Company's Option to Effect Defeasance or
Covenant Defeasance.
The Company may, at its option by Board Resolution, at any
time, with respect to the Securities, elect to have either Section 1202 or
Section 1203 be applied to all Outstanding Securities upon compliance with the
conditions set forth below in this Article Twelve.
SECTION 1202. Defeasance and Discharge.
Upon the Company's exercise under Section 1201 of the option
applicable to this Section 1202, the Company and any Guarantor shall be deemed
to have been discharged from their obligations with respect to all Outstanding
Securities on the date the conditions set forth in Section 1204 are satisfied
(hereinafter, "defeasance"). For this purpose, such defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the then Outstanding Securities, which shall thereafter be
deemed to be "Outstanding" only for the purposes of Section 1205 and the other
Sections of this Indenture referred to in (A) and (B) below, and to have
satisfied all its other obligations under such Securities and this Indenture
insofar as such Securities are concerned (and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging the same), and
Holders of the Securities and the Guarantees and any amounts deposited under
Section 1204 shall cease to be subject to any obligations to, or the rights of,
any holder of Senior Indebtedness or Guarantor Senior Indebtedness under
Article Thirteen, Article Fourteen or otherwise, except for the following which
shall survive until otherwise terminated or discharged hereunder: (A) the
rights of Holders of Outstanding Securities to receive, solely from the trust
fund described in Section 1204 and as more fully set forth in such Section,
payments in respect of the principal of (and premium, if any) and interest on
such Securities when such payments are due, (B) the Company's obligations with
respect to such Securities under Sections 304, 305, 306, 1002 and 1003 and any
Guarantor's obligations in respect thereof, (C) the rights, powers, trusts,
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duties and immunities of the Trustee hereunder and (D) this Article Twelve.
Subject to compliance with this Article Twelve, the Company may exercise its
option under this Section 1202 notwithstanding the prior exercise of its option
under Section 1203 with respect to the Securities.
SECTION 1203. Covenant Defeasance.
Upon the Company's exercise under Section 1201 of the option
applicable to this Section 1203, the Company shall be released from its
obligations under any covenant contained in Section 801 and in Sections 1007
through 1020 with respect to the Outstanding Securities on and after the date
the conditions set forth below are satisfied (hereinafter, "covenant
defeasance"), and the Securities shall thereafter be deemed not to be
"Outstanding" for the purposes of any direction, waiver, consent or declaration
or Act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "Outstanding" for all other purposes
hereunder and Holders of the Securities and the Guarantees and any amounts
deposited under Section 1204 shall cease to be subject to any obligations to,
or the rights of, any holder of Senior Indebtedness or Guarantor Senior
Indebtedness under Article Thirteen, Article Fourteen or otherwise. For this
purpose, such covenant defeasance means that, with respect to the Outstanding
Securities, the Company and any Guarantor may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 501(4), but, except as specified above, the remainder of this Indenture
and such Securities shall be unaffected thereby.
SECTION 1204. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either
Section 1202 or Section 1203 to the Outstanding Securities:
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(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 608 who shall agree to comply with the
provisions of this Article Twelve applicable to it) as trust funds in
trust for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Securities, (A) cash in United States dollars in an
amount, or (B) U.S. Government Obligations which through the scheduled
payment of principal and interest in respect thereof in accordance
with their terms will provide, not later than one day before the due
date of any payment, money in an amount, or (C) a combination thereof,
sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which
shall be applied by the Trustee (or other qualifying trustee) to pay
and discharge, the principal of (and premium, if any) and interest on
the Outstanding Securities on the Stated Maturity (or Redemption Date,
if applicable) of such principal (and premium, if any) or installment
of interest; provided that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such U.S. Government
Obligations to said payments with respect to the Securities; and
provided further that upon the effectiveness of this Section 1204, the
cash or U.S. Government Obligations deposited shall not be subject to
the rights of the holders of Senior Indebtedness pursuant to the
provisions of Article Thirteen. For this purpose, "U.S. Government
Obligations" means securities that are (x) direct obligations of the
United States of America for the timely payment of which its full
faith and credit is pledged or (y) obligations of a person controlled
or supervised by and acting as an agency or instrumentality of the
United States of America the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by
the United States of America, which, in either case, are not callable
or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian with respect to any such
U.S. Government Obligation
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or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the
holder of such depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from
the amount payable to the holder of such depository receipt from any
amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal of or interest on the
U.S. Government Obligation evidenced by such depository receipt;
(2) No Default or Event of Default with respect to the
Securities shall have occurred and be continuing on the date of such
deposit or, insofar as Section 501(9) or 501(10) hereof are concerned,
at any time during the period ending on the 91st day after the date of
such deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period);
(3) Such defeasance or covenant defeasance shall not result
in a breach or violation of, or constitute a default under, this
Indenture or any other material agreement or instrument to which the
Company or any Guarantor is a party or by which it is bound;
(4) In the case of an election under Section 1202, the
Company shall have delivered to the Trustee an Opinion of Counsel
stating that (x) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (y) since date
of the Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon
such opinion shall confirm that, the Holders of the Outstanding
Securities will not recognize income, gain or loss for federal income
tax purposes as a result of such defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance had not
occurred;
(5) Such defeasance or covenant defeasance shall not cause
the Trustee to have a conflicting
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interest with respect to any Securities of the Company or any
Guarantor;
(6) In the case of an election under Section 1203, the
Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Holders of the Outstanding Securities will not
recognize income, gain or loss for federal income tax purposes as a
result of such covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred;
(7) The Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that (x) the trust funds will not be
subject to any rights of any holders of Senior Indebtedness of the
Company, including, without limitation, rights arising under this
Indenture, and (y) after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable Federal
Bankruptcy Code;
(8) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stat- ing that
all conditions precedent provided for relating to either the
defeasance under Section 1202 or the covenant defeasance under Section
1203 (as the case may be) have been complied with;
(9) The Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with intent of preferring the Holders or any Guarantor over
the other creditors of the Company or any Guarantor with the intent of
defeating, hindering or delaying or defrauding creditors of the
Company, any Guarantor or others; and
(10) If the Bank Credit Agreement is in effect, the Company
shall have delivered to the Trustee any required consent of the
lenders under the Bank Credit Agreement to such defeasance or covenant
defeasance, as the case may be.
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SECTION 1205. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations (includ- ing the proceeds
thereof) deposited with the Trustee (or other qualifying trustee--collectively
for purposes of this Section 1205, the "Trustee") pursuant to Section 1204 in
respect of the Outstanding Securities shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities of all sums due and to become due
thereon in respect of principal (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent required by
law. Money and U.S. Government Obligations so held in trust are not subject to
Article Thirteen.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 1204 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the Outstanding Securities.
Anything in this Article Twelve to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon Company Request any money or U.S. Government Obligations held by it
as provided in Section 1204 which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof which
would then be required to be deposited to effect an equivalent defeasance or
covenant defeasance, as applicable, in accordance with this Article.
SECTION 1206. Reinstatement.
If the Trustee or any Paying Agent is unable to apply any
money in accordance with Section 1205 by reason of any order or judgment of any
court or governmental
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authority enjoining, restraining or otherwise prohibiting such application,
then the obligations of the Company and any Guarantor under this Indenture and
the Securities shall be revived and reinstated as though no deposit had
occurred pursuant to Section 1202 or 1203, as the case may be, until such time
as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 1205; provided, however, that if the Company makes any
payment of principal of (or premium, if any) or interest on any Security
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from
the money held by the Trustee or Paying Agent.
ARTICLE THIRTEEN
SUBORDINATION OF SECURITIES
SECTION 1301. Securities Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a
Security, by his acceptance thereof, likewise covenants and agrees, for the
benefit of the holders, from time to time, of Senior Indebtedness that, to the
extent and in the manner hereinafter set forth in this Article, the
Indebtedness represented by the Securities and the payment of the principal of
(and premium, if any) and interest on each and all of the Securities are hereby
expressly made subordinate and subject in right of payment as provided in this
Article to the prior payment in full in cash, Cash Equivalents or other form of
payment acceptable to the holders of Senior Indebtedness of all existing and
future Senior Indebtedness of the Company, which includes, without limitation,
all obligations under the Bank Credit Agreement; provided, however, that the
Securities, the indebtedness represented thereby and the payment of the
principal of (and premium, if any) and interest on the Securities in all
respects shall rank equal with all other existing and future Pari Passu
Indebtedness and senior to all future Subordinated Indebtedness.
This Article shall constitute a continuing offer to all
Persons who, in reliance upon such provisions, become holders of, or continue
to hold, Senior Indebtedness, and such provi-
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sions are made for the benefit of the holders of Senior Indebtedness, and such
holders are made obligees hereunder and they and/or each of them may enforce
such provisions.
SECTION 1302. Payment Over of Proceeds upon Dissolution, etc.
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relating to the Company or its
assets, (b) any liquidation, dissolution or other winding-up of the Company,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or (c) any assignment for the benefit of creditors or other
marshalling of assets or liabilities of the Company, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy, then and in
any such event
(1) the holders of Senior Indebtedness shall be entitled to
receive payment in full in cash, Cash Equivalents or other form of
payment acceptable to the holders of Senior Indebtedness of all
amounts due on or in respect of all Senior Indebtedness, or provision
shall be made for such payment in accordance with the instrument
governing such Senior Indebtedness, before the Holders of the
Securities are entitled to receive any payment or distribution of any
kind or character (other than any payment or distribution in the form
of equity securities or subordinated securities of the Company or any
successor obligor with respect to the Senior Indebtedness provided for
by a plan of reorganization or readjustment that, in the case of any
such subordinated securities, are subordinated in right of payment to
all Senior Indebtedness that may at the time be outstanding to
substantially the same extent as, or to a greater extent than, the
Securities are so subordinated as provided in this Article (such
equity securities or subordinated securities of a person hereinafter
being "Permitted Junior Securities") or payments made pursuant to
Article Twelve) on account of the principal of (and premium, if any)
and interest on each and all of the Securities; and
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(2) in the event that, notwithstanding the foregoing
provisions of this Section, after an event described in clause (a),
(b) or (c), the Trustee or any Holder of the Securities shall have
received any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, in respect
of the principal of (and premium, if any) and interest on each and all
of the Securities before all Senior Indebtedness is paid in full or
payment thereof provided for in cash, Cash Equivalents or other form
of payment acceptable to the holders of Senior Indebtedness, then and
in such event such payment or distribution (other than a payment or
distribution in the form of Permitted Junior Securities or payments
made pursuant to Article Twelve) shall be paid over or delivered
forthwith to the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or other person making payment or
distribution of assets of the Company for application to the payment
of all Senior Indebtedness remaining unpaid, to the extent necessary
to pay all Senior Indebtedness in full in cash, Cash Equivalents or
other form of payment, acceptable to the holders of Senior
Indebtedness after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness.
The consolidation of the Company with, or the merger of the
Company into, another person or the liquidation or dissolution of the Company
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another person upon the terms and conditions
set forth in Article Eight shall not be deemed a dissolution, winding up,
liquidation, reorganization, assignment for the benefit of creditors or
marshalling of assets and liabilities of the Company for the purposes of this
Section if the person formed by such consolidation or into which the Company is
merged or the person which acquires by conveyance, transfer or lease such
properties and assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance, transfer or lease, comply
with the conditions set forth in Article Eight.
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SECTION 1303. Suspension of Payment When Senior Indebtedness
in Default.
(a) Unless Section 1302 shall be applicable, upon the
occurrence of a Payment Default, then no payment or distribution of any assets
of the Company of any kind or character (other than Permitted Junior Securities
or payments made pursuant to Article Twelve) shall be made by the Company or
the Trustee (if notice of such Payment Default has been received by the Trustee
pursuant to Section 1309) or received by the Holders on account of the
principal of (and premium, if any) and interest on each and all of the
Securities or on account of the purchase or redemption or other acquisition of
Securities unless and until such Payment Default shall have been cured or
waived or shall have ceased to exist or such Senior Indebtedness shall have
been discharged or paid in full in cash, Cash Equivalents or other form of
payment acceptable to the holders of Senior Indebtedness, after which the
Company shall resume making any and all required payments in respect of the
Securities, including any missed payments.
(b) Unless Section 1302 shall be applicable, upon (1) the
occurrence of a Non-payment Default and (2) receipt by the Trustee from the
representative of holders of Designated Senior Indebtedness of written notice
of such occurrence, then no payment or distribution of any assets of the
Company of any kind or character (other than Permitted Junior Securities or
payments made pursuant to Article Twelve) shall be made by the Company on
account of the principal of (and premium, if any) and interest on each and all
of the Securities or on account of the purchase or redemption or other
acquisition of Securities for a period ("Payment Blockage Period") commencing
on the date of receipt by the Trustee of such notice from such representative
unless and until (subject to any blockage of payments that may then be in
effect under paragraph (a) of this Section) (A) more than 179 days shall have
elapsed since receipt of such written notice by the Company or the Trustee
(provided such Designated Senior Indebtedness as to which notice was given
shall not theretofore have been accelerated), (B) such Non-payment Default
shall have been cured or waived in writing or shall have ceased to exist
(provided that no other Payment Default or Non-payment Default has occurred and
is then continuing after giving effect to
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such cure or waiver) or (C) such Designated Senior Indebtedness shall
have been discharged or paid in full in cash, Cash Equivalents or other form of
payment acceptable to the holders of Designated Senior Indebtedness or (D) such
Payment Blockage Period shall have been terminated by written notice to the
Company or the Trustee from such representative initiating such Payment
Blockage Period, after which, in the case of clause (A), (B), (C) or (D),
whichever was earlier, the Company shall resume making any and all required
payments in respect of the Securities, including any missed payments.
Notwithstanding any other provision of this Agreement, only one Payment
Blockage Period may be commenced within any consecutive 360-day period, and no
Non-payment Default which existed or was continuing on the date of the
commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period shall be, or can be
made, the basis for the commencement of a subsequent Payment Blockage Period
whether or not within a period of 360 consecutive days unless such event of
default shall have been cured or waived for a period of not less than 90
consecutive days. In no event will a Payment Blockage Period extend beyond 179
days from the date of the receipt by the Trustee of the notice and there must
be at least a 181-consecutive-day period in any 360-day period during which no
Payment Blockage Period is in effect.
(c) In the event that, notwithstanding the foregoing, the
Trustee or the Holder of any Security shall have received a payment prohibited
by the foregoing provisions of this Section, then and in such event such
payment shall be paid over and delivered forthwith by the Trustee (if the
notice required by Section 1309 has been received by the Trustee) or an amount
equal to such payment or distribution shall be paid over and delivered
forthwith by such Holder to the agent under the Bank Credit Agreement for the
benefit of, and distribution to, the holders of Designated Senior Indebtedness
or, if the Bank Credit Agreement has been terminated, to the Company; provided
that, in the event any Holder has received notice that such payment is
prohibited by the foregoing provisions of this Section prior to the receipt of
such payment by such Holders, any such Holders shall hold such payment in trust
for the benefit of the holders of Designated Senior Indebtedness.
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SECTION 1304. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this
Indenture or in any of the Securities shall prevent the Company, at any time
except during the pendency of any case, proceeding, dissolution, liquidation or
other winding up, assignment for the benefit of creditors or other marshalling
of assets and liabilities of the Company referred to in Section 1302 or under
the conditions described in Section 1303, from making payments at any time of
principal of (and premium, if any) or interest on the Securities.
SECTION 1305. Subrogation to Rights of Holders of Senior
Indebtedness.
Subject to the payment in full in cash, Cash Equivalents or
other form of payment acceptable to the holders of Senior Indebtedness of all
Senior Indebtedness, the Holders of the Securities shall be subrogated to the
rights of the holders of such Senior Indebtedness to receive payments and
distributions of cash, property and securities applicable to the Senior Indebt-
edness until the principal of (and premium, if any) and interest on the
Securities shall be paid in full. For purposes of such subrogation, no payments
or distributions to the holders of Senior Indebtedness of any cash, property or
securities to which the Holders of the Securities or the Trustee would be
entitled except for the provisions of this Article, and no payments pursuant to
the provisions of this Article to the holders of Senior Indebtedness by Holders
of the Securities or the Trustee, shall, as among the Company, its creditors
other than holders of Senior Indebtedness, and the Holders of the Securities,
be deemed to be a payment or distribution by the Company to or on account of
the Senior Indebtedness.
SECTION 1306. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for
the purpose of defining the relative rights of the Holders of the Securities on
the one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Securities
is intended to or shall (a) impair, as between the Company and the Holders of
the
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Securities, the obligation of the Company, which is absolute and unconditional,
to pay to the Holders of the Securities the principal of (and premium, if any)
and interest on the Securities as and when the same shall become due and
payable in accordance with their terms; or (b) affect the relative rights
against the Company of the Holders of the Securities and creditors of the
Company other than the Holders of Senior Indebtedness; or (c) prevent the
Trustee or the holder of any Security from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article of the holders of Senior Indebtedness.
SECTION 1307. Trustee to Effectuate Subordination.
Each Holder of a Security by his acceptance thereof authorizes
and directs the Trustee on his behalf to take such action as may be necessary
or appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 1308. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any non-compliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof any such
holder may have or be otherwise charged with.
(b) Without in any way limiting the generality of paragraph
(a) of this Section, the holders of Senior Indebtedness may, at any time and
from time to time, without the consent of or notice to the Trustee or the
Holders of the Securities, without incurring responsibility to the Holders of
the Securities and without impairing or releasing the subordination provided in
this Article or the obligations hereunder of the Holders of the Securities to
the holders of Senior Indebtedness, do any one or more of the following: (1)
change the manner,
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place or terms of payment or extend the time of payment of, or renew or alter,
Senior Indebtedness or any instrument evidencing the same or any agreement
under which Senior Indebtedness is outstanding; (2) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing
Senior Indebtedness; (3) release any person liable in any manner for the
collection of Senior Indebtedness; and (4) exercise or refrain from exercising
any rights against the Company and any other person; provided, however, that in
no event shall any such actions limit the right of the Holders of the
Securities to take any action to accelerate the maturity of the Securities
pursuant to Article Five hereof or to pursue any rights or remedies hereunder
or under applicable laws if the taking of such action does not otherwise
violate the terms of this Indenture.
SECTION 1309. Notice to Trustee.
(a) The Company shall give prompt written notice to the
Trustee of any fact known to the Company which would prohibit the making of any
payment to or by the Trustee in respect of the Securities. Notwithstanding the
provisions of this Article or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts which
would prohibit the making of any payment to or by the Trustee in respect of the
Securities, unless and until the Trustee shall have received written notice
thereof from the Company or a holder of Senior Indebtedness or from any
trustee, fiduciary or agent therefor; and, prior to the receipt of any such
written notice, the Trustee, subject to TIA Section 315(a) through 315(d),
shall be entitled in all respects to assume that no such facts exist; provided,
however, that, if the Trustee shall not have received the notice provided for
in this Section at least three Business Days prior to the date upon which by
the terms hereof any money may become payable for any purpose (including,
without limitation, the payment of the principal of (and premium, if any) or
interest on any Security), then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive
such money and to apply the same to the purpose for which such money was
received and shall not be affected by any notice to the contrary which may be
received by it within three Business Days prior to such date.
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(b) Subject to TIA Section 315(a) through 315(d), the Trustee
shall be entitled to rely on the delivery to it of a written notice by a person
representing himself to be a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor) to establish that such notice has been given by a
holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor). In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such person, the extent to which such person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such person under this Article and, if such evidence is not furnished, the
Trustee may defer any payment to such person pending judicial determination as
to the right of such person to receive such payment.
SECTION 1310. Reliance on Judicial Order or Certificate of
Liquidating Agent.
Upon any payment or distribution of assets of the Company
referred to in this Article, the Trustee, subject to TIA Section 315(a) through
315(d), and the Holders of the Securities shall be entitled to rely upon any
order or decree entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution,
winding-up or similar case or proceeding is pending, or a certificate of the
trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for
the benefit of creditors, agent or other person making such payment or
distribution, delivered to the Trustee or to the Holders of Securities, for the
purpose of ascertaining the persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article.
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SECTION 1311. Rights of Trustee as a Holder of Senior
Indebtedness; Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article with respect to any Senior
Indebtedness which may at any time be held by it, to the same extent as any
other holder of Senior Indebtedness, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder. Nothing in this
Article shall apply to claims of, or payments to, the Trustee under or pursuant
to Section 606.
SECTION 1312. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying
Agent within its meaning as fully for all intents and purposes as if such
Paying Agent were named in this Article in addition to or in place of the
Trustee; provided, however, that Section 1311 shall not apply to the Company or
any Affiliate of the Company if it or such Affiliate acts as Paying Agent.
SECTION 1313. No Suspension of Remedies.
Nothing contained in this Article shall limit the right of the
Trustee or the Holders of Securities to take any action to accelerate the
maturity of the Securities pursuant to Article Five or to pursue any rights or
remedies hereunder or under applicable law.
SECTION 1314. Trust Moneys Not Subordinated.
Notwithstanding anything contained herein to the contrary,
payments from cash or the proceeds of U.S. Government Obligations held in trust
under Article Twelve hereof by the Trustee (or other qualifying trustee) and
which were deposited in accordance with the terms of Article Twelve hereof and
not in violation of Section 1303 hereof for the payment of principal of (and
premium, if any) and interest on the Securities shall not be
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subordinated to the prior payment of any Senior Indebtedness or subject to the
restrictions set forth in this Article Thirteen, and none of the holders shall
be obligated to pay over any such amount to the Company or any holder of Senior
Indebtedness or any other creditor of the Company.
SECTION 1315. Proof of Claim.
In the event of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Holders irrevocably authorize and empower the agent under the
Bank Credit Agreement (but without imposing any obligation on, or any duty to
such agent) to file and prove all claims therefor in the name of the Holders
(or otherwise, as such agent may determine, to be necessary or appropriate for
the enforcement of the provisions of this Article Thirteen) if the Trustee or
the Holders do not file a proper claim or proof of debt in the form required in
any such proceeding prior to 15 days before the expiration of the time to file
such claim or claims.
This Indenture may be signed in any number of counterparts
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Indenture.
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IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
SPX CORPORATION
[SEAL] By
-------------------------
Title:
Attest:
------------------
Title:
THE BANK OF NEW YORK
[SEAL] By
-------------------------
Title:
Attest:
------------------
Title:
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EXHIBIT A
ARTICLE FOURTEEN
GUARANTEE OF SECURITIES
SECTION 1401. Guarantee.
Subject to the provisions of this Article Fourteen, each Guarantor
hereby jointly and severally unconditionally guarantees to each Holder of a
Security Outstanding authenticated and delivered by the Trustee and to the
Trustee, irrespective of the validity and enforceability of this Indenture, the
Securities or the obligations of the Company or any other Guarantors to the
Holders or the Trustee hereunder or thereunder, that: (a) the principal of,
premium, if any, and interest on the Securities will be duly and punctually
paid in full when due, whether at maturity, by acceleration or otherwise, and
interest on the overdue principal and (to the extent permitted by law)
interest, if any, on the Securities and all other obligations of the Company to
the Holders or the Trustee hereunder or thereunder (including fees, expenses or
other) and all other Guarantor Senior Subordinated Note Obligations will be
promptly paid in full or performed, all in accordance with the terms hereof and
thereof; and (b) in case of any extension of time of payment or renewal of any
Securities or any of such other Guarantor Senior Subordinated Note Obligations,
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at Stated Maturity, by
acceleration or otherwise. This Guarantee is a present and continuing guarantee
of payment and performance, and not of collectibility only. Accordingly,
failing payment when due of any amount so guaranteed, or failing performance of
any other obligation of the Company to the Holders under this Indenture or the
Securities, for whatever reason, each Guarantor shall be obligated to pay, or
to perform or cause the performance of, the same immediately. An Event of
Default under this Indenture or the Securities shall constitute an event of
default under this Guarantee, and shall entitle the Holders of Securities to
accelerate the obligations of the Guarantors hereunder in the same
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manner and to the same extent as the obligations of the Company.
Each of the Guarantors hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Securities or this Indenture, the absence of any action
to enforce the same, any waiver or consent by any Holder of the Securities with
respect to any provisions hereof or thereof, any release of any other
Guarantor, the recovery of any judgment against the Company, any action to
enforce the same, whether or not a Guarantee is affixed to any particular
Security, or any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a Guarantor. Each of the Guarantors hereby
waives the benefit of diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Company,
any right to require a proceeding first against the Company, protest, notice
and all demands whatsoever and covenants that its Guarantee will not be
discharged except by complete performance of the obligations contained in the
Securities, this Indenture and this Guarantee. If any Holder or the Trustee is
required by any court or otherwise to return to the Company or to any
Guarantor, or any custodian, trustee, liquidator or other similar official
acting in relation to the Company or such Guarantor, any amount paid by the
Company or such Guarantor to the Trustee or such Holder, this Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor further agrees that, as between it, on the one hand, and the
Holders of Securities and the Trustee, on the other hand, (a) subject to this
Article Fourteen, the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Five hereof for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (b) in
the event of any acceleration of such obligations as provided in Article Five
hereof, such obligations (whether or not due and payable) shall forthwith
become due and payable by the Guarantors for the purpose of this Guarantee.
This Guarantee shall remain in full force and effect and
continue to be effective should any petition be filed by or against the Company
for liquidation or
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reorganization, should the Company become insolvent or make an assignment for
the benefit of creditors or should a receiver or trustee be appointed for all
or any significant part of the Company's assets, and shall, to the fullest
extent permitted by law, continue to be effective or be reinstated, as the case
may be, if at any time payment and performance of the Securities are, pursuant
to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee on the Securities, whether as a "voidable
preference," "fraudulent transfer" 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 Securities shall, to
the fullest extent permitted by law, be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.
The Guarantors shall have the right to seek contribution from
any nonpaying Guarantor so long as the exercise of such right does not impair
the rights of the Holders under this Guarantee.
SECTION 1402. Execution and Delivery of Guarantee.
The validity and enforceability of any Guarantee shall not be
affected by the fact that it is not affixed to any particular Security. Each of
the Guarantors hereby agrees that its Guarantee set forth in Section 1401 shall
remain in full force and effect notwithstanding any failure to endorse on each
Security a notation of such Guarantee.
If an Officer of a Guarantor whose signature is on the
Indenture or a Guarantee no longer holds that office at the time the Trustee
authenticates any Security or at any time thereafter, such Guarantor's
Guarantee of such Security shall be valid nevertheless.
The delivery of any Guarantee to the Trustee as required by
Section 1018(a) shall constitute due delivery of such Guarantee on behalf of
the Guarantor to and for the benefit of all Holders of the Securities.
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SECTION 1403. Additional Guarantors.
Any person may become a Guarantor by executing and delivering
to the Trustee (a) a supplemental indenture in form and substance satisfactory
to the Trustee, which subjects such person to the provisions of this Indenture
as a Guarantor, and (b) an Opinion of Counsel to the effect that such
supplemental indenture has been duly authorized and executed by such person and
constitutes the legal, valid, binding and enforceable obligation of such person
(subject to such customary exceptions concerning fraudulent conveyance laws,
creditors' rights and equitable principles as may be acceptable to the Trustee
in its discretion).
SECTION 1404. Guarantee Obligations Subordinated to Guarantor
Senior Indebtedness.
Each Guarantor covenants and agrees, and each Holder of a
Security, by his acceptance thereof, likewise covenants and agrees, for the
benefit of the holders, from time to time, of Guarantor Senior Indebtedness
that, to the extent and in the manner hereinafter set forth in this Article,
the Indebtedness represented by the Guarantee and all payments pursuant to the
Guarantee made by or on behalf of such Guarantor are hereby expressly made
subordinate and subject in right of payment as provided in this Article to the
prior payment in full in cash, Cash Equivalents or other form of payment
acceptable to the holders of Guarantor Senior Indebtedness of all Guarantor
Senior Indebtedness of such Guarantor.
This Section and the following Sections 1405 through 1417 of
this Article shall constitute a continuing offer to all persons, who in
reliance upon such provisions, become holders of, or continue to hold Guarantor
Senior Indebtedness of any Guarantor and, to the extent set forth in Section
1406(b), holders of Designated Senior Indebtedness; and such provisions are
made for the benefit of the holders of Guarantor Senior Indebtedness of each
Guarantor and, to the extent set forth in Section 1406(b), holders of
Designated Senior Indebtedness; and such holders, (to such extent) are made
obligees hereunder and they or each of them may enforce such provisions.
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SECTION 1405. Payment Over of Proceeds upon Dissolution,
etc., of a Guarantor.
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to any Guarantor or its
assets, or (b) any liquidation, dissolution or other winding-up of any
Guarantor, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshalling of assets or liabilities of any Guarantor, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
then and in any such event
(1) the holders of Guarantor Senior Indebtedness of such
Guarantor shall be entitled to receive payment in full in cash, Cash
Equivalents or other form of payment acceptable to the holders of
Guarantor Senior Indebtedness of all amounts due on or in respect of
all Guarantor Senior Indebtedness, or provision shall be made for such
payment in accordance with the instrument governing such Guarantor
Senior Indebtedness, before the Holders of the Securities are entitled
to receive any payment or distribution of any kind or character by and
on behalf of such Guarantor (other than any payment or distribution in
the form of the Permitted Junior Securities of such Guarantor) on
account of the Guarantor Senior Subordinated Note Obligations; and
(2) in the event that, notwithstanding the foregoing
provisions of this Section, the Trustee or the Holder of any Security
shall have received any payment or distribution of assets of such
Guarantor of any kind or character, whether in cash, property or
securities, in respect of the Guarantor Senior Subordinated Note
Obligations before all Guarantor Senior Indebtedness is paid in full
in cash, Cash Equivalents or other form of payment acceptable to the
holders of Guarantor Senior Indebtedness or payment thereof is
provided for, then and in such event such payment or distribution
(other than a payment or distribution in the form of Permitted Junior
Securities of such Guarantor) shall be paid over or delivered
forthwith to the trustee in bankruptcy,
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receiver, liquidating trustee, custodian, assignee, agent or other
person making payment or distribution of assets of such Guarantor for
application to the payment of all Guarantor Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Guarantor Senior
Indebtedness in full in cash, Cash Equivalents or other form of
payment acceptable to the holders of Guarantor Senior Indebtedness,
after giving effect to any concurrent payment or distribution to or
for the holders of Guarantor Senior Indebtedness.
The consolidation of any Guarantor with, or the merger of any
Guarantor into, another person or the liquidation or dissolution of any
Guarantor following the conveyance, transfer or lease of its properties and
assets substantially as an entirety to another person upon the terms and
conditions set forth in Article Eight shall not be deemed a dissolution,
winding up, liquidation, reorganization, assignment for the benefit of
creditors or marshalling of assets and liabilities of the Company for the
purposes of this Section if the person formed by such consolidation or into
which such Guarantor is merged or the person which acquires by conveyance,
transfer or lease such properties and assets substantially as an entirety, as
the case may be, shall, as a part of such consolidation, merger, conveyance,
transfer or lease, comply with the conditions set forth in Article Eight.
SECTION 1406. Suspension of Guarantee Obligations When Senior
Indebtedness in Default.
(a) Unless Section 1405 shall be applicable, upon the
occurrence of a Payment Default, then no payment or distribution of any assets
of any Guarantor of any kind or character (other than Permitted Junior
Securities of such Guarantor) shall be made by such Guarantor or the Trustee
(if notice of such Payment Default has been received by the Trustee pursuant to
Section 1309) or received by the Holders on account of the Guarantor Senior
Subordinated Note Obligations or on account of the pur- chase or redemption or
other acquisition of Securities or the Guarantee of such Guarantor unless and
until such Payment Default shall have been cured or waived or shall have ceased
to exist or the Senior Indebtedness as to which such Payment Default relates
shall have been dis-
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charged or paid in full in cash, Cash Equivalents or other form of payment
acceptable to the holders of Senior Indebtedness, after which such Guarantor
shall resume making any and all required payments in respect of the Guarantee,
including any missed payments.
(b) Unless Section 1405 shall be applicable, during any
Payment Blockage Period in respect of the Securities, no payment or
distribution of any assets of any Guarantor of any kind or character (other
than Permitted Junior Securities of such Guarantor) shall be made by such
Guarantor on account of the Guarantor Senior Subordinated Note Obligations or
on account of the purchase or redemption or other acquisition of Securities or
the Guarantee of such Guarantor; provided, however, that the foregoing
prohibition shall not apply unless such Payment Blockage Period has been
instituted under Section 1303(b) by the representative of holders of Designated
Senior Indebtedness which also constitutes Guarantor Senior Indebtedness. Upon
the termination of any Payment Blockage Period, subject to Section 1405 and
Section 1406(a) (if applicable), such Guarantor shall resume making any and all
required payments in respect of its obligations under this Guarantee.
(c) In the event that, notwithstanding the foregoing, the
Trustee or the Holder of any Security shall have received a payment prohibited
by the foregoing provisions of this Section, then and in such event such
payment shall be paid over and delivered forthwith by the Trustee (if the
notice required by Section 1309 has been received by the Trustee) or an amount
equal to such payment or distribution shall be paid over and delivered
forthwith by such Holder to the agent under the Bank Credit Agreement for the
benefit of, and distribution to, the holders of Designated Senior Indebtedness
only to the extent, if at all, that such Designated Senior Indebtedness also
constitutes Guarantor Senior Indebtedness or, if the Bank Credit Agreement has
been terminated, to the Guarantor; provided that, in the event any Holder has
received notice that such payment is prohibited by the foregoing provisions of
this Section prior to the receipt of such payment by such Holders, any such
Holders shall hold such payment in trust for the benefit of the holders of
Guarantor Senior Indebtedness.
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SECTION 1407. Release of a Guarantor.
(a) Notwithstanding anything to the contrary contained in
this Indenture, in the event that a Guarantor is released from all obligations
which pursuant to Section 1018(a) obligate it to become a Guarantor, such
Guarantor shall be released from all obligations under its Guarantee (provided
that the provisions of Section 1018(a) shall apply anew in the event that such
Guarantor subsequent to being released incurs any obligations that pursuant to
Section 1018(a) obligate it to become a Guarantor).
(b) In addition, except in the case where the prohibition on
transfer in Section 801(a) is applicable, upon the sale or disposition of all
of the Capital Stock of a Guarantor by the Company or a Subsidiary, or upon the
consolidation or merger of a Guarantor with or into any person (in each case,
other than to the Company or an Affiliate of the Company), such Guarantor shall
be deemed automatically and unconditionally released and discharged from all
obligations under this Article without any further action required on the part
of the Trustee or any Holder; provided, however, that each such Guarantor is
sold or disposed of in accordance with Section 1014 hereof; and provided
further that the foregoing proviso shall not apply to the sale or disposition
of a Guarantor in a foreclosure to the extent that such proviso would be
inconsistent with the requirements of the Uniform Commercial Code.
(c) The Trustee shall deliver an appropriate instrument
evidencing the release of a Guarantor upon receipt of a request of the Company
accompanied by an Officers' Certificate certifying as to the compliance with
this Section 1407. Any Guarantor not so released or the entity surviving such
Guarantor, as applicable, shall remain or be liable under its Guarantee as
provided in this Article.
The Trustee shall execute any documents reasonably requested
by the Company or a Guarantor in order to evidence the release of such
Guarantor from its obligations under its Guarantee endorsed on the Securities
and under this Article.
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Except as set forth in Articles Eight and Ten and this Section
1407, nothing contained in the Indenture or in any of the Securities shall
prevent any consolidation or merger of a Guarantor with or into the Company or
another Guarantor or shall prevent any sale or conveyance of the property of a
Guarantor as an entirety or substantially as an entirety to the Company or
another Guarantor.
SECTION 1408. Waiver of Subrogation.
Each Guarantor hereby irrevocably waives any claim or other
rights which it may now or hereafter acquire against the Company or any
Restricted Subsidiary that arise from the existence, payment, performance or
enforcement of such Guarantor's obligations under this Guarantee and this
Indenture, including, without limitation, any right of subrogation,
reimbursement, exoneration, indemnification, and any right to participate in
any claim or remedy of any Holder of Securities against the Company or any
Restricted Subsidiary, whether or not such claim, remedy or right arises in
equity or under contract, statute or common law, including, without limitation,
the right to take or receive from the Company, directly or indirectly, in cash
or other property or by set-off or in any other manner, payment or security on
account of such claim or other rights. If any amount shall be paid to any
Guarantor in violation of the preceding sentence and the Securities shall not
have been paid in full, such amount shall be deemed to have been paid to such
Guarantor for the benefit of, and held in trust for the benefit of, the Holders
of the Securities and shall, subject to the provisions of this Article and to
Article Thirteen, forthwith be paid to the Trustee for the benefit of such
Holders to be credited and applied upon the Securities, whether matured or
unmatured, in accordance with the terms of this Indenture. Each Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated by this Indenture and that the waiver set
forth in this Section is knowingly made in contemplation of such benefits.
This Section as applicable to any particular Guarantor may be
amended or modified, without the consent of the Holders, in a manner to be
consistent with the terms of any waiver of subrogation language set forth in
any guarantee of such Guarantor issued under the Bank
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Credit Agreement at the time that the Guarantee hereunder is first issued and
shall thereafter be required to be modified in the same manner as such
guarantee under the Bank Credit Agreement is thereafter amended or modified;
provided that no such amendment or modification to thereafter conform to the
Bank Credit Agreement shall be in a manner which is adverse to the Holders in
any respect. No modification or amendment referred to in the preceding
sentence shall be permitted if it would disadvantage the Holders relative to
the Banks pursuant to the Bank Credit Agreement other than by operation of the
subordination provisions of this Article.
SECTION 1409. Subrogation to Rights of Holders of Guarantor
Senior Indebtedness.
Subject to the payment in full of all Guarantor Senior
Indebtedness of the Guarantors and all Senior Indebtedness of the Company, the
Holders of the Securities shall be subrogated to the rights of the holders of
such Guarantor Senior Indebtedness of the Guarantors to receive payments and
distributions of cash, property and securities of a Guarantor applicable to
such Guarantor Senior Indebtedness of the Guarantors until all amounts due
under the Guarantee of such Guarantor shall be paid in full. For purposes of
such subrogation, no payments or distributions to the holders of Guarantor
Senior Indebtedness of any cash, property or securities of such Guarantor to
which the Holders of the Securities or the Trustee would be entitled except for
the provisions of this Article, and no payments pursuant to the provisions of
this Article to the holders of Guarantor Senior Indebtedness of the Guarantors
by Holders of the Securities or the Trustee, shall, as among such Guarantor,
its creditors other than holders of Guarantor Senior Indebtedness, and the
Holders of the Securities, be deemed to be a payment or distribution by such
Guarantor to or on account of the Guarantor Senior Indebtedness.
SECTION 1410. Guarantor Provisions Solely to Define Relative
Rights.
The provisions of this Article are and are intended solely for
the purpose of defining the relative rights of the Holders of the Securities on
the one hand and the holders of Guarantor Senior Indebtedness of each Guarantor
and, to the extent set forth in Section 1406,
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holders of Designated Senior Indebtedness on the other hand. Nothing contained
in this Article (other than a release pursuant to Section 1407) or elsewhere in
this Indenture or in the Securities is intended to or shall (a) impair, as
between each Guarantor and the Holders of the Securities, the obligation of
each Guarantor, which is absolute and unconditional, to pay to the Holders of
the Securities its obligations under the Guarantee as and when the same shall
become due and payable in accordance with their terms; or (b) affect the
relative rights against such Guarantor of the Holders of the Securities and
creditors of such Guarantor other than the holders of Guarantor Senior
Indebtedness of such Guarantor; or (c) prevent the Trustee or the Holder of any
Security from exercising all remedies otherwise permitted by applicable law
upon Default or an Event of Default under this Indenture, subject to the
rights, if any, under this Article of the holders of Guarantor Senior
Indebtedness of the Guarantors hereunder and, to the extent set forth in
Section 1406, holders of Designated Senior Indebtedness.
The failure by any Guarantor to make a payment in respect of
its obligations under this Guarantee by reason of any provision of this Article
shall not be construed as preventing the occurrence of a Default or an Event of
Default hereunder.
SECTION 1411. Trustee to Effectuate Subordination of
Guarantee Obligations.
Each Holder of a Security by his acceptance thereof authorizes
and directs the Trustee on his behalf to take such action as may be necessary
or appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 1412. No Waiver of Guarantee Subordination Provisions.
(a) No right of any present or future holder of any Guarantor
Senior Indebtedness of any Guarantor to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or any Guarantor or by any act or
failure to act, in good faith, by any such holder, or by any noncompliance by
the Company
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or any Guarantor with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
(b) Without limiting in any way the generality of subsection
(a) of this Section, the holders of Guarantor Senior Indebtedness of any
Guarantor may, at any time and from time to time, without the consent of or
notice to the Trustee or the Holders of the Securities, without incurring
responsibility to the Holders of the Securities and without impairing or
releasing the subordination provided in this Article Fourteen or the
obligations hereunder of the Holders of the Securities to the holders of such
Guarantor Senior Indebtedness, do any one or more of the following: (1) change
the manner, place or terms of payment or extend the time of payment of, or
renew or alter, such Guarantor Senior Indebtedness or any Senior Indebtedness
as to which such Guarantor Senior Indebtedness relates or any instrument
evidencing the same or any agreement under which such Guarantor Senior
Indebtedness or such Senior Indebtedness is outstanding; (2) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing such Guarantor Senior Indebtedness or any Senior Indebtedness as to
which such Guarantor Senior Indebtedness relates; (3) release any person liable
in any manner for the collection or payment of such Guarantor Senior
Indebtedness or any Senior Indebtedness as to which such Guarantor Senior
Indebtedness relates; and (4) exercise or refrain from exercising any rights
against such Guarantor and any other person; provided, however, that in no
event shall any such actions limit the right of the Holders of the Securities
to take any action to accelerate the maturity of the Securities pursuant to
Article Five hereof or to pursue any rights or remedies hereunder or under
applicable laws if the taking of such action does not otherwise violate the
terms of this Indenture.
SECTION 1413. Guarantors to Give Notice to Trustee.
(a) The Company and each Guarantor shall give prompt written
notice to the Trustee of any fact known to such Guarantor which would prohibit
the making of any payment to or by the Trustee in respect of the Securities.
Notwithstanding the provisions of this Article or any other provision of this
Indenture, the Trustee shall
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not be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to or by the Trustee in respect of the
Securities, unless and until the Trustee shall have received written notice
thereof from the Company, such Guarantor or a holder of Guarantor Senior
Indebtedness or from any trustee, fiduciary or agent therefor; and, prior to
the receipt of any such written notice, the Trustee, subject to TIA Sections
315(a) through 315(d), shall be entitled in all respects to assume that no such
facts exist; provided, however, that if the Trustee shall not have received the
notice provided for in this Section at least three Business Days prior to the
date upon which by the terms hereof any money may become payable for any
purpose (including, without limitation, the payment of the principal of (and
premium, if any) or interest on any Security) then, anything herein contained
to the contrary notwithstanding, the Trustee shall have full power and
authority to receive such money and to apply the same to the purpose for which
such money was received and shall not be affected by any notice to the contrary
which may be received by it within three Business Days prior to such date.
(b) Subject to TIA Sections 315(a) through 315(d), the
Trustee shall be entitled to rely on the delivery to it of a written notice by
a person representing himself to be a holder of Guarantor Senior Indebtedness
(or a trustee, fiduciary or agent therefor) to establish that such notice has
been given by a holder of Guarantor Senior Indebtedness (or a trustee,
fiduciary or agent therefor). In the event that the Trustee determines in good
faith that further evidence is required with respect to the right of any person
as a holder of Guarantor Senior Indebtedness to participate in any payment or
distribution pursuant to this Article, the Trustee may request such person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Guarantor Senior Indebtedness held by such person, the extent to which such
person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such person under this Article and, if such
evidence is not furnished, the Trustee may defer any payment to such person
pending judicial determination as to the right of such person to receive such
payment.
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SECTION 1414. Reliance on Judicial Order or Certificate of
Liquidating Agent Regarding Dissolution, etc., of Guarantors.
Upon any payment or distribution of assets of any Guarantor
referred to in this Article, the Trustee, subject to TIA Sections 315(a)
through 315(d), and the Holders of the Securities shall be entitled to rely
conclusively upon any order or decree entered by any court of competent
jurisdiction in which such insolvency, bankruptcy, receivership, liquidation,
reorganization, dissolution, winding-up or similar case or proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other
person making such payment or distribution, delivered to the Trustee or to the
Holders of the Securities, for the purpose of ascertaining the persons entitled
to participate in such payment or distribution, the holders of Guarantor Senior
Indebtedness of such Guarantor and other Indebtedness of such Guarantor, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article.
SECTION 1415. Rights of Trustee as a Holder of Guarantor
Senior Indebtedness; Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article with respect to any Guarantor Senior
Indebtedness of any Guarantor which may at any time be held by the Trustee, to
the same extent as any other holder of such Guarantor Senior Indebtedness, and
nothing in this Indenture shall deprive the Trustee of any of its rights as
such holder. Nothing in this Article shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 606.
SECTION 1416. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and
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including such Paying Agent within its meaning as fully for all intents and
purposes as if such Paying Agent were named in this Article in addition to or
in place of the Trustee; provided, however, that Section 1414 shall not apply
to the Company or any Affiliate of the Company if it or such Affiliate acts as
Paying Agent.
SECTION 1417. No Suspension of Remedies.
Nothing contained in this Article shall limit the right of the
Trustee or the Holders of Securities to take any action to accelerate the
maturity of the Securities pursuant to Article Five or to pursue any rights or
remedies hereunder or under applicable law.
SECTION 1418. Proof of Claim.
In the event of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to Guarantor or the property of any Guarantor or
its creditors, the Holders irrevocably authorize and empower the agent under
the Bank Credit Agreement, if the Bank Credit Agreement is in effect and the
Banks are holders of Guarantor Senior Indebtedness (but without imposing any
obligation on, or any duty to such agent) to file and prove all claims therefor
in the name of the Holders (or otherwise, as such agent may determine, to be
necessary or appropriate for the enforcement of the provisions of this Article
Fourteen) if the Trustee or the Holders do not file a proper claim or proof of
debt in the form required in any such proceeding prior to 15 days before the
expiration of the time to file such claim or claims.
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<PAGE> 159
EXHIBIT B
SENIOR SUBORDINATED GUARANTEE
For value received, the undersigned hereby unconditionally
guarantees to the holder of a Security (as that term is defined in the
Indenture dated as of __________ 1994 (the "Indenture") between SPX Corporation
(the "Company") and The Bank of New York, as trustee (the "Trustee"), and the
Trustee, the payments of principal of, premium, if any, and interest on such
Security in the amounts and at the time when due and interest on the overdue
principal, premium, if any, and interest, if any, of such Security, if lawful,
and the payment or performance of all other obligations of the Company under
the Indenture or the Securities, all in accordance with and subject to the
terms and limitations of such Security, Article Fourteen of the Indenture and
this Guarantee. This Guarantee shall become effective in accordance with
Article Fourteen of the Indenture, and its terms shall be evidenced therein.
The validity and enforceability of this Guarantee shall not be affected by the
fact that it is not affixed to any particular Security.
The obligations of the undersigned to the holders of
Securities and to the Trustee pursuant to this Guarantee and the Indenture are
expressly set forth in Article Fourteen of the Indenture, and reference is
hereby made to the Indenture for the precise terms of this Guarantee and all of
the other provisions of the Indenture to which this Guarantee relates. The
Indebtedness (as defined in the Indenture) evidenced by this Guarantee is, to
the extent and in the manner provided in the Indenture, subordinate and subject
in right of payment to the prior payment in full in cash or cash equivalents of
all Guarantor Senior Indebtedness (as defined in the Indenture), and this
Guarantee is issued subject to such provisions. Each holder of a Security, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee, on behalf of such holder, to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such
holder for such purpose; provided, however, that such subordination provisions
shall
<PAGE> 160
cease to affect amounts deposited in accordance with the defeasance provisions
of the Indenture upon the terms and conditions set forth therein.
This Guarantee is subject to release upon the terms set forth
in the Indenture.
[NAME OF GUARANTOR]
By:
------------------------
Name:
Title:
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<PAGE> 1
Exhibit 5
GARDNER, CARTON & DOUGLAS
SUITE 3400-QUAKER TOWER
321 NORTH CLARK STREET
CHICAGO, ILLINOIS 60610-4795
(312) 644-3000
TELEX: 25-3626
TELECOPIER: (312) 644-3381
May 10, 1994
SPX Corporation
700 Terrace Point Drive
Muskegon, Michigan 49443
Re: SPX Corporation
Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to SPX Corporation, a Delaware corporation
(the "Issuer"), in connection with the registration under the Securities Act of
1933, as amended (the "Securities Act"), of an aggregate of $260,000,000
principal amount of Senior Subordinated Notes due 2002 of the Issuer (the
"Securities"), pursuant to the Registration Statement (the "Registration
Statement") on Form S-3 (Registration No. 33-52833). The Securities are to be
issued under an indenture (the "Indenture") between the Issuer and The Bank of
New York, as trustee (the "Trustee").
In connection with this opinion, we have examined into the corporate
organization of the Issuer and the proceedings taken to date by the Issuer for
the sale of the Securities. Our examination has extended to all statutes,
instruments, agreements, forms of agreements, resolutions, charter documents,
certificates and records which we have deemed necessary of examination for
purposes of this opinion.
With respect to all documents examined by us, we have assumed that (i)
all signatures on documents are genuine, (ii) all documents submitted to us as
originals are authentic and (iii) all documents submitted to us as copies
conform to the originals of those documents. With respect to matters of fact
necessary to provide the opinions expressed herein, we have obtained or been
furnished with, and have relied upon, such certificates and assurances from
officers and other representatives of the Issuer and public officials as we
have deemed necessary or appropriate for purposes of this opinion.
<PAGE> 2
SPX CORPORATION
May 10, 1994
Page 2
We have assumed for purposes of this opinion that the Indenture, the
Securities included in the Indenture and the Purchase Agreement (the "Purchase
Agreement") to be entered into by and among the Issuer, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Donaldson Lufkin & Jenrette Securities Corporation
and Wertheim Schroder & Co. Incorporated (the "Underwriters") will, when
executed, be substantially similar to the forms thereof which have been or are
being filed as exhibits to the Registration Statement.
Members of this firm are admitted to practice in the State of Illinois
and we express no opinion as to the laws of any other jurisdiction other than
the corporate laws of the State of Delaware and the laws of the United States
of America.
Based upon our examination as aforesaid and subject to the assumptions
set forth above, we are of the opinion that when (i) the Registration
Statement, as finally amended, has become effective; (ii) the appropriate
officers of the Issuer have adopted resolutions and taken all such other
additional action as may be necessary to establish and approve the terms of the
Securities; (iii) the Indenture is duly executed and delivered by the Issuer
and the Trustee; (iv) the Purchase Agreement is duly executed and delivered by
the Issuer and the Underwriters; and (v) the Securities are duly executed,
authenticated and delivered to the Underwriters upon payment of the agreed-upon
consideration therefor, the Securities will be validly issued and binding
obligations of the Issuer entitled to the benefits provided by the Indenture,
except to the extent that the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or
other similar laws now or hereafter in effect relating to creditors' rights
generally, and general principles of equity (whether considered in a proceeding
at law or in equity).
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to our firm in the Registration
Statement and related Prospectus under the caption "Legal Matters." In giving
such consent, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
<PAGE> 1
EXHIBIT 12
SPX CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
PRO FORMA
THREE MONTHS TWELVE PRO FORMA
ENDED MARCH MONTHS YEAR
31, ENDED ENDED YEAR ENDED DECEMBER 31,
---------------- MARCH 31, DEC. 31, ---------------------------------------------------------
1994 1993 1994 1993 1993 1992 1991 1990 1989
------- ------ --------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before income
taxes and cumulative
effect of change in
accounting methods and
extraordinary loss....... $ 5,100 $ 635 $(25,300) $(30,400) $ 44,655 $ 33,993 $ (28,732) $ 23,102 $ 33,333
Add (deduct):
SPT and SP Europe equity
losses................. 0 565 0 0 48,345 2,407 8,532 5,298 4,667
------- ------ --------- --------- --------- --------- --------- --------- ---------
Income as adjusted......... 5,100 1,200 (25,300) (30,400) 93,000 36,400 (20,200) 28,400 38,000
------- ------ --------- --------- --------- --------- --------- --------- ---------
Fixed charges:
Interest expense, net.... 10,228 3,907 37,500 39,000 17,882 15,061 16,853 17,708 9,906
Amortization of debt
expense................ 0 46 0 0 185 216 130 95 94
Rental expense
representative of an
interest factor........ 975 1,079 3,900 3,767 4,316 3,104 3,598 4,034 2,477
------- ------ --------- --------- --------- --------- --------- --------- ---------
Total fixed charges........ 11,203 5,032 43,400 42,767 22,383 18,381 20,581 21,837 12,477
------- ------ --------- --------- --------- --------- --------- --------- ---------
Total adjusted earnings
available for payment of
fixed charges............ $16,303 $6,232 $ 18,100 $ 12,367 $ 115,383 $ 54,781 $ 381 $ 50,237 $ 50,477
------- ------ --------- --------- --------- --------- --------- --------- ---------
------- ------ --------- --------- --------- --------- --------- --------- ---------
Ratio of earnings to fixed
charges.................. 1.46 1.24 * * 5.15 2.98 * 2.30 4.05
</TABLE>
- -------------------------
* In the pro forma twelve months ended March 31, 1994, the pro forma year ended
December 31, 1993, and the year ended December 31, 1993, earnings were
insufficient to cover fixed charges by $25.3 million, $30.4 million and $20.2
million, respectively. Pro forma twelve months ended March 31, 1994 and pro
forma year ended December 31, 1993 included a pretax restructuring charge of
$27.5 million. The year ended December 31, 1991 included a pretax special
charge of $18.2 million.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports included in this Amendment No. 1 to Form S-3 Registration Statement of
SPX Corporation and to all references to Arthur Andersen & Co., included in or
made part of this filing.
ARTHUR ANDERSEN & CO.
Chicago, Illinois,
May 10, 1994
