<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 5, 1997
REGISTRATION STATEMENT NO. 333-22279
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------
TITAN WHEEL INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<C> <C> <C>
ILLINOIS 3523 36-3228472
(State or other jurisdiction (Primary standard industrial (IRS Employer
of incorporation or classification code number) Identification No.)
organization)
</TABLE>
2701 SPRUCE STREET
QUINCY, ILLINOIS 62301
(217) 228-6011
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
CHERI T. HOLLEY, ESQ.
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
TITAN WHEEL INTERNATIONAL, INC.
2701 SPRUCE STREET
QUINCY, ILLINOIS 62301
(217) 228-6011
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
Copies of all communications to:
<TABLE>
<C> <C>
JOHN L. GILLIS, JR., ESQ. VALERIE FORD JACOB, ESQ.
ARMSTRONG, TEASDALE, SCHLAFLY & DAVIS FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
ONE METROPOLITAN SQUARE, SUITE 2600 ONE NEW YORK PLAZA
ST. LOUIS, MISSOURI 63102 NEW YORK, NEW YORK 10004
(314) 621-5070 (212) 859-8000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
------------------------
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, please check the following box. [ ]
If this Form is filed to register additional securities pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------------
If delivery of the Prospectus is expected pursuant to Rule 434, please
check the following box. [X]
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MARCH 5, 1997
PROSPECTUS
- ---------------------
$150,000,000
TITAN WHEEL LOGO
TITAN WHEEL INTERNATIONAL, INC.
% SENIOR SUBORDINATED NOTES DUE 2007
------------------------
Interest on the % Senior Subordinated Notes due 2007 (the "Notes") of
Titan Wheel International, Inc. ("Titan" or the "Company") will accrue from the
date of issuance thereof and will be payable semi-annually on and
of each year, commencing , 1997. The Notes will mature on
, 2007. The Notes are redeemable for cash at any time on or after
, 2002, at the option of Titan, in whole or in part, at the redemption
prices set forth herein, plus accrued and unpaid interest, if any, to the
redemption date. Upon a Change of Control (as defined herein), each holder of
the Notes will have the right to require the repurchase of its Notes by the
Company in cash at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of purchase. See
"Description of the Notes."
The Notes will be unsecured senior subordinated obligations of the Company
and, as such, will be subordinated in right of payment to all existing and
future Senior Indebtedness (as defined herein) of the Company, including
indebtedness under the Bank Credit Facility (as defined herein), and will rank
pari passu in right of payment with all other existing and future senior
subordinated indebtedness, if any, of the Company. In addition, the business
operations of the Company are conducted in part through its subsidiaries and the
Notes will also be effectively subordinated to all existing and future
liabilities of the Company's subsidiaries, including such subsidiaries'
guarantees of the Company's indebtedness under the Bank Credit Facility. As of
September 30, 1996, on a pro forma basis after giving effect to the sale of the
Notes and the application of the estimated net proceeds therefrom, the
redemption and conversion of the Company's 4 3/4% Notes (as defined herein) and
the repayment of certain other indebtedness, the Company would have had
approximately $11.6 million of Senior Indebtedness outstanding and the Company's
subsidiaries would have had approximately $129.3 million of indebtedness
outstanding (including trade payables and current, long-term and other
liabilities and excluding the guarantees by certain of the Company's
subsidiaries of the Company's obligations under the Bank Credit Facility).
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED 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>
<CAPTION>
=================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Per Note.......................................... % % %
- -----------------------------------------------------------------------------------------------------------------
Total............................................. $ $ $
=================================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from , 1997.
(2) The Company has agreed to indemnify the 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 $275,455.
------------------------
The Notes are being offered by the Underwriters, subject to prior sale,
when, as and if issued to and accepted by them, 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 through the book-entry facilities of The Depository Trust Company
on or about , 1997.
------------------------
MERRILL LYNCH & CO.
SMITH BARNEY INC.
SCHRODER WERTHEIM & CO.
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
------------------------
The date of this Prospectus is , 1997.
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.
<PAGE> 3
Titan Wheel Logo
Titan serves several major
original equipment
manufacturers, including John
Deere, Case, New Holland,
Caterpillar and AGCO. Titan
serves four primary markets:
agricultural, consumer,
earthmoving/construction, and
military applications.
Photograph depicting John Deere
tractor with Titan wheels and tires.
Photograph depicting New Holland
tractor with Titan wheels and tires.
Photograph depicting Case front-end
loader with Titan wheels.
Certain persons participating in this offering may engage in transactions
that stabilize, maintain, or otherwise affect the price of the Notes. Such
transactions may include stabilizing, the purchase of Notes to cover syndicate
short positions and the imposition of penalty bids. For a description of these
activities, see "Underwriting."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and the Consolidated Financial Statements of the Company, including
the notes thereto, included elsewhere in this Prospectus. References herein to
the Offering refer to the offer and sale of the Notes offered hereby.
THE COMPANY
Titan Wheel International, Inc. ("Titan" or the "Company") is a leading
global manufacturer of steel wheels and tires for off-highway vehicles used in
the agricultural, consumer products (including recreational trailers, all
terrain vehicles ("ATVs") and grounds care vehicles), earthmoving/construction
and military markets. The Company generally manufactures both the wheels and
tires for these vehicles and increasingly provides the value-added service of
assembling the completed system. The Company offers a broad range of over 25,000
different products that are manufactured in relatively short production runs and
must meet Original Equipment Manufacturers' ("OEM") specifications. The Company
believes, based upon current industry revenue data, that it is the largest
agricultural wheel producer and the third largest agricultural tire manufacturer
in North America. Agricultural sales in the aggregate accounted for
approximately 44% and 47% of the Company's net sales for the year ended December
31, 1995 and the latest twelve months ended September 30, 1996, respectively.
The Company's net sales for the year ended December 31, 1995 and the latest
twelve months ended September 30, 1996 were approximately $623.2 million and
$648.3 million, respectively. The Company's earnings before interest, income
taxes, depreciation and amortization ("EBITDA") for the year ended December 31,
1995 and the latest twelve months ended September 30, 1996 were $98.8 million
and $103.7 million, respectively.
Titan's major OEM customers include Deere & Company ("Deere"), Case
Corporation ("Case"), New Holland North America Inc. ("New Holland") and
Caterpillar Inc. ("CAT") in the agricultural and off-highway construction
markets and Deere, Bayliner Marine Corporation ("Bayliner") and Polaris
Industries, Inc. ("Polaris") in the consumer products market. In addition, the
Company continues to expand its sales of wheels and tires to the after-market,
where product demand tends to be less cyclical than in the OEM market. The
Company distributes its tire products in the after-market through a network of
more than 1,500 independent distributors and 12 of its own distribution centers.
This distribution network enables the Company to service markets not otherwise
accessible through its traditional OEM marketing channels.
Through a series of strategic acquisitions, the Company has broadened its
expertise in steel wheels, has become a major participant in tire manufacturing
and has expanded geographically into Europe. The Company has experienced
significant growth, both internally and through acquisitions. In the three years
ended December 31, 1995, the Company increased its net sales and EBITDA at a
compounded annual rate of 77% and 98%, respectively. The Company's history of
successful integration of acquisitions is evidenced by a growth in gross margin
over the same period at a compounded rate of 88%.
COMPANY STRENGTHS
Strong Market Position. The Company has achieved strong positions in both
the domestic and European markets for each of its major product categories.
Titan's ability to offer a broad range of different products has increased the
Company's visibility both in the United States and in Europe and has enhanced
the Company's ability to cross-sell its products and consolidate its market
positions. Innovative marketing programs have strengthened Titan's market image,
and the Company's widening distribution network is reaching increasing numbers
of customers in the after-market. Years of product design and engineering
experience have enabled the Company to improve existing products and develop new
ones that have been well received in the marketplace. In addition, Titan
believes that it has benefitted from significant barriers to entry, such as the
substantial investment necessary to replicate Titan's manufacturing equipment
and numerous tools and dies.
Cost-Effective Manufacturing Facilities. The Company believes it enjoys low
costs of production relative to the industry as a whole due to its workforce and
production facilities. Titan's employees receive continuing training to increase
their efficiency and flexibility and the Company's comprehensive maintenance
program
3
<PAGE> 5
enables it to utilize its production capabilities to maximum advantage.
Completion of Titan's new tire manufacturing facility in Brownsville, Texas will
enhance the Company's ability to shift production loads and will provide greater
flexibility in meeting output schedules to meet customer demands.
Geographic Diversity/Global Presence. The Company has established a strong
presence in North America and Europe, with manufacturing facilities in the
United States, the United Kingdom, France, Germany and Italy. International
sales for the year ended December 31, 1995 and the nine months ended September
30, 1996 accounted for 16% and 22%, respectively, of the Company's aggregate net
sales for these periods. The Company's European facilities are located in the
four countries that in the aggregate account for a significant majority of the
European market for off-highway wheels and tires. Titan believes that there will
be opportunities to expand sales of its agricultural wheel and tire products to
European OEMs and to Titan's existing North American OEM customers for export to
Europe and for their European operations.
Proven Track Record of Integrating Acquired Assets. The Company maintains a
highly disciplined approach in evaluating prospective acquisitions, focusing on
opportunities to improve and complement existing products, establishing a
broader market presence and consolidating its engineering, manufacturing and
marketing activities, while striving to acquire assets which have been
inefficiently utilized or ineffectively managed. By integrating acquired assets
with the Company's existing operations, reducing costs of operation and
achieving economies of scale, the Company has rapidly improved earnings and cash
flows of the majority of its acquired companies. Generally, the Company's
acquisitions have allowed it to: (i) expand its market and geographic reach;
(ii) enter the market for assembled wheels and tires, a market in which margins
are greater than markets for wheels and rims alone; (iii) substantially increase
its penetration of the after-market for wheels and tires (which market for tires
is larger and less cyclical than the OEM market); (iv) improve significantly the
operating efficiencies of its acquired assets and its manufacturing facilities;
and (v) improve its ability to service its customers' needs on a timely basis.
BUSINESS STRATEGY
Titan's business strategy is to increase its penetration of the
after-market for tires and wheels, increase its penetration of European and
possibly other global markets, focus on possible additional strategic
acquisitions, continue to improve its operating efficiencies and continue its
emphasis on new product development.
Increase After-Market Tire and Wheel Business. Titan has concentrated on
increasing its penetration of the tire and wheel after-markets. These
after-markets offer higher profit margins and the tire after-market is larger
and somewhat less cyclical than the OEM market. The Company estimates that sales
in the tire and wheel after-markets represented approximately 14% and 8%,
respectively, of the Company's net sales for the first nine months of 1996.
Titan intends to continue to devote its resources to future growth in the tire
and wheel after-markets.
Expand European Markets. Titan currently manufactures wheels for sale to
European OEMs in the agricultural and the earthmoving/construction off-highway
markets. The Company has established a significant presence in Europe, including
the following four markets: the United Kingdom, France, Germany and Italy. A
primary motivation for the Company's entry into European markets is its desire
to serve the worldwide needs of its major United States OEM customers, many of
which have substantial business in Europe. Additionally, the Company believes
that, due to the removal of trade barriers in the European Union and political
changes in Eastern Europe, the average size of farms in Europe is likely to
increase and, as a result, the average size of farm vehicles used in Europe will
increase. Because larger farm vehicles utilize larger and a greater number of
wheels and tires similar to those produced in the United States, Titan believes
that there will be opportunities to expand sales of its agricultural wheel and
tire products to European OEMs and to Titan's existing North American OEM
customers for export to Europe and for their European operations.
Explore Additional Strategic Acquisitions. Titan believes that its
expertise in the manufacture of steel wheels has permitted it to take advantage
of opportunities to acquire businesses in the United States and Europe that
complement this product line, including companies engaged in the tire market and
ultimately companies with wheel and tire assembly capabilities. The broadening
of Titan's business may permit it to
4
<PAGE> 6
make additional strategic acquisitions in the future. Although the Company
continuously reviews opportunities and has discussions with various parties, it
has no acquisition agreements at the present time.
Improve Operating Efficiencies. The Company continually works to improve
the operating efficiency of its acquired assets and its manufacturing
facilities. With each acquisition, Titan integrates each facility's strengths,
often transferring equipment and business to the facilities that are best
equipped to handle the work. This provides capacity to increase utilization and
spread operating costs over a greater volume of products. Titan is also
continuing a comprehensive program to refurbish, modernize and computerize its
equipment. Titan has also centralized and streamlined its inventory controls,
instituting a "just-in-time" system of providing raw materials to its
manufacturing units. These efforts have led to improved management of order
backlog and have substantially improved the Company's ability to respond to
customer orders on a timely basis. The Company is continually evaluating
opportunities to improve its operating efficiency. The Company is ISO 9000
certified at two of its wheel manufacturing facilities, evidencing its
conformance to internationally recognized standards of management and quality
assurance.
Improve Design Capacity and Increase New Product Development. Equipment
manufacturers constantly face changing industry dynamics. Titan directs its
business and marketing strategy to understanding all of its markets, addressing
the needs of its customers and demonstrating the advantages of its products. In
particular, the Company often participates with its customers in the design of
new and upgraded products. Titan will from time to time recommend modified
products to its customers based on Titan's own market information and research
and development. The Company's engineering and research and development staffs
test new designs and technologies, developing new methods of manufacturing to
improve product quality and performance. These value-added services enhance the
Company's relationship with its customers. The Company has spent in excess of $2
million annually on research and development for the fiscal years ending
December 31, 1994, 1995 and 1996, and has introduced more than 2,000 new
products in those years. The Company believes that its performance orientation
provides Titan with a competitive advantage in the global marketplace.
RECENT DEVELOPMENTS
Acquisition of Delachaux. In December 1996, the Company acquired the wheel
subsidiary of the French manufacturing company, Delachaux SA. The company has
been renamed Titan France SA ("Titan France") and will initially do business
under the name "Titan Delachaux." Titan France manufactures wheels and rims for
the French and European off-highway wheel markets. The acquisition enhances the
Company's presence in one of the four leading European wheel markets.
Redemption of 4 3/4% Notes. In December 1996, the Company redeemed $28.7
million aggregate principal amount of its 4 3/4% Notes, and the remaining $56.6
million aggregate principal amount of the 4 3/4% Notes were converted into
4,530,240 shares of common stock of the Company ("Common Stock").
Construction of Brownsville Plant. In October 1996, the Company announced
that it will construct a new off-highway tire manufacturing facility in
Brownsville, Texas. The new plant, which will be the first new agricultural tire
manufacturing facility constructed in the United States since the early 1960s,
is projected to be operational in late 1997 or early 1998. Upon completion, this
facility will significantly increase the Company's tire manufacturing capacity.
Bank Credit Facility. In September 1996, the Company entered into a $175.0
million credit facility with a syndicate of banks (the "Bank Credit Facility").
The Company is currently discussing with its lenders the possibility of
increasing the availability under the Bank Credit Facility to $200.0 million.
See "Description of Certain Indebtedness."
Offer to Purchase. On February 25, 1997, the Company commenced an offer to
purchase (the "Offer to Purchase") up to 5 million shares of its Common Stock
(the "Shares") at a price not greater than $15.00 nor less than $12.50 per
Share, for a maximum aggregate purchase price of $75 million. The Offer to
Purchase will expire on March 24, 1997 unless extended. Because holders of
Shares are not required to tender their Shares, no determination can be made of
the number of Shares, if any, that will be tendered. The repurchase is expected
to be funded by the Company partially from cash on hand and partially from
increased borrowings
5
<PAGE> 7
under the Bank Credit Facility. In May 1996, the Board of Directors authorized
the Company to repurchase up to five million Shares, and as of February 12,
1997, the Company had repurchased 1,758,100 Shares on the open market. On
February 21, 1997, the Executive Committee of the Board of Directors authorized
the Company to repurchase an additional five million Shares pursuant to the
Offer to Purchase for an aggregate total of ten million Shares.
1996 Results. Sales for the year ended December 31,1996 totaled $634.6
million, an $11.4 million increase over fiscal 1995 sales of $623.2 million.
Income from operations totaled $67.3 million for the year ended December
31,1996, compared to $73.1 million in fiscal 1995. The 1996 amounts were
impacted by the divestiture of the assets of non-core businesses in the second
and third quarters of 1996 and by pricing competition and certain other factors.
Titan is an Illinois corporation, its executive office is located at 2701
Spruce Street, Quincy, Illinois 62301, and its telephone number is (217)
228-6011.
6
<PAGE> 8
THE OFFERING
NOTES OFFERED.............. $150,000,000 aggregate principal amount of %
Senior Subordinated Notes due 2007.
MATURITY DATE.............. , 2007.
INTEREST PAYMENT DATES..... and of each year,
commencing , 1997.
OPTIONAL REDEMPTION........ On and after , 2002, the Notes may be
redeemed, in whole or in part, at the option of the
Company at the redemption prices set forth herein,
plus accrued and unpaid interest, if any, to the
redemption date. See "Description of Notes --
Optional Redemption."
CHANGE OF CONTROL.......... Upon the occurrence of a Change of Control, each
holder of Notes will have the right to require the
Company to repurchase in whole or in part such
holder's Notes at a cash purchase price equal to
101% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the redemption
date. See "Description of Notes -- Change of
Control."
RANKING.................... The Notes will be unsecured senior subordinated
obligations of the Company and, as such, will be
subordinated in right of payment to all existing
and future Senior Indebtedness of the Company,
including indebtedness under the Bank Credit
Facility (defined below). The Notes will rank pari
passu in right of payment with all other existing
and future senior subordinated indebtedness, if
any, of the Company and will rank senior to all
other subordinated indebtedness, if any, of the
Company. In addition, the business operations of
the Company are conducted in part through its
subsidiaries and the Notes will also be effectively
subordinated to all existing and future liabilities
of the Company's subsidiaries, including such
subsidiaries' guarantees of the Company's
indebtedness under the Bank Credit Facility. As of
September 30, 1996, on a pro forma basis after
giving effect to the sale of the Notes and the
application of the estimated net proceeds
therefrom, the redemption and conversion of the
4 3/4% Notes and the repayment of certain other
indebtedness, the Company would have had
approximately $11.6 million of Senior Indebtedness
outstanding and the Company's subsidiaries would
have had approximately $129.3 million of
Indebtedness outstanding (including trade payables
and current, long-term and other liabilities and
excluding the guarantees by certain of such
subsidiaries of the Company's obligations under the
Bank Credit Facility). See "Risk Factors --
Subordination of the Notes," "Risk Factors --
Holding Company Structure" and "Description of the
Notes -- Ranking."
CERTAIN COVENANTS.......... The indenture relating to the Notes (the
"Indenture") will contain certain covenants for the
benefit of the holders of the Notes, including, but
not limited to, covenants with respect to the
following matters: (i) limitation on indebtedness;
(ii) limitation on restricted payments; (iii)
limitation on transactions with affiliates, (iv)
limitation on certain liens; (v) limitation on
certain guarantees; (vi) limitation on other senior
subordinated indebtedness; (vii) limitation on the
sale or issuance of capital stock of subsidiaries;
(viii) limitation on dividend and other payment
restrictions affecting subsidiaries; (ix)
limitation on sale of assets; (x) change of
control; and (xi) limitation on mergers,
consolidations and sales of assets. However, these
limitations will be subject to a
7
<PAGE> 9
number of important qualifications and exceptions.
See "Description of the Notes -- Certain Covenants"
and "-- Mergers, Consolidations and Sales of
Assets."
USE OF PROCEEDS............ The net proceeds to the Company from the sale of
the Notes offered hereby are estimated to be
approximately $146.0 million (after deducting
estimated offering expenses and the Underwriters'
discount). The Company will use the net proceeds of
the Offering to repay outstanding long-term debt
and, if the Offer to Purchase is not consummated,
for general corporate purposes, which may include
capital expenditures and acquisitions. See "Use of
Proceeds" and "Capitalization."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating an investment in the Notes.
8
<PAGE> 10
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth summary historical consolidated financial
data with respect to the Company for the periods ended and as of the dates
indicated. The summary historical consolidated annual financial data is derived
from the audited Consolidated Financial Statements of the Company as of December
31, 1994 and 1995 and for the years ended December 31, 1993, 1994 and 1995
included elsewhere in this Prospectus and as of December 31, 1993 included in
the Company's 1993 Annual Report on Form 10-K. The summary historical
consolidated interim financial data is derived from the unaudited Consolidated
Condensed Financial Statements of the Company included elsewhere in this
Prospectus and as of and for the nine months ended September 30, 1995 included
in the Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 1995. In the opinion of the Company's management, the unaudited Consolidated
Condensed Financial Statements include all adjustments, consisting only of
normal recurring adjustments, necessary for the fair presentation of the
financial position and the results of operations for such period and as of such
dates. Operating results for the nine months ended September 30, 1996 are not
necessarily indicative of results expected for the year ended December 31, 1996.
See "-- Recent Developments -- 1996 Results." This information should be read in
conjunction with the Consolidated Financial Statements of the Company and the
notes thereto appearing elsewhere in this Prospectus, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Selected
Financial Information." The pro forma data for the year ended December 31, 1995
and the nine months ended September 30, 1996 is unaudited and such amounts are
not necessarily indicative of future results or of the results which would have
occurred had the sale of Notes taken place on January 1, 1995.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1993(A) 1994(A) 1995(A) 1995 1996
------- ------- ------- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................................................. $150,441 $407,000 $623,183 $464,900 $489,969
Income from operations.................................... 13,142 37,996 73,055 53,586 57,184(b)
Interest expense.......................................... 3,242 8,503 12,045 8,794 7,779
Net income................................................ 6,361 18,480 37,983 28,237 30,697
OTHER DATA:
EBITDA(c)................................................. $ 18,689 $ 56,038 $ 98,753 $ 73,331 $ 78,282(b)
Depreciation and amortization............................. 5,333 17,428 23,428 17,480 20,991
Capital expenditures...................................... 5,427 15,249 20,191 17,581 19,073
EBITDA Margin(d).......................................... 12.4% 13.8% 15.8% 15.8% 16.0%
Ratio of EBITDA to interest expense....................... 5.76x 6.59x 8.20x 8.34x 10.06x
Ratio of earnings to fixed charges(e)..................... 3.98x 4.39x 6.09x 6.18x 7.13x
Pro forma ratio of earnings to fixed charges(f)........... 4.84x 4.78x
Total debt as a percentage of total book
capitalization(g)....................................... 66% 63% 44% 46% 45%
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1996
-------------------------
ACTUAL AS ADJUSTED(H)
------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $216,795 $251,784
Total assets.............................................. 571,210 596,897
Total debt................................................ 195,719 183,446
Stockholders' equity...................................... 242,194 280,154
OTHER DATA:
Ratio of EBITDA to interest expense....................... 10.06x 6.67x
Total debt as a percentage of total book
capitalization(g)....................................... 45% 40%
</TABLE>
- -------------------------
(a) See Note 1 of the Notes to Consolidated Financial Statements herein for a
description of significant acquisitions.
(b) See Notes F and G of the Notes to Consolidated Condensed Interim Financial
Statements herein for a description of certain sales of assets and
realignment costs, respectively.
(c) EBITDA means earnings before interest, income taxes, depreciation and
amortization. Management believes that EBITDA is used by certain investors
as one measure of the Company's historical ability to service and/or incur
debt. However, EBITDA should not be considered as an alternative to net
income as a measure of the Company's operating results or to cash flows as a
measure of liquidity. In addition, although the EBITDA measure of
performance is not recognized under generally accepted accounting
principles, it is widely used by industrial companies as a general measure
of a company's operating performance because it assists in comparing
performance on a relatively consistent basis across companies without regard
to depreciation and amortization, which can vary significantly depending on
accounting methods (particularly where acquisitions are involved) or
non-operating factors such as historical cost bases. Because EBITDA is not
calculated identically by all companies, the presentation herein may not be
comparable to other similarly titled measures of other companies.
(d) EBITDA Margin means EBITDA expressed as a percentage of net sales.
(e) The ratio of earnings to fixed charges is determined by dividing the sum of
earnings before extraordinary items, cumulative effect of change in
accounting principle, interest expense, taxes on income, and a portion of
rent expense representative of the interest component by the sum of interest
expense and the portion of rent expense representative of the interest
component.
(f) Pro forma ratio of earnings to fixed charges is calculated by determining
the ratio of earnings to fixed charges (as calculated in footnote (e) above)
as adjusted to reflect the redemption and conversion of the 4 3/4% Notes,
repayment of certain other indebtedness, the repurchase of certain shares of
the Company's Common Stock as of February 12, 1997, the issuance of the
Notes offered hereby and the application of the estimated net proceeds
therefrom. See "Use of Proceeds." Assuming that, pursuant to the Offer to
Purchase, the maximum number of Shares (5 million) are tendered to the
Company at the maximum tender offer price of $15.00 per Share and not
withdrawn, and after giving effect to the redemption and conversion of the
4 3/4% Notes, repayment of certain other indebtedness, the Company's
repurchase of shares of its Common Stock as of February 12, 1997 (see
"Capitalization") and the sale of the Notes offered hereby and the
application of the estimated net proceeds therefrom (see "Use of Proceeds"),
the pro forma ratio of earnings to fixed charges for the year ended December
31, 1995 and the nine months ended September 30, 1996 would have been 4.34x
and 4.38x, respectively. See "Business Summary--Recent Developments--Offer
to Purchase."
(g) Total debt as a percentage of total book capitalization is equal to total
debt divided by the sum of total debt plus total stockholders' equity.
(h) Adjusted to reflect the redemption and conversion of the Company's 4 3/4%
Notes, repayment of certain other indebtedness, the repurchase of certain
shares of the Company's Common Stock as of February 12, 1997, the issuance
of the Notes offered hereby and the application of the estimated net
proceeds therefrom. See "Use of Proceeds."
9
<PAGE> 11
RISK FACTORS
Prospective purchasers of the Notes should carefully consider the factors
set forth below, as well as the other information set forth in this Prospectus,
in evaluating an investment in the Notes. This Prospectus contains certain
forward-looking statements which involve risks and uncertainties. There can be
no assurance that such forward-looking information will in fact transpire. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
DEPENDENCE ON CYCLICAL INDUSTRIES
Titan's sales are dependent in substantial part on three major industries,
the agricultural equipment industry, the consumer products industry (including
recreational trailers, ATVs and grounds care vehicles) and the
earthmoving/construction equipment industry, representing 44%, 27% and 22% of
Titan's net sales for the year ended December 31, 1995, respectively, and 47%,
25% and 23% of Titan's net sales for the nine-month period ended September 30,
1996, respectively.
From the late 1970's until 1993, sales of agricultural equipment in North
America declined significantly and sales of off-highway construction equipment,
recreational trailer and vehicle and turf and garden equipment in North America
were cyclical. Since the mid-1980's, the market for marine trailers also
declined substantially. Although these markets improved significantly in 1994
and remained strong through the third quarter of 1996, Titan believes that the
market for the sale by OEMs of agricultural equipment which utilize Titan's
products will continue to be below historical averages for the foreseeable
future. Because of Titan's already strong position in the North American and
European markets as a producer of wheels and rims for this equipment, Titan
believes that its opportunities for significant growth in market share in this
aspect of its business will be limited. See "Business."
LEVERAGE
Upon consummation of the Offering the Company will be leveraged. At
September 30, 1996, on a pro forma basis, after giving effect to the sale of the
Notes and the application of the estimated net proceeds therefrom, the
redemption and conversion of the 4 3/4% Notes and repayment of certain other
indebtedness, the Company would have had total indebtedness of approximately
$183.4 million. See "Capitalization." The Company may incur additional
indebtedness in the future, including Senior Indebtedness, subject to
limitations imposed by the Indenture and the Bank Credit Facility. The Company's
ability to make payments with respect to the Notes and to satisfy its other debt
obligations will depend on its future operating performance, which will be
affected by prevailing economic conditions and financial, business and other
factors, certain of which are beyond the Company's control.
Upon the issuance of the Notes, the Company's interest expense will
increase compared to prior years. The Company believes, based on current
circumstances, that the Company's cash flow, together with available borrowings
under the Bank Credit Facility, will be sufficient to permit the Company to meet
its operating expenses and to service its debt requirements as they become due
for the foreseeable future. Significant assumptions underlie this belief,
including, among other things, that the Company will succeed in implementing its
business strategy and there will be no material adverse developments in the
business, liquidity or capital requirements of the Company. If the Company is
unable to service its indebtedness, it will be forced to adopt an alternative
strategy that may include actions such as reducing or delaying capital
expenditures, selling assets, restructuring or refinancing its indebtedness or
seeking additional equity capital. There can be no assurance that any of these
strategies could be effected on satisfactory terms, if at all. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
The degree to which the Company will be leveraged following the Offering
could have important consequences to holders of the Notes, including, but not
limited to, the following: (i) a substantial portion of the Company's cash flow
from operations will be required to be dedicated to debt service and will not be
available to the Company for its operations; (ii) the Company's ability to
obtain additional financing in the future for acquisitions, capital
expenditures, working capital or general corporate purposes could be limited;
10
<PAGE> 12
(iii) certain of the Company's borrowings are at variable rates of interest,
which could result in higher interest expense in the event of increases in
interest rates; and (iv) the Company may be substantially more leveraged than
certain of its competitors, which may place the Company at a relative
competitive disadvantage and make the Company more vulnerable to changing market
conditions and regulations. See "Description of the Notes."
SUBORDINATION OF THE NOTES
The Notes will be senior subordinated obligations of the Company,
subordinated in right of payment to all present and future Senior Indebtedness
of the Company including indebtedness under the Bank Credit Facility. The Notes
will rank pari passu with all senior subordinated indebtedness, if any, of the
Company and will rank senior to all other subordinated indebtedness, if any, of
the Company. The Notes will also be effectively subordinated to all existing and
future liabilities of the Company's subsidiaries, including such subsidiaries'
guarantees of the Company's indebtedness under the Bank Credit Facility. As of
September 30, 1996, on a pro forma basis after giving effect to the sale of the
Notes and the application of the estimated net proceeds therefrom, the
redemption and conversion of the Company's 4 3/4% Notes and the repayment of
certain other indebtedness, the Company would have had approximately $11.6
million of Senior Indebtedness outstanding and the Company's Subsidiaries would
have had approximately $129.3 million of indebtedness outstanding (including
trade payables and current, long-term and other liabilities and excluding the
guarantees by certain of the Company's subsidiaries of the Company's obligations
under the Bank Credit Facility). The Company expects that it will incur
additional Senior Indebtedness, including Senior Indebtedness under the Bank
Credit Facility, in connection with the implementation of its growth strategy.
In addition, on a pro forma basis at September 30, 1996, the Company would have
had available an additional $175.0 million under the Bank Credit Facility and,
provided certain tests were met, would have been able to borrow additional
Senior Indebtedness. The Company is currently discussing with the lenders under
the Bank Credit Facility a potential increase in the availability under such
agreement to up to $200.0 million.
By reason of such subordination, in the event of the liquidation or
insolvency of the Company, creditors of the Company who are not holders of
Senior Indebtedness, including holders of the Notes, may recover less, ratably,
than holders of Senior Indebtedness. The holders of any indebtedness of the
Company's subsidiaries will be entitled to payment of their indebtedness from
the assets of such subsidiaries prior to the holders of any general unsecured
obligations of the Company, including the Notes. If the Company incurs
additional pari passu indebtedness, the holders of such debt would be entitled
to share ratably with the holders of the Notes in any proceeds distributed in
connection with any insolvency, liquidation, reorganization, dissolution or
other winding up of the Company. This will have the effect of reducing the
amount of proceeds paid to holders of the Notes. In addition, no payments may be
made with respect to the principal of or interest on the Notes if a payment
default exists with respect to Designated Senior Indebtedness (as defined
herein) and, under certain circumstances, no payments may be made with respect
to the principal of or interest on the Notes for certain periods of time if a
non-payment default exists with respect to Designated Senior Indebtedness. See
"Description of Certain Indebtedness" and "Description of the Notes--Ranking."
HOLDING COMPANY STRUCTURE
The Company conducts a portion of its business through its subsidiaries.
The Company will, in part, be dependent on the cash flow of such subsidiaries
and dividends and distributions from such subsidiaries to the Company in order
to meet its debt service obligations. The ability of the Company's subsidiaries
to pay such dividends and distributions will be subject to, among other things,
the terms of any debt instruments of the Company's subsidiaries then in effect
and applicable law. As a result of the structure of the Company, the holders of
the Notes will be structurally subordinated to all creditors of the subsidiaries
of the Company, including the guarantees by certain subsidiaries of the
Company's obligations under the Bank Credit Facility. The Company's rights, and
the rights of its creditors, to participate in the distribution of assets of any
subsidiary upon such subsidiary's liquidation or reorganization will be subject
to the prior claims of such subsidiary's creditors, except to the extent that
the Company is itself recognized as a creditor of such
11
<PAGE> 13
subsidiary, in which case the claims of the Company would still be subject to
the claims of any secured creditor of such subsidiary and of any holder of
indebtedness of such subsidiary senior to that held by the Company. As of
September 30, 1996, the aggregate amount of indebtedness and other obligations
of the subsidiaries (including trade payables current, long-term and other
liabilities) plus other debt would have been approximately $129.3 million
(excluding the guarantees of the Company's obligations under the Bank Credit
Facility by certain of the Company's subsidiaries).
SENSITIVITY TO NORTH AMERICAN AND EUROPEAN ECONOMIES
Sales of a substantial portion of Titan's products in the agricultural,
consumer products and the off-highway construction markets are directly related
to the overall level of production of OEMs, which, in turn, is sensitive to the
overall strength of the North American and European economies, including farm
income and farm land values, consumer disposable income, interest rates, levels
of acreage planted and crop yields, international supply and demand conditions
for agricultural commodities and forestry products, weather conditions, and
other general agricultural, forestry, construction and mining conditions.
Significant adverse changes in the overall strength of these economies or in
these other factors would have a negative effect on the Company's business.
RISKS OF FOREIGN OPERATIONS
During 1995 and the nine months ended September 30, 1996, 16% and 22%,
respectively, of the Company's net sales was generated by sales of its foreign
subsidiaries. The percentage of sales generated by foreign subsidiaries of the
Company has been increasing. See Note 15 to the Company's Consolidated Financial
Statements. International operations and exports to foreign markets are subject
to a number of special risks, including, but not limited to, risks with respect
to currency exchange rates, economic and political destabilization, other
disruption of markets, restrictive actions by foreign governments (such as
restrictions on transfer of funds, export duties and quotas, foreign customs and
tariffs and unexpected changes in regulatory environments), changes in foreign
laws regarding trade and investment, difficulty in obtaining distribution and
support, nationalization, the laws and policies of the United States affecting
trade, foreign investment and loans, and foreign tax laws. There can be no
assurance that one or a combination of these factors will not have a material
adverse effect on the Company's ability to increase or maintain its foreign
sales or on its results of operations.
In addition, the Company has significant manufacturing operations in
foreign countries and purchases a portion of its raw materials from foreign
suppliers. The production costs, profit margins and competitive position of the
Company are affected by the strength of the currencies in countries where it
manufactures or purchases goods relative to the strength of the currencies in
countries where its products are sold. The Company's results of operations and
financial position may be adversely affected by fluctuations in foreign
currencies and by translations of the financial statements of the Company's
foreign subsidiaries from local currencies into U.S. dollars.
POTENTIAL ADVERSE EFFECT OF REGULATION AND GOVERNMENT POLICY
Domestic and foreign political developments and government regulations and
policies directly affect the agricultural, off-highway construction and consumer
products industries in the United States and abroad and indirectly affect the
wheel and tire markets for such industries. Regulations and policies relating to
the agricultural industry include those encouraging farm acreage reduction in
the United States and restricting deforestation techniques. Regulations and
policies relating to the off-highway construction industry include those
regarding the construction of roads, bridges and other items of infrastructure.
Regulations and policies relating to over-the-highway vehicles include standards
established by the U.S. Department of Transportation for tire endurance
standards and safety. The modification of existing laws, regulations or
policies, or the adoption of new laws, regulations or policies, could have an
adverse effect on Titan's business.
12
<PAGE> 14
DEPENDENCE ON PRINCIPAL CUSTOMERS
For the year ended December 31, 1995 and the nine months ended September
30, 1996, Titan's largest customer, Deere & Company, accounted for approximately
12% and 13%, respectively, of net sales, and Titan's ten largest customers
accounted for approximately 42% of net sales during both periods. As a result,
Titan's business could be adversely affected if one of its larger customers
reduces its purchases from Titan due to work stoppages or slow-downs, financial
difficulties, as a result of termination provisions, competitive pricing or
other reasons. Although the Company has had long-term relationships with its
major customers and expects that it will be able to negotiate extensions of its
current arrangements, there can be no assurance that it will be able to do so or
that, if obtained, such arrangements will be obtained on terms favorable to the
Company. Any failure to obtain an extension of an arrangement with a leading
customer could have an adverse effect on the Company. See "Business--Customers."
DEPENDENCE ON EXISTING MANAGEMENT AND KEY PERSONNEL
Titan's continued success and viability are dependent, to a certain extent,
upon its ability to attract and retain qualified personnel in all areas of its
businesses, especially management positions. In the event the Company is unable
to attract and retain qualified personnel, its businesses may be adversely
affected. Mr. Taylor, the Company's President and Chief Executive Officer, has
been instrumental in the development and implementation of Titan's business
strategy. The Company's Bank Credit Facility provides that if Mr. Taylor ceases
to serve as an executive officer or director of the Company for more than 180
days, and if during that period Titan has not replaced Mr. Taylor with a person
reasonably acceptable to the Company's lenders, the lenders may require the
entire amount outstanding thereunder to be prepaid. The Company has not entered
into employment agreements with any of its executive officers, including Mr.
Taylor, and does not maintain key-person life insurance policies on any of its
executive officers. The loss or interruption of the continued full-time services
of any of the Company's executive officers, including Mr. Taylor, could have a
material adverse effect on Titan. See "Business--Business History."
COMPETITION
Titan competes with several international and domestic competitors, some of
which are larger and have greater financial and marketing resources than Titan.
Titan competes primarily on the basis of price, quality, customer service,
design capability and delivery time. Its ability to compete with international
competitors may be adversely affected by currency fluctuations. In addition,
certain of Titan's OEM customers could, under certain circumstances, elect to
manufacture certain of Titan's products to meet their requirements or to
otherwise compete with Titan. There can be no assurance that the businesses of
Titan will not be adversely affected by increased competition in the markets in
which it operates or that the Company's competitors will not develop products
that are more effective or less expensive than the Company's products or which
could render certain of the Company's products less competitive. From time to
time certain competitors of the Company have reduced their prices in particular
product categories, which has caused the Company to reduce its prices. There can
be no assurance that in the future competitors of the Company will not further
reduce prices or that any such reductions would not have a material adverse
effect on the Company. See "Business -- Competition."
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Indenture will contain certain covenants limiting the incurrence of
additional indebtedness, the payment of dividends, the redemption of capital
stock, the making of certain investments, the issuance of capital stock of
subsidiaries, the creation of liens, the creation of dividend and other
restrictions affecting subsidiaries, the issuance of guarantees, transactions
with affiliates, asset sales and certain mergers and consolidations. However,
these limitations will be subject to a number of important qualifications and
exceptions. In addition, the Bank Credit Facility contains restrictive covenants
and requires the Company to maintain specified financial ratios and satisfy
certain financial tests. The Company's ability to meet such financial ratios and
tests may be affected by events beyond its control, and there can be no
assurance that the Company will meet such tests. A breach of any of these
covenants could result in an event of default under the
13
<PAGE> 15
Bank Credit Facility. In an event of default under the Bank Credit Facility, the
lenders thereunder could elect to declare all amounts borrowed, together with
accrued interest, to be immediately due and payable and the lenders under the
Bank Credit Facility could terminate all commitments thereunder. If any such
indebtedness were to be accelerated, there can be no assurance that the assets
of the Company would be sufficient to repay in full such indebtedness and the
other indebtedness of the Company, including the Notes. In addition, a default
under the Bank Credit Facility or the instruments governing the Company's other
indebtedness could constitute a cross-default under the Indenture and any
instruments governing the Company's other indebtedness, and a default under the
Indenture could constitute a cross-default under the Bank Credit Facility and
any instruments governing the Company's other indebtedness. See "Description of
the Notes--Certain Covenants" and "Description of Certain Indebtedness."
RISKS IN ACQUISITION STRATEGY
The ability of the Company to successfully implement its acquisition
strategy depends upon a number of factors. To implement its strategy, the
Company must identify acquisition opportunities in the wheel and tire or related
industries, successfully negotiate, finance and consummate such acquisitions and
comply with applicable regulatory restrictions (including antitrust laws) in the
United States and abroad. There can be no assurance that the Company will be
able to identify suitable acquisition candidates at favorable acquisition prices
or that it will be able to finance and consummate any such acquisitions. In past
acquisitions, the Company has been successful in reducing product and
organization costs upon consummation and integration of the acquisitions.
However, there can be no assurance that the Company will be able to integrate
any new acquisitions successfully into its operations and achieve cost savings
from such integration.
ABSENCE OF A PUBLIC MARKET FOR THE NOTES; POSSIBLE VOLATILITY
There is no established trading 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 any automated dealer quotation system. The
Company has been advised by the Underwriters that they presently intend to make
a market in the Notes after the consummation of the Offering contemplated
hereby, although they are under no obligation to do so and may discontinue any
market-making activities at any time without any notice. Accordingly, no
assurance can be given as to the price of the Notes or the liquidity of the
trading market for the Notes or that an active public trading market for the
Notes will develop. If an active public trading market for the Notes does not
develop, the market price and liquidity of the Notes may be adversely affected.
If the Notes are traded, they may trade at a discount from their initial
offering price, depending upon prevailing interest rates, the market for similar
securities, the performance of the Company and certain other factors. The
liquidity of, and trading markets for, the Notes may also be adversely affected
by general declines in the market for non-investment grade debt. Such declines
may adversely affect the liquidity of, and trading markets for, the Notes,
independent of the financial performance of or prospects for the Company.
Historically, the market for debt similar to the Notes has been subject to
disruptions that have caused substantial price volatility. There can be no
assurance that the market for the Notes will not be subject to similar
disruptions. Any such disruptions may have a material adverse effect on the
value of the Notes.
14
<PAGE> 16
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes, after deducting
estimated underwriting discounts and offering expenses, are estimated to be
approximately $146.0 million. The Company intends to use approximately $100.0
million of such proceeds to repay amounts then outstanding under the Bank Credit
Facility; however, if the Offer to Purchase is consummated, the entire net
proceeds will be used to repay a portion of amounts then outstanding under the
Bank Credit Facility. See "Prospectus Summary--Recent Developments--Offer to
Purchase," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Description of Certain Indebtedness." The remaining
proceeds (if any) will be used for general corporate purposes, which may include
capital expenditures and additional acquisitions.
The Bank Credit Facility provides the Company with four interest options,
bore interest at the rate of 6 1/4% per annum on February 18, 1997 and is
scheduled to mature in September 2001. Approximately $100.0 million was
outstanding under the Bank Credit Facility at February 18, 1997. Borrowings
under the Bank Credit Facility were used primarily to discharge subsidiary term
loans and the SIRMAC Group (as defined herein) revolving credit facility and for
the redemption of the 4 3/4% Notes.
15
<PAGE> 17
CAPITALIZATION
The following table sets forth (i) the consolidated capitalization of the
Company at September 30, 1996, (ii) the consolidated capitalization of the
Company on a pro forma basis to give effect to the redemption and conversion of
the 4 3/4% Notes (as described in note (b) below), repayment of certain other
indebtedness and the Company's repurchase of shares of its Common Stock (as
described in note (f) below) and (iii) the September 30, 1996 pro forma
capitalization as adjusted for the sale of the Notes offered hereby and the
application of the estimated net proceeds as described under "Use of Proceeds."
The following table should be read in conjunction with the Company's unaudited
Consolidated Condensed Financial Statements and the Notes thereto included in
this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA(A) AS ADJUSTED(B)
-------- ------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents............................... $ 56,146 $ 32,789 $ 78,789
======== ======== ========
Total debt:
Industrial Revenue Bonds -- Greenwood................. $ 9,500 $ 9,500 $ 9,500
Bank borrowings:
Revolving credit -- SIRMAC (c)..................... 16,994 -- --
Bank Credit Facility (d)........................... 60,000 100,000 --
Notes offered hereby.................................. -- -- 150,000
4 3/4% Convertible Subordinated Notes due 2000 (e).... 85,279 -- --
Note payable to PATC.................................. 19,743 19,743 19,743
Other................................................. 4,203 4,203 4,203
-------- -------- --------
Total debt......................................... $195,719 $133,446 $183,446
======== ======== ========
Stockholders' equity:
Common Stock--no par value, 60,000,000 shares
authorized, 22,295,541 shares outstanding at
September 30, 1996 and 25,444,892 shares
outstanding at September 30, 1996 on a pro forma
and pro forma as adjusted basis.................... $ 23 $ 27 $ 27
Additional paid-in capital (e)........................ 154,688 210,307 210,307
Retained earnings..................................... 93,823 93,823 93,823
Cumulative translation adjustments.................... (355) (355) (355)
Treasury stock at cost: 399,165 shares at September
30, 1996 and 1,807,265 shares at September 30, 1996
on a pro forma and a pro forma as adjusted basis,
respectively (f)................................... (5,985) (23,648) (23,648)
-------- -------- --------
Total stockholders' equity......................... 242,194 280,154 280,154
-------- -------- --------
Total capitalization............................. $437,913 $413,600 $463,600
======== ======== ========
</TABLE>
- -------------------------
(a) Gives pro forma effect to the redemption and conversion of the 4 3/4% Notes,
repayment of certain other indebtedness and the Company's repurchase of
shares of Common Stock as of February 12, 1997.
(b) Gives pro forma effect to the redemption and conversion of the 4 3/4% Notes,
repayment of certain other indebtedness, the Company's repurchase of shares
of Common Stock as of February 12, 1997, the sale of the Notes offered
hereby and the application of the $146.0 million of the estimated net
proceeds described under "Use of Proceeds."
(c) This loan was repaid with borrowings under the Bank Credit Facility.
(d) The Bank Credit Facility presently allows borrowings up to $175.0 million.
The Company is currently discussing with its lenders the possibility of
increasing the availability under the Bank Credit Facility to $200.0
million. Approximately $100.0 million was outstanding under the Bank Credit
Facility at February 18, 1997.
(e) On December 30, 1996 the Company redeemed $28.7 million principal amount of
the 4 3/4% Notes with borrowings under the Bank Credit Facility, with the
remaining $56.6 million principal amount converted into 4,530,240 shares of
Common Stock of the Company resulting in an increase in additional paid-in
capital of $55.6 million.
(f) In May 1996 the Company's Board of Directors authorized the repurchase of up
to 5 million shares (approximately 22% of outstanding shares as of the end
of May 1996) of its Common Stock. As of February 12, 1997 the Company has
repurchased 1,758,100 shares pursuant to this program.
16
<PAGE> 18
SELECTED FINANCIAL INFORMATION
The selected financial data presented below as of December 31, 1994 and
1995 and for the years ended December 31, 1993, 1994 and 1995 are derived from
the Company's Consolidated Financial Statements, audited by Price Waterhouse
LLP, independent accountants, included elsewhere herein. The selected financial
data as of December 31, 1992 and 1993 and for the years ended December 31, 1991
and 1992 are derived from the Company's Consolidated Financial Statements
audited by Price Waterhouse LLP, not included herein, which have been filed in
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1993. The selected financial data as of December 31, 1991 is derived from the
Company's Consolidated Financial Statements audited by Price Waterhouse LLP. The
selected financial data as of and for the nine months ended September 30, 1996
is derived from the Company's unaudited Consolidated Condensed Financial
Statements included elsewhere herein, and the selected financial data as of and
for the nine months ended September 30, 1995 is derived from financial data
included in the Company's third quarter 1995 Quarterly Report on Form 10-Q. In
the opinion of the Company's management, the unaudited Consolidated Condensed
Financial Statements have been prepared on the same basis as the audited
Consolidated Financial Statements and include all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of the
financial position and the results of operations for these periods and as of
such dates. Operating results for the nine months ended September 30, 1996 are
not necessarily indicative of results expected for the entire year. See
"Prospectus Summary -- Recent Developments -- 1996 Results." The selected
consolidated financial data set forth below should be read in conjunction with
the Consolidated Financial Statements and Notes thereto, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other financial information included elsewhere in this Prospectus. The pro forma
data for the year ended December 31, 1995 and the nine months ended September
30, 1996 is unaudited and such amounts are not necessarily indicative of future
results or of the results which would have occurred had the sale of Notes taken
place on January 1, 1995.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------------------------- -------------------
1991 1992 1993(A) 1994(A) 1995(A) 1995 1996
---- ---- ------- ------- ------- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales........................... $100,054 $113,170 $150,441 $407,000 $623,183 $464,900 $489,969
Gross profit........................ 11,501 17,437 25,269 68,432 115,726 84,673 76,989(c)
Income (loss) from operations....... (911)(b) 8,798 13,142 37,996 73,055 53,586 57,184(c)
Other (income) expenses:
Interest expense.................. 3,399 2,817 3,242 8,503 12,045 8,794 7,779
Other............................. (782) (487) (214) (614) (3,480) (2,688) (2,189)
Income (loss) before income taxes,
extraordinary loss and cumulative
effect of change in accounting
principle......................... (3,528) 6,468 10,114 30,107 63,280 47,057 49,512
Extraordinary loss related to early
retirement of debt(d)............. -- (258) -- -- -- -- --
Cumulative effect of change in
accounting principle(e)........... -- (275) -- -- -- -- --
Net income (loss)................... (3,616) 3,539 6,361 18,480 37,983 28,237 30,697
BALANCE SHEET DATA (AT END OF PERIOD):
Current assets...................... $ 41,978 $ 40,663 $141,682 $192,358 $264,900 $287,001 $323,308
Total assets........................ 66,994 69,313 261,266 400,460 512,135 534,923 571,210
Current liabilities................. 21,125 22,459 50,944 72,396 113,642 134,174 106,513
Current portion of long-term debt... 2,443 2,317 7,115 3,195 26,419 31,736 14,009
Long-term debt...................... 36,950 35,785 123,646 178,341 142,305 142,180 181,710
Total liabilities................... 59,900 62,673 194,538 292,724 296,263 329,017 329,016
Stockholders' equity................ 7,094 6,640 66,728 107,736 215,872 205,906 242,194
OTHER FINANCIAL DATA:
EBITDA(f)........................... $ 2,812 $ 12,725 $ 18,689 $ 56,038 $ 98,753 $ 73,331 $ 78,282(c)
Depreciation and amortization....... 2,941 3,440 5,333 17,428 23,428 17,480 20,991
Capital expenditures................ 3,704 3,035 5,427 15,249 20,191 17,581 19,073
EBITDA Margin(g).................... 2.8% 11.2% 12.4% 13.8% 15.8% 15.8% 16.0%
Ratio of EBITDA to interest
expense........................... .83x 4.52x 5.76x 6.59x 8.20x 8.34x 10.06x
Ratio of earnings to fixed
charges(h)........................ (--)(i) 3.14x 3.98x 4.39x 6.09x 6.18x 7.13x
Pro forma ratio of earnings to fixed
charges(j)........................ -- -- -- -- 4.84x -- 4.78x
Total debt as a percentage of total
book capitalization(k)............ 85% 85% 66% 63% 44% 46% 45%
</TABLE>
(footnotes on following page)
17
<PAGE> 19
- -------------------------
(a) See Note 1 of the Notes to the Consolidated Financial Statements herein for
a description of significant acquisitions.
(b) In December 1991, Titan recorded a provision of $4.2 million for the
estimated costs associated with the closure of the Company's Toronto,
Ontario facility, including costs related to employee severance, inventory
obsolescence, rent and property taxes, asset disposal and other
miscellaneous costs. This facility was closed in October 1992.
(c) See Notes F and G of the Notes to Consolidated Condensed Interim Financial
Statements herein for a description of sale of assets and realignment costs,
respectively.
(d) On July 31, 1992, Titan entered into a credit agreement and, in connection
therewith, recorded an extraordinary loss of $258,000 (net of tax benefit of
$167,000), consisting primarily of deferred financing costs associated with
its previous credit facility.
(e) The Company adopted SFAS 109 effective January 1, 1992. The cumulative
effect of adopting SFAS 109 was a $275,000 charge to the statement of
operations for the year ended December 31, 1992.
(f) EBITDA means earnings before interest, income taxes, depreciation and
amortization. Management believes that EBITDA is used by certain investors
as one measure of the Company's historical ability to service and/or incur
its debt. However, EBITDA should not be considered as an alternative to net
income as a measure of the Company's operating results or to cash flows as a
measure of liquidity. In addition, although the EBITDA measure of
performance is not recognized under generally accepted accounting
principles, it is widely used by industrial companies as a general measure
of a company's operating performance because it assists in comparing
performance on a relatively consistent basis across companies without regard
to depreciation and amortization, which can vary significantly depending on
accounting methods (particularly where acquisitions are involved) or
non-operating factors such as historical cost bases. Because EBITDA is not
calculated identically by all companies, the presentation herein may not be
comparable to other similarly titled measures of other companies.
(g) EBITDA Margin means EBITDA expressed as a percentage of net sales.
(h) The ratio of earnings to fixed charges is determined by dividing the sum of
earnings before extraordinary items, cumulative effect of change in
accounting principle, interest expense, taxes on income, and a portion of
rent expense representative of the interest component by the sum of interest
expense and the portion of rent expense representative of the interest
component.
(i) Earnings for 1991 were inadequate to cover fixed charges; the coverage
deficiency totaled approximately $100,000.
(j) Pro forma ratio of earnings to fixed charges is calculated by determining
the ratio of earnings to fixed charges (as calculated in footnote (h) above)
as adjusted to reflect the redemption and conversion of the 4 3/4% Notes,
repayment of certain other indebtedness, the repurchase of certain shares of
the Company's Common Stock prior to February 12, 1997, the issuance of the
Notes offered hereby and the application of the estimated net proceeds
therefrom. See "Use of Proceeds." Assuming that, pursuant to the Offer to
Purchase, the maximum number of Shares (5 million) are tendered to the
Company at the maximum tender offer price of $15.00 and not withdrawn, and
after giving effect to the redemption and conversion of the 4 3/4% Notes,
repayment of certain other indebtedness, the Company's repurchase of shares
of its Common Stock prior to February 12, 1997 (see "Capitalization") and
the sale of the Notes offered hereby and the application of the estimated
net proceeds therefrom (see "Use of Proceeds"), the pro forma ratio of
earnings to fixed charges for the year ended December 31, 1995 and the nine
months ended September 30, 1996 would have been 4.34x and 4.38x,
respectively. See "Business Summary -- Recent Developments -- Offer to
Purchase."
(k) Total debt as a percentage of total book capitalization is equal to total
debt divided by the sum of total debt plus total stockholders' equity.
18
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company conducts its business in a single segment, the manufacture and
sale of a full line of tires, wheels and components for the agricultural,
consumer products, earthmoving/construction, engineered product and military
markets.
Through a series of strategic acquisitions, the Company has broadened its
expertise into steel wheel and tire manufacturing, expanded both its product
lines and markets and expanded geographically into Europe. Between the beginning
of 1993 and the end of 1995, the Company made eight acquisitions and increased
its net sales from $113.2 million in 1992 to $623.2 million in 1995, improved
its ratio of debt to total capital from 85.2% in 1992 to 43.9% in 1995 and
increased its EBITDA from $12.7 million (excluding cumulative effect of change
in accounting principle and extraordinary loss related to early retirement of
debt) in 1992 to $98.8 million in 1995. For the nine months ended September 30,
the Company increased its net sales from $464.9 million in 1995 to $490.0
million in 1996, increased its EBITDA from $73.3 million in 1995 to $78.3
million in 1996, improved its EBITDA expressed as a percentage of net sales from
15.8% in 1995 to 16.0% in 1996, and reduced its ratio of total debt to total
book capitalization from 46.0% in 1995 to 45.0% in 1996. Generally, the
Company's acquisitions have allowed it to: (i) expand its market and geographic
reach; (ii) enter the market for assembled wheels and tires, a market in which
margins are greater than markets for wheels and rims alone; (iii) substantially
increase its penetration of the after-market for wheels and tires, a market
larger and less cyclical than the OEM market; (iv) improve significantly the
operating efficiencies of its acquired assets and its manufacturing facilities;
and (v) improve its ability to service its customers' needs on a timely basis.
For a further discussion of recent acquisitions by the Company, see "Business --
Business History."
While a majority of the Company's growth in net sales and earnings from
1992 to 1995 has been due to acquisitions, the Company has also experienced
compounded annual growth in excess of 7% from its existing operations during
that period. This increase in net sales is primarily attributable to increased
unit sales. Sales of agricultural products totaled $276.0 million and 44% of net
sales in 1995, compared to $65.3 million and 58% of net sales in 1992. Sales in
Titan's next largest market, consumer products, totaled $170.7 million and
represented 27% of Titan's net sales in 1995, compared to $2.6 million and 2% of
net sales in 1992. Titan's line of consumer products has significantly increased
and includes wheels, tires and brakes for lawn and garden tractors, ATVs,
recreational vehicles, boat and utility trailers and specialty automotive
wheels. Sales in Titan's third largest market, earthmoving/construction, totaled
$133.5 million and 22% of net sales in 1995 compared to $26.0 million and 23% of
net sales in 1992. For the nine months ended September 30, 1996, sales of
agricultural equipment products accounted for 47% of net sales, consumer market
products accounted for approximately 25%, earthmoving/construction products
accounted for approximately 23%, engineered and other products accounted for 4%
and military products accounted for 1%, compared to 44%, 29%, 21%, 5% and 1%
respectively, for the nine months ended September 30, 1995.
Titan has also increased its liquidity in recent years. During 1995 and
through the third quarter of 1996, the Company relied on internally-generated
cash flow for all of its liquidity needs associated with its existing
operations. The Company increased its liquidity for acquisitions through
external sources. In September 1996, Titan entered into the $175.0 million Bank
Credit Facility with Harris Trust and Savings Bank and other lenders. The
Company is currently discussing with its lenders the possibility of increasing
the availability under the Bank Credit Facility to $200.0 million. In March
1995, the Company financed its new facility in Greenwood, South Carolina with
$9.5 million in aggregate principal amount of Industrial Revenue Bonds. The
Company intends to repay an aggregate of approximately $100.0 million of
outstanding indebtedness through the proceeds of the offering of the Notes
hereunder. See "Use of Proceeds."
19
<PAGE> 21
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, Titan's
statement of operations expressed as a percentage of sales. This table and
subsequent discussions should be read in conjunction with the Company's
Consolidated Financial Statements, the Company's Consolidated Condensed
Financial Statements and related notes included herein.
<TABLE>
<CAPTION>
AS A PERCENTAGE OF SALES
-------------------------------------------------------
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- -------------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................... 83.2 83.2 81.4 81.8 82.2
Realignment costs........................... 0.0 0.0 0.0 0.0 2.1
----- ----- ----- ----- -----
Gross profit.............................. 16.8 16.8 18.6 18.2 15.7
Selling, general and administrative
expenses.................................. 7.1 7.0 6.6 6.3 6.9
Research and development expenses........... 0.9 0.5 0.3 0.4 0.4
Gain on sale of assets...................... 0.0 0.0 0.0 0.0 (3.3)
----- ----- ----- ----- -----
Income from operations.................... 8.8 9.3 11.7 11.5 11.7
Other (income) expense:
Interest expense.......................... 2.2 2.1 1.9 1.9 1.6
Minority interest......................... 0.0 0.0 0.2 0.1 0.4
Other (income) expense.................... (0.1) (0.2) (0.6) (0.6) (0.4)
----- ----- ----- ----- -----
Income before taxes....................... 6.7 7.4 10.2 10.1 10.1
Provision for income taxes.................. 2.5 2.9 4.1 4.0 3.8
----- ----- ----- ----- -----
Net income................................ 4.2% 4.5% 6.1% 6.1% 6.3%
===== ===== ===== ===== =====
</TABLE>
In addition, the following table sets forth, for the periods indicated,
components of the Company's net sales classified by major markets. The majority
of the Company's Engineered Products divisions were divested in 1996.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Agricultural............................. 50% 38% 44% 44% 47%
Consumer................................. 16 34 27 29 25
Earthmoving/Construction................. 22 19 22 21 23
Engineered Products...................... 4 6 6 5 4
Military................................. 8 3 1 1 1
--- --- --- --- ---
Total.................................. 100% 100% 100% 100% 100%
=== === === === ===
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1995
Net sales for the nine months ended September 30, 1996, were $490.0
million, an increase of 5% compared to $464.9 million in sales for the nine
months ended September 30, 1995. The change from the equity method of accounting
to the consolidation method for the SIRMAC Group (as defined herein) beginning
July 1, 1995, accounted for the majority of the increase in sales for the
year-to-date period.
Sales in the agricultural market were $231.6 million for the nine months
ended September 30, 1996, as compared to $203.7 million in 1995. The Company's
construction market sales were $111.6 million for the nine months ended
September 30, 1996, as compared to $98.3 million in 1995. The increase in sales
in the agricultural and construction markets is primarily due to the addition of
the SIRMAC Group. Consumer product sales were $120.7 million for the nine months
ended September 30, 1996, as compared to $134.7 million in 1995. The decrease in
consumer product sales was primarily due to a $23.9 million reduction in sales
of light truck tires, which resulted from the expiration of an agreement to
produce such tires.
20
<PAGE> 22
Cost of sales was $402.7 million for the nine months ended September 30,
1996, as compared to $380.2 million in 1995. Gross profit for the nine months
ended September 30, 1996, before realignment costs was $87.3 million, or 17.8%
of net sales, compared to $84.7 million, or 18.2% of net sales for 1995.
During the third quarter of 1996, the Company recorded a pretax realignment
charge of $10.3 million. These costs consisted primarily of a write-off of
start-up costs and inventory associated with the elimination of non-core
products including automotive OEM wheels, certain rolled rims and axles. This is
part of the Company's overall strategy to concentrate its resources on tire and
wheel manufacturing, and is consistent with the sale of assets mentioned below.
On September 30, 1996, the Company sold the assets of Tractech to a joint
venture group and private investors. Tractech, which produces no-spin
differentials, contributed annual sales of approximately $25.0 million. During
the nine months ended September 30, 1996, Tractech contributed net sales of
$18.4 million, net income of $0.8 million, and fully diluted earnings per share
of $0.03. The Company has recorded a pretax gain of $15.3 million after related
expenses as a result of the transaction in the third quarter of 1996. This
follows the sale of the assets of Automation International, Inc. in the second
quarter of 1996.
Selling, general and administrative ("SG&A") and research and development
("R&D") expenses were $36.1 million and 7.4% of sales for the nine months ended
September 30, 1996 as compared to $31.1 million and 6.7% of sales for the nine
months ended September 30, 1995. The rise in SG&A expenses is primarily due to
increased tire advertising coupled with overall efforts to improve systems
resources and technology.
Amortization and depreciation expenses for the nine months ended September
30, 1996 were $21.0 million compared to $17.5 million for the same period in
1995. The difference is primarily attributable to full year depreciation on
recent capital additions.
Income from operations for the nine months ended September 30, 1996, before
realignment costs and gain on sale of assets, was $51.2 million or 10.4% of net
sales, compared to $53.6 million or 11.5% in 1995. Income from operations, as a
percentage of 1996 sales, was negatively impacted by pricing pressure in the
tire after-market, a strike at the Company's Walcott wheel facility and higher
SG&A expenses.
Net interest expense for the nine months ended September 30, 1996 was $7.8
million or 1.6% of net sales, a decrease of 11% compared to the $8.8 million
interest expense or 1.9% of net sales for the same period in 1995. The decrease
was largely due to the Company's lower revolving debt and 4 3/4% Note balances,
partially offset by interest expense related to the SIRMAC Group.
Net income for the nine months ended September 30, 1996, was $30.7 million,
compared to $28.2 million in 1995. Earnings per common share (on a fully diluted
basis) were $1.12 for the nine months ended September 30, 1996, as compared to
$1.15 in 1995. The average number of 1996 fully diluted common shares
outstanding increased 10% for the period ended September 30, 1996, due to a June
1995 Common Stock offering.
FISCAL YEAR ENDED DECEMBER 31, 1995 COMPARED TO FISCAL YEAR ENDED DECEMBER
31, 1994
Net sales for the year ended December 31, 1995 were $623.2 million, an
increase of 53% compared to 1994 sales of $407.0 million. The increase was
primarily due to the acquisition by the Company of Steel Wheels in February
1995, Titan Tire Corporation ("Titan Tire") in July 1994, and to the
consolidation of the SIRMAC Group in the second half of 1995. Sales to the
agricultural market, the Company's largest market segment, were $276.0 million
in 1995 compared to 1994 sales of $156.0 million. Agricultural sales accounted
for 44% of the Company's total sales in 1995. Sales increased primarily due to
the acquisition of Titan Tire and the SIRMAC Group. Sales in the Company's
second largest market, consumer products, increased $30.6 million in 1995
compared to 1994, and represented 27% of 1995 total sales. The increase was due
primarily to the acquisitions noted above. Earthmoving/construction sales, the
Company's third largest market in 1995 at 22% of total sales, increased $58.0
million over 1994, primarily due to the acquisition of Steel Wheels.
21
<PAGE> 23
Gross profit was $115.7 million or 18.6% of net sales in 1995, compared to
$68.4 million or 16.8% of net sales in 1994. The gross profit margin was
positively affected by strong margins from the Titan Tire acquisition as well as
strength in the Company's traditional markets.
SG&A expenses were $40.6 million, or 6.5% of net sales in 1995, compared to
$28.3 million or 7.0% of sales in 1994. The dollar increase was principally due
to the acquisitions noted above as well as increases in operations and
administrative personnel to enhance systems and controls. R&D expenses were
consistent from year to year at $2.1 million.
Interest expense for 1995 was $12.0 million or 1.9% of net sales, which
compares to $8.5 million or 2.1% of net sales in 1994. The increased interest
expense was primarily due to an increase of approximately $57.0 million in the
average debt outstanding in 1995 compared to 1994, coupled with slightly higher
average borrowing rates. The acquisition of Steel Wheels and the consolidation
of the SIRMAC Group accounted for the majority of the increase in the average
debt outstanding.
In June 1995, the Company issued 4,312,500 shares of Common Stock at a
price of $15.83 per share. Excluding fees, Titan received $64.9 million, before
related offering costs of $300,000. Titan used $17.5 million of the proceeds
from this stock offering to repurchase the convertible preferred stock and
Common Stock warrants issued to Pirelli Armstrong Tire Corporation ("PATC") in
the Titan Tire acquisition. Titan used the remaining proceeds to reduce the
amount outstanding under its revolving credit facility.
Net income for the year ended December 31, 1994 and the year ended December
31, 1995 was $18.5 million and $38.0 million, respectively. The increase was
primarily due to the 53% increase in sales noted above and improvements in the
gross profit percentage.
FISCAL YEAR ENDED DECEMBER 31, 1994 COMPARED TO FISCAL YEAR ENDED DECEMBER
31, 1993
Net sales for the year ended December 31, 1994, were $407.0 million, an
increase of 171% compared to 1993 sales of $150.4 million. The increase was
primarily due to the acquisitions by the Company of Dyneer Corporation
("Dyneer") and TD Wheels of Virginia, Inc. ("TD Wheel") in November 1993,
Nieman's Limited ("Nieman's") in January 1994, and Titan Tire in July 1994, as
well as strong growth in the agricultural and earthmoving/construction markets
in 1994. Net sales in the agricultural products market, Titan's largest category
in 1994 at 38% of sales, increased $81.1 million compared to 1993, primarily due
to the acquisitions noted above. Net sales in Titan's second largest market in
1994, consumer products at 34% of net sales, increased $116.4 million compared
to 1993, primarily due to the Dyneer acquisition. Earthmoving/construction
sales, Titan's third largest market in 1994 at 19% of net sales, increased $42.8
million over 1993, primarily due to the acquisitions noted above and growth in
existing markets. Excluding the effect of these acquisitions, 1994 net sales
increased by 10% compared to 1993.
Gross profit was $68.4 million, or 16.8% of net sales in 1994, compared to
$25.3 million, or 16.8% of net sales in 1993. The gross profit margin was
positively affected by strong growth in Titan's traditional markets and strong
margins from Titan Tire, but was adversely impacted by lower margins from Dyneer
and Nieman's in the consumer products market.
SG&A expenses were $28.3 million, or 7.0% of net sales in 1994, compared to
$10.7 million, or 7.1% of net sales in 1993. The dollar increase was principally
due to the acquisitions noted above as well as an increase in operations and
administrative personnel to improve systems and controls. The Company was
successful in reducing Dyneer's SG&A expenses from 9.7% in 1993 to the corporate
average in 1994 as part of Titan's corporate restructuring.
Interest expense for 1994 was $8.5 million or 2.1% of net sales, which
compares to $3.2 million and 2.2% of net sales in 1993. The increased interest
expense was primarily due to an increase of $79.0 million in the average debt
outstanding in 1994 compared to 1993, but was partially offset by lower average
borrowing rates in 1994. The issuance of $103.5 million of 4 3/4% Notes in
November 1993 increased the average debt outstanding by $88 million, but lowered
the average interest rate for 1994 since the net proceeds were used to repay
higher interest debt. Also positively affecting the rate was the $100.0 million
credit facility that provided borrowing rates approximately one and one-half
percentage points lower than the previous Titan and Dyneer credit facilities,
which were repaid in July 1994.
22
<PAGE> 24
Deferred financing costs have historically been amortized by Titan through
SG&A expenses. Beginning in 1994, the Company implemented a policy of amortizing
these costs to interest expense as a cost of borrowing. Amortization of deferred
financing costs in 1993 included in SG&A expenses totalled $263,000.
Amortization of deferred financing costs included in interest expense in 1994
was $983,000.
Net income for the year ended December 31, 1993 and the year ended December
31, 1994 was $6.4 million and $18.5 million, respectively. The increase was
primarily due to the 171% increase in sales noted above.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically relied primarily on internally generated cash
flow, bank debt, the issuance of shares of Common Stock and the incurrence of
debt by its subsidiaries in order to fund working capital requirements, capital
expenditures, debt service, stockholder dividends and acquisitions.
On February 25, 1997, the Company commenced the Offer to Purchase up to 5
million shares of its Common Stock at a price not greater than $15.00 nor less
than $12.50 per share, for a maximum aggregate purchase price (if all 5 million
shares are purchased) of $75 million. See "Prospectus Summary--Recent
Developments--Offer to Purchase." The Company would fund such repurchase with
cash on hand and amounts available under the $175.0 million Bank Credit Facility
entered into by the Company in September 1996.
The Bank Credit Facility which expires on September 19, 2001 replaced the
Company's $100.0 million revolving credit facility. The Bank Credit Facility
provides for borrowings by the Company on an unsecured, revolving basis, either
in U.S. dollars or in various European currencies, at various interest rate
options. The Bank Credit Facility also provides for standby letters of credit.
The Company and each of its U.S. subsidiaries other than Nieman's have
unconditionally guaranteed all outstanding obligations under the Bank Credit
Facility. The Bank Credit Facility contains customary financial and other
covenants and customary events of default. The Company believes that it is
currently in compliance with all terms of its outstanding indebtedness,
including all terms under the Bank Credit Facility. The Company intends to use a
portion of the proceeds of this Offering to prepay approximately $100.0 million
currently outstanding under the Bank Credit Facility. If the Offer to Purchase
is consummated, all of the proceeds of this offering will be used to repay a
portion of the amounts then outstanding under the Bank Credit Facility. The
Company is presently discussing with its lenders the possibility of increasing
the availability under the Bank Credit Facility to $200.0 million. See
"Description of Certain Indebtedness -- Bank Credit Facility."
In addition to the Bank Credit Facility, the Company will also issue $150.0
million of the Notes. The Notes will be subordinated to the indebtedness under
the Bank Credit Facility and to any and all other Senior Indebtedness of the
Company. The Indenture governing the Notes will impose certain restrictions on
the Company and its subsidiaries, including restrictions on the ability to incur
indebtedness, pay dividends, make investments, grant liens and engage in certain
other activities. The Notes may be required to be purchased by the Company upon
a Change of Control (as defined) and in certain circumstances with the proceeds
of asset sales. See "Description of the Notes." Upon issuance of the Notes, the
Company's interest expense will increase compared to prior years.
Net cash used for investing activities decreased from $53.7 million in 1994
to $37.3 million in 1995, primarily due to a decrease in the cost of
acquisitions (net of cash received), partially offset by an increase in capital
expenditures. Although the Company spent a total of $17.1 million on
acquisitions and $20.2 million on capital expenditures in 1995, it still
maintained a current ratio of 2.3 to 1 in 1995 compared to a current ratio of
2.7 to 1 in 1994.
Capital expenditures by the Company have increased from 1994 levels.
Capital expenditures for property, plant and equipment totaled $20.2 million in
1995 compared to $15.2 million in 1994. The Company is continuing its program of
capital expansion to modernize and improve production efficiencies. The increase
in 1995 was primarily due to an investment by the Company of an additional $5
million for its Greenwood, South Carolina facility. The Company expects total
capital expenditures in 1996 will approximate $30.0 million, of
23
<PAGE> 25
which $19.1 million was expended through September 30, 1996. The Company
believes its capital expenditures for 1997 will be approximately $60.0 million,
principally due to the construction of the new tire facility in Brownsville,
Texas.
Net cash provided by financing activities decreased from $43.5 million in
1994 to $6.8 million in 1995. In 1994, Titan Tire acquired certain PATC assets
by paying $5 million cash, issuing $10 million of warrants to purchase 2,250,000
shares of the Company's Common Stock at an exercise price of $24.44 per share,
issuing $7.5 million of the Company's Series A Convertible Preferred Stock
convertible into 281,250 shares of Common Stock and issuing a subordinated note
for approximately $19.7 million with a 7% fixed interest rate maturing February
2000. The warrants and preferred stock were repurchased in June 1995 by the
Company for $10 million and $7.5 million, respectively. Also in 1994 the Company
paid $9.5 million for a 50% interest in the SIRMAC Group, made additional
advances to the SIRMAC Group of $9.5 million, and acquired Nieman's for $1.2
million and payment of $5.3 million of Nieman's debt.
The Company received $64.9 million from the issuance of 4,312,500 shares of
Common Stock in June 1995, before related offering costs of $300,000. The
proceeds were used to reduce revolving debt and repurchase $17.5 million of the
preferred stock and stock warrants issued to PATC in the acquisition of Titan
Tire (as discussed above).
The Company received $58.1 million in proceeds from long-term debt incurred
in 1995, including $37 million under its credit facility, $9.5 million from an
Industrial Revenue Bond issued for the Greenwood facility and Steel Wheels' $8
million term loan from the Royal Bank of Scotland. The Company repaid debt
totaling $97.5 million, which includes the repayment of the $74.5 million
revolving credit balance.
At December 31, 1995, the Company had cash and cash equivalents of $14.2
million, an increase of $7.0 million as compared to the prior year, as increases
in net income and depreciation and decreases in accounts receivable and
inventory more than offset decreases in the accounts payable and other current
liabilities resulting in cash from operations of approximately $37.5 million.
Depreciation and amortization expenses were $21.9 million and $1.5 million,
respectively, in 1995 compared to $15.4 million and $2.0 million in 1994.
Net cash provided by operating activities during the nine months ended
September 30, 1996 increased to $46.8 million from $23.5 million in the nine
months ended September 30, 1995. The increase was primarily due to increased net
income before depreciation and amortization, decreases in accounts receivable
and increases in other current liabilities. These amounts were partially offset
by increases in inventory and decreases in accounts payable. Net income was also
adjusted by the gain on sale of assets and the realignment costs to arrive at
cash flows of a recurring nature.
Net cash provided by financing activities during the nine months ended
September 30, 1996 increased to $21.7 million from $12.7 million in the nine
months ended September 30, 1995. In May 1996 the Board of Directors of the
Company authorized the repurchase of up to 5 million shares of the Company's
Common Stock in the open market, and during the nine months ended September 30,
1996 the Company repurchased $5.1 million of the Common Stock pursuant to such
authorization. See Note H to the Company's Consolidated Condensed Financial
Statements.
The Company has historically paid quarterly dividends on its outstanding
shares of Common Stock. Dividend payments totaled approximately $0.4 million,
$1.0 million and $1.4 million during 1994, 1995 and 1996, respectively. The Bank
Credit Facility and the Indenture governing the Notes both generally permit the
Company to pay dividends, subject to certain limitations. The Company has funded
its payment of dividends through internally generated cash flow.
In 1993 the Company issued $103.5 million of its 4 3/4% Notes. In 1995 and
the first three quarters of 1996, $18.2 million of the Notes were converted into
shares of the Company's Common Stock. In the fourth quarter of 1996, the Company
redeemed $28.7 million principal amount of the 4 3/4% Notes and the remaining
$56.6 million principal amount were converted into 4,530,240 shares of the
Company's Common Stock. The cash redemption required a one time charge of $1.3
million related to the redemption of the 4 3/4% Notes. The Company funded the
redemption of a portion of the 4 3/4% Notes through borrowings under the Bank
Credit Facility.
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<PAGE> 26
Other than in connection with certain foreign acquisitions and other
limited circumstances, the Company generally does not engage in derivatives
activity or purchase interest rate or currency hedge agreements.
The Company is subject to various federal, state, local and foreign
environmental laws and regulations in the jurisdictions in which it operates.
The Company does not currently anticipate any material adverse effect on its
operations or financial condition as a result of its efforts to comply with, or
its liabilities under, environmental laws. The Company does not currently
anticipate any material capital expenditures for environmental control
facilities. Some risk of environmental liability is inherent in the Company's
business, including with respect to Company facilities that have been used for
industrial purposes for a period of decades, and there can be no assurance that
material environmental costs will not arise in the future. In particular, the
Company might incur capital, remediation and other costs to comply with
increasingly stringent environmental laws and enforcement policies. Although it
is difficult to predict future environmental costs, the Company does not
anticipate any material adverse effect on its operations, financial condition or
competitive position as a result of future costs of environmental compliance.
The Company expects to continue to have significant liquidity requirements.
In addition to working capital needs and capital expenditures, the Company will
have increased cash requirements for debt service. The Company expects that cash
on hand (including the anticipated proceeds of the Notes offered hereunder),
anticipated internal cash flows and utilization of available borrowing under the
Bank Credit Facility will provide sufficient liquidity for working capital
needs, debt service (including payment of interest on the Notes), capital
expenditures and acquisitions for the foreseeable future. As the Company's debt
(including debt under the Bank Credit Facility and the Notes) matures, the
Company may need to refinance such debt. There can be no assurance that such
debt will be refinanced on terms acceptable to the Company.
NEW ACCOUNTING STANDARDS
In 1996 the Company adopted the following new accounting standards:
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," effective for Titan for the year ending
December 31, 1996, establishes standards for the impairment of long-lived
assets, certain identifiable intangibles and goodwill related to those assets to
be held and used and those to be disposed of. SFAS 121 did not have a material
impact on Titan's financial condition or results of operations.
SFAS 123, "Accounting for Stock-based Compensation," which defines the fair
value based method of accounting for stock option, purchase and awards plans.
SFAS 123 allows companies to use the fair value method defined in the Statement
or to continue use of the intrinsic value method as outlined in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25). The Company adopted the disclosure provisions of SFAS 123; therefore, the
Statement did not have an impact on the Company's financial position or results
of operations.
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements, including statements
regarding, among other items, (i) anticipated trends in the Company's
businesses, (ii) future expenditures for capital projects, (iii) the Company's
ability to continue to control costs and maintain quality, (iv) the Company's
business strategies, including its intention to introduce new products and (v)
the Company's intention to consider and pursue acquisitions. These
forwardlooking statements are based largely on the Company's expectations and
are subject to a number of risks and uncertainties, certain of which are beyond
the Company's control. Actual results could differ materially from these
forward-looking statements as a result of the factors described in "Risk
Factors" including, among others, (i) changes in the Company's end-user markets
as a result of economic or regulatory influences or (ii) changes in the
competitive marketplace, including new products and pricing changes by the
Company's competitors. The Company undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. In light of these risks and
uncertainties, there can be no assurance that the forward-looking information
contained in this Prospectus will in fact transpire.
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<PAGE> 27
BUSINESS
GENERAL
Titan is a leading global manufacturer of steel wheels and tires for
off-highway vehicles used in the agricultural, consumer products (including
recreational trailers, ATVs and grounds care vehicles), earthmoving/construction
and military markets. The Company generally manufactures both the wheels and
tires for these vehicles and increasingly provides the value-added service of
assembling the completed system. The Company offers a broad range of over 25,000
different products that are manufactured in relatively short production runs and
must meet OEM specifications. The Company believes, based upon current industry
revenue data, that it is the largest agricultural wheel producer and the third
largest agricultural tire manufacturer in North America. Agricultural sales in
the aggregate accounted for approximately 44% and 47% of the Company's net sales
for the year ended December 31, 1995 and the latest twelve months ended
September 30, 1996, respectively. The Company's net sales for the year ended
December 31, 1995 and the latest twelve months ended September 30, 1996 were
approximately $623.2 million and $648.3 million respectively. The Company's
EBITDA for the year ended December 31, 1995 and for the latest twelve months
ended September 30, 1996 were $98.8 million and $103.7 million, respectively.
BUSINESS HISTORY
In early 1983, Firestone Tire & Rubber Co. closed its Electric Wheel
Company subsidiary, located in Quincy, Illinois, which had been engaged in the
manufacture of steel wheel and rim products, primarily in the agricultural and
construction industries, since the 1890's. In March 1983, the assets of the then
closed Electric Wheel Company were acquired by the Company (then a newly formed
entity known as Can-Am Industries Incorporated) under the direction of Maurice
M. Taylor, the Company's current President and Chief Executive Officer.
Operations re-commenced in Quincy, Illinois two months later.
In 1986, when Goodyear Tire & Rubber Co. decided to exit its agricultural
steel wheel and rim business, Titan Proform, Ltd. ("Titan Proform") purchased
and installed the Goodyear rim line at its Toronto, Ontario facility and the
Company purchased and installed the Goodyear equipment to manufacture "power
adjust" wheels at its Quincy, Illinois facility. In 1988, the Company purchased
certain assets of the French & Hecht agricultural steel wheel and rim business
and commenced operations at the facility located in Walcott, Iowa. In 1990,
Titan was acquired in a management-led buyout by investors including Mr. Taylor
and MascoTech, Inc. Immediately thereafter, Titan purchased certain assets of
Titan Proform.
The Company completed the initial public offering of its Common Stock in
1993. Since 1993, through a series of nine strategic acquisitions, the Company
has broadened its basic steel wheel manufacturing business into tire
manufacturing and tire and wheel assemblies and has expanded geographically into
Europe. The following is a summary of these acquisitions:
<TABLE>
<CAPTION>
DATE OF ACQUISITION NAME AND PRINCIPAL BUSINESS OF ACQUIRED COMPANY
------------------- -----------------------------------------------
<S> <C>
February, 1993....................... Automotive Wheels, Inc., a manufacturer of steel and
aluminum rims which are sold to manufacturers of specialty
wheels for the automobile and light truck after-market and
wheels for sale to OEMs in the North American automobile
industry.
November, 1993....................... Dyneer Corporation, a manufacturer of wheels and tires for
lawn and garden equipment, recreational and industrial
trailers, ATVs, and farm and industrial equipment.
November, 1993....................... TD Wheels of Virginia, Inc., a manufacturer of construction
and mining equipment wheels.
January, 1994........................ Nieman's Limited, a national distributor of tires, wheels
and axle assemblies and component parts to recreational and
industrial trailer OEMs.
</TABLE>
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<PAGE> 28
<TABLE>
<CAPTION>
DATE OF ACQUISITION NAME AND PRINCIPAL BUSINESS OF ACQUIRED COMPANY
------------------- -----------------------------------------------
<S> <C>
July, 1994........................... Titan Tire, a manufacturer of tires for agricultural and
light truck vehicles, enabled the Company to offer tires and
to provide the value-added service of wheel and tire
assemblies.
November, 1994....................... 50% of SIRMAC Officine Meccaniche SpA ("SIRMAC") and Siria
Officine Meccaniche SpA ("Siria" and, together with SIRMAC,
the "SIRMAC Group") which are major European manufacturers
of steel wheels for the off-highway wheel markets and other
specialty products.
February, 1995....................... Steel Wheels, a Kidderminster, England manufacturer of steel
wheels principally for the earthmoving/construction market.
December, 1995....................... Grasdorf Titan GmbH ("Titan GmbH"), a German manufacturer of
steel wheels and rims for the earthmoving and agricultural
equipment markets.
July, 1996........................... Remaining 50% of the SIRMAC Group.
December, 1996....................... Titan France, a French manufacturer of wheels and rims for
the French and European off-highway wheel markets.
</TABLE>
In the second and third quarters of 1996, respectively, Titan sold the
assets of its subsidiary, Automation International, Inc. ("Automation"), and of
its Tractech division. These divestitures were made pursuant to Titan's strategy
to shed non-core businesses and concentrate its resources on tire and wheel
manufacturing for off-highway markets. Automation produced automated welding
equipment and had net sales in 1995 of $6.1 million; Tractech manufactured
mechanical differentials, clutches and brakes and had net sales in 1995 of $26.4
million.
Titan is currently constructing a new off-highway tire plant in
Brownsville, Texas, which will be the first new agricultural tire plant
constructed in the United States since the early 1960's. The plant, which will
significantly increase the Company's production capacity, should be operational
in late 1997 or early 1998.
COMPETITIVE STRENGTHS
Strong Market Position. The Company has achieved strong positions in both
the domestic and European markets for each of its major product categories.
Titan's ability to offer a broad range of different products has increased the
Company's visibility both in the United States and in Europe and has enhanced
the Company's ability to cross-sell its products and consolidate its market
positions. Innovative marketing programs have strengthened Titan's market image,
and the Company's widening distribution network is reaching increasing numbers
of customers in the after-market. Years of product design and engineering
experience have enabled the Company to improve existing products and develop new
ones that have been well received in the marketplace. In addition, Titan
believes that it has benefitted from significant barriers to entry, such as the
substantial investment necessary to replicate Titan's manufacturing equipment
and numerous tools and dies.
Cost-Effective Manufacturing Facilities. The Company believes it enjoys low
costs of production relative to the industry as a whole due to its workforce and
production facilities. Titan's employees receive continuing training to sharpen
their efficiency and flexibility and the Company's comprehensive maintenance
program enables it to utilize its production capabilities to maximum advantage.
Completion of Titan's new tire manufacturing facility in Brownsville, Texas will
enhance the Company's ability to shift production loads and will provide greater
flexibility in meeting output schedules to meet customer demands.
Geographic Diversity/Global Presence. The Company has established a strong
presence in North America and Europe, with manufacturing facilities in the
United States, the United Kingdom, France, Germany and Italy. International
sales for the year ended December 31, 1995 and the nine months ended September
30, 1996 accounted for 16% and 22%, respectively, of the Company's aggregate net
sales for these periods. The Company's European facilities are located in the
four countries that in the aggregate account for a significant majority of the
European market for off-highway wheels and tires. Titan believes that there will
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<PAGE> 29
be opportunities to expand sales of its agricultural wheel and tire products to
European OEMs and to Titan's existing North American OEM customers for export to
Europe and for their European operations.
Proven Track Record of Integrating Acquired Assets. The Company maintains a
highly disciplined approach in evaluating prospective acquisitions, focusing on
opportunities to improve and complement existing products, establishing a
broader market presence and consolidating its engineering, manufacturing and
market activities, while striving to acquire assets which have been
inefficiently utilized or ineffectively managed. By integrating acquired assets
with the Company's existing operations, reducing costs of operation and
achieving economies of scale, the Company has rapidly improved earnings and cash
flows of the majority of its acquired companies. Generally, the Company's
acquisitions have allowed it to: (i) expand its market and geographic reach;
(ii) enter the market for assembled wheels and tires, a market in which margins
are greater than markets for wheels and rims alone; (iii) substantially increase
its penetration of the after-market for wheels and tires (which market for tires
is larger and less cyclical than the OEM market); (iv) improve significantly the
operating efficiencies of its acquired assets and its manufacturing facilities;
and (v) improve its ability to service its customers' needs on a timely basis.
BUSINESS STRATEGY
Titan's business strategy is to increase its penetration of the
after-market for tires and wheels, increase its penetration of European and
possibly other global markets, focus on possible additional strategic
acquisitions, continue to improve its operating efficiencies and continue its
emphasis on new product development.
Increase After-Market Tire and Wheel Business. Titan has concentrated on
increasing its penetration of the tire and wheel after-markets. These
after-markets offer higher profit margins and the tire after-market is larger
and somewhat less cyclical than the OEM market. The Company estimates that sales
in the tire and wheel after-markets represented approximately 14% and 8%,
respectively, of the Company's net sales for the first nine months of 1996.
Titan intends to continue to devote its resources to future growth in the tire
and wheel after-markets.
Expand European Markets. Titan currently manufactures wheels for sale to
European OEMs in the agricultural and the earthmoving/construction off-highway
markets. The Company has established a significant presence in Europe, including
the following four markets: the United Kingdom, France, Germany and Italy. A
primary motivation for the Company's entry into European markets is its desire
to serve the worldwide needs of its major United States OEM customers, many of
which have substantial business in Europe. Additionally, the Company believes
that, due to the removal of trade barriers in the European Union and political
changes in Eastern Europe, the average size of farms in Europe is likely to
increase and, as a result, the average size of farm vehicles used in Europe will
increase. Because larger farm vehicles utilize larger and a greater number of
wheels and tires similar to those produced in the United States, Titan believes
that there will be opportunities to expand sales of its agricultural wheel and
tire products to European OEMs and to Titan's existing North American OEM
customers for export to Europe and for their European operations.
Explore Additional Strategic Acquisitions. Titan believes that its
expertise in the manufacture of steel wheels has permitted it to take advantage
of opportunities to acquire businesses in the United States and Europe that
complement this product line, including companies engaged in the tire market and
ultimately companies with wheel and tire assembly capabilities. The broadening
of Titan's business may permit it to make additional strategic acquisitions in
the future. Although the Company continuously reviews opportunities and has
discussions with various parties, it has no acquisition agreements at the
present time.
Improve Operating Efficiencies. The Company continually works to improve
the operating efficiency of its acquired assets and its manufacturing
facilities. With each acquisition, Titan integrates each facility's strengths,
often transferring equipment and business to the facilities that are best
equipped to handle the work. This provides capacity to increase utilization and
spread operating costs over a greater volume of products. Titan is also
continuing a comprehensive program to refurbish, modernize and computerize its
equipment. Titan has also centralized and streamlined its inventory controls,
instituting a "just-in-time" system of providing raw materials to its
manufacturing units. These efforts have led to improved management of order
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<PAGE> 30
backlog and have substantially improved the Company's ability to respond to
customer orders on a timely basis. The Company is continually evaluating
opportunities to improve its operating efficiency. The Company is ISO 9000
certified at two of its wheel manufacturing facilities, evidencing its
conformance to internationally recognized standards of management and quality
assurance.
Improve Design Capacity and Increase New Product Development. Equipment
manufacturers constantly face changing industry dynamics. Titan directs its
business and marketing strategy to understanding all of its markets, addressing
the needs of its customers and demonstrating the advantages of its products. In
particular, the Company often participates with its customers in the design of
new and upgraded products. Titan will from time to time recommend modified
products to its customers based on Titan's own market information and research
and development. The Company's engineering and research and development staffs
test new designs and technologies, developing new methods of manufacturing to
improve product quality and performance. These value-added services enhance the
Company's relationship with its customers. The Company has spent in excess of $2
million annually on research and development for the fiscal years ending
December 31, 1994, 1995 and 1996, and has introduced more than 2,000 new
products in those years. The Company believes that its performance orientation
provides Titan with a competitive advantage in the global marketplace.
PRODUCTS AND MARKETS
The Company's product line includes a wide range of steel wheels and rims
and agricultural, industrial and specialty tires. The Company's sales are
divided into five major markets: Agricultural Equipment, Consumer Products,
Earthmoving/Construction, Engineered Products and Military Products. The
following table sets forth, for the periods indicated, the approximate relative
contribution to Titan's net sales of the products indicated below. The majority
of the Company's Engineered Products divisions were divested in 1996.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------- ---------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Agricultural......................................... 50% 38% 44% 44% 47%
Consumer............................................. 16 34 27 29 25
Earthmoving/Construction............................. 22 19 22 21 23
Engineered Products.................................. 4 6 6 5 4
Military............................................. 8 3 1 1 1
--- --- --- --- ---
Total.............................................. 100% 100% 100% 100% 100%
=== === === === ===
</TABLE>
AGRICULTURAL MARKET
Titan sells agricultural wheels, rims and tires to OEMs and to after-market
distributors. These wheels, rims and tires are manufactured by Titan for
installation on various agricultural and forestry equipment, such as tractors,
combines, skidders, plows, planters and irrigation equipment. The wheels and
rims range in diameter from 4" to 54," with the 54" diameter being the largest
agricultural wheel manufactured in North America. Basic configurations are
combined with other features (such as different centers and a wide range of
material thicknesses) allowing the Company to offer the broadest line of
different product models to meet customer specifications. The agricultural tires
range in diameter from 8" to 46" and in width from 4.80" to 30.5." The Company
offers the added value of a wheel and tire assembly to many of its customers.
The after-market tires are currently marketed through a network of more than
1,500 independent distributors and twelve of its own distribution centers. The
Company is building a tire manufacturing plant in Brownsville, Texas to meet the
growing demand of the agricultural tire after-market.
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<PAGE> 31
CONSUMER MARKET
Titan's consumer products division manufactures a variety of products. The
Company held a significant share of the boat/marine trailer market in the United
States in 1995 and the first nine months of 1996, supplying wheel and tire
assemblies, brakes and actuators. Titan also supplied a substantial share of the
wheel and tire assemblies for the utility and camping trailer markets in the
United States in 1995 and the first nine months of 1996. The Company anticipates
future growth in these markets with the focus on value-added wheel and tire
assemblies. Additionally, the Company believes it will increase its market share
through the introduction of new products in 1997.
Other markets served by Titan within the consumer products division include
the trailer and lawn and garden markets. In addition, the Company currently
produces specialty automotive wheels and light truck tires. In 1996, Titan
introduced its new line of rolled rims to complement its existing wheel and tire
products for the lawn and garden and ATV markets. Titan will produce a new line
of smaller diameter rolled rims for the lawn and garden market at its new wheel
making facility in Greenwood, South Carolina.
EARTHMOVING/CONSTRUCTION MARKET
Titan manufactures wheels and rims for various types of earthmoving, mining
and construction equipment, including cranes, graders and levelers, scrapers,
self-propelled shovel loaders, load transporters and haul trucks and back-hoe
loaders. These wheels and rims range in diameter from 20" to 57" (with the 57"
diameter being the largest earthmoving/construction wheel manufactured in North
America), in width from 8" to 44", and in weight from 125 lbs. to 6,300 lbs. The
Company currently produces a limited range of tires for the
earthmoving/construction market. The Company believes that it provides its
customers with the broadest range of earthmoving/construction wheels and rims
available in the world, manufacturing a significant variety of wheels, rims and
components for earthmoving/construction applications. The majority of the
earthmoving/construction products produced by Titan are sold directly to OEMs.
The earthmoving/construction tire market is an area of expansion in which the
Company can offer the added value of a wheel and tire assembly.
ENGINEERED PRODUCTS MARKET
Assets of Automation and the Tractech division, which represented a
majority of the Company's engineered products sales, were divested in 1996 in a
continuing effort to focus on the Company's core business. The Company still
maintains some operations in the engineered products area.
MILITARY PRODUCTS MARKET
The Company manufactures various wheels and rims for the U.S. Government,
principally for certain military vehicles (such as trucks, tanks and personnel
carriers). This business is cyclical, depending largely on defense spending,
which has been cut drastically in the last few years. The current political
climate, encouraging downsizing of government spending, has caused a marked
reduction in purchasing requirements for spare parts as well as a reduction of
new programs. While the Company believes that this trend will affect Titan's
wheel sales in the military market for 1997 and beyond, the military tire market
provides modest growth opportunities in which the Company has and will continue
to offer the added value of a wheel and tire assembly.
CUSTOMERS
Titan's major OEM customers include Deere, Case, New Holland and CAT in the
agricultural and off-highway construction markets and Deere, Bayliner and
Polaris in the consumer products market. In 1995, Titan sold its products to
over 8,000 customers compared to 900 customers in 1992. Titan's ten largest
customers accounted for approximately 42% of net sales for each of the year
ended December 31, 1995 and the nine months ended September 30, 1996. For the
nine months ended September 30, 1996, Deere accounted for approximately 13% of
the Company's net sales compared to 12% for the year ended December 31, 1995.
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<PAGE> 32
No other customer represented more than 10% of the Company's net sales during
1995 or the nine months ended September 30, 1996.
The Company has supply arrangements with Deere, New Holland,
Komatsu-Dresser Co. and others. Sales pursuant to these arrangements aggregated
approximately 36%, 14% and 16% of Titan's net sales for the years ended December
31, 1993, 1994 and 1995, respectively. This trend reflects the Company's
significant increase in customer base and a broadening of the Company's markets.
The Company's supply arrangements generally provide for an adjustment in the
sale price of Titan's products based upon changes of a specified amount in the
cost of materials, provide for a sharing between Titan and the customer of any
cost reductions resulting from design or manufacturing changes and are subject
to termination provisions. The Company does not believe that these provisions in
its supply arrangements with its OEM customers or its other arrangements with
its OEM customers have had or will have a material effect on its profitability.
With the exception of certain tire arrangements, no arrangements provide for a
minimum or maximum volume requirement, except that, subject to the preceding
sentence, to the extent a product is specified and manufactured by Titan
pursuant to its arrangement with the customer, the customer is generally
obligated to purchase all of its requirements for such product from the Company.
MARKETING & DISTRIBUTION
Titan has an internal sales force comprised of approximately 25 employees,
and also utilizes several manufacturing representative firms for sales to OEMs
in the United States. European sales and marketing is led by a director with
Company sales representatives located in the countries in which Titan conducts
business. Titan believes European sales efforts are enhanced when sales
representatives sell primarily within their native countries. The sales force
includes employees in the United Kingdom, France, Germany and Italy.
Titan distributes wheels and tires directly to OEMs. In the after-market,
Titan distributes wheels and tires through its own distribution centers and
distributes tires primarily through a network of more than 1,500 independent
distributors. Titan's distribution network consists of twelve facilities which
are strategically located throughout North America and Europe. Sales made
directly to OEMs represent approximately 60% of total sales, with the balance
made to after-market distributors for sale to end-users. The majority of after-
market sales are made through its independent tire distribution network. The
Company seeks to maintain a sufficient level of work-in-progress inventory to
insure its ability to respond to customer needs in a timely manner.
OPERATIONS
Wheel Manufacturing Process. Most agricultural steel wheels are produced
using a rim and a wheel center. A rim is produced by first cutting large steel
sheets to required width and length specifications. These steel sheets are
rolled and welded to form a circular rim, which is flared and formed in the
rollform operation. The majority of wheel centers are manufactured using presses
that both blank and form the center to specifications in multiple stage
operations. The Company has the capability in each facility to paint the wheel
using an electrostatic process prior to application of the final top coating.
Earthmover/construction steel wheels are manufactured principally from hot
rolled steel sections. This process is used because the high load bearing
capacity of these wheels requires rim thicknesses which are beyond the
capability of cold-rolling. Rims are built up from a series of hoops which are
welded together to form a rim base. The complete rim is made from either three
or five separate parts which then lock together after the rubber tire has been
fitted to the wheel and inflated.
Smaller wheels (usually 12" or less in diameter), of which the majority are
manufactured for consumer markets, are manufactured by a process in which
half-wheels are press-formed, then two of these half-wheel stampings are welded
together to form a complete wheel. The wheel assembly is then painted, generally
on automated electrostatic painting equipment. Generally, for larger wheels (12"
or more in diameter) manufactured for consumer markets, the Company manufactures
rims and centers, welds the rims to the centers and paints the assembled
product.
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<PAGE> 33
Due to the wide variation of applications of the Company's products,
engineering requirements often specify wheels having as many as five separate
components. Titan manufactures each of the components specified and then
assembles them into a finished product.
Tire Manufacturing Process. Tires are produced by mixing rubber and other
raw materials and chemicals to form a rubber compound. The compound is extruded
into tread and sidewall stock, mixed with wire strands to make the bead and
mixed with steel or fabric to produce the ply. Next, the tread, sidewall, bead
and plies are assembled into a green tire (uncured). Then the green tire is put
into a press which molds the tire under temperature and pressure into a finished
cured tire.
Quality Control. During the entire production process, inspections are
performed continuously by production employees to ensure high product quality.
The Company has quality control testing capabilities, such as radial fatigue
testing, metallurgical analysis, physical property analysis, salt spray testing
and other related testing. Titan's manufacturing employees are trained in
Statistical Process Control, the periodic testing of products.
Engineering/Research & Development. Supported by computer-aided design
(CAD), computer-aided manufacturing (CAM) and finite element techniques, Titan's
engineering and research and development staff continually investigates and
tests new designs and technologies, and develops new methods of manufacturing to
improve product quality and performance. To ensure the durability and longevity
of wheel products, the Company performs radial fatigue tests that put prototypes
through a minimum of 1 million cycles at 1.6 times the rated load before they
reach the manufacturing stage.
The Company's research and development activities have resulted in new
product innovations for the wheel industry. In 1996, Titan introduced a number
of new products that expanded its product mix, including the AERO 6000(TM)
actuator, the Titan ST line of trailer wheels and tires, new lines of ATV wheels
and tires and the Powerdyne braking system.
Titan has also initiated the development and production of new tire lines,
including Skidmaster, HD2000 and Supertrac II, used on skid steer vehicles and
lawn and garden tractors, respectively. These products offer customers improved
wear, endurance, traction and reduced turf damage and have been well received in
the marketplace.
Materials. The primary raw materials used by the Company are steel and
rubber. Due to demand/capacity issues in the steel industry, steel procurement
planning and execution are paramount. To ensure a consistent steel supply, Titan
purchases basic steel from key steel mills and maintains relationships with
steel processors for steel preparation. The Company is not dependent on any
single steel producer for its supply of steel. As is customary in the industry,
the Company does not have long-term contracts for the purchase of steel and,
therefore, its purchases are subject to fluctuation in the price of steel.
Rubber and raw materials for tire manufacture are the Company's second largest
commodity expense. The Company buys rubber on the spot markets, where there are
numerous sources of supply. As the Company continues to grow, additional
commodities/services are being contracted to secure better pricing on purchased
items. Commodities or services that are significant include freight,
paints/coatings, welding materials, fasteners, systems software and hardware,
material handling equipment, tooling and manufacturing equipment. In addition to
the development of key suppliers domestically, the Company's strategic
procurement plan includes international sourcing to assure competitive price and
quality in the global marketplace.
Backlog/Firm Orders. As of December 31, 1996, Titan estimates that it had
$205.6 million in firm orders compared to $171.8 million at December 31, 1995.
Orders are considered firm if the customer would be obligated to accept products
covered thereby if manufactured and delivered pursuant to the terms of such
orders. Firm order backlog has increased due to recent acquisitions and growth
in existing operations. The Company believes that the majority of its current
backlog orders will be filled during the current fiscal year.
COMPETITION
The Company's wheel and tire businesses compete with several international
and domestic competitors, some of whom are larger and have greater financial
resources than Titan.
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In the wheel business, the Company competes primarily on the basis of
price, quality, customer service, design capability and delivery time. The
Company believes that it is the primary source of steel wheels and rims to the
majority of its North American customers in the agricultural and
earthmoving/construction markets. In North America, Titan's major competitors in
the agricultural wheel market include GKN Wheels, Ltd. ("GKN"), Armstrong Rim
and Wheel Co., and US Rim, while its major competitors in the
earthmoving/construction wheel market are GKN and Topy Industry, Ltd.
In the tire business, Titan competes primarily on the basis of price,
quality, customer service, and the added value of wheel and tire assembly
distribution. Main competitors include Goodyear Tire & Rubber Co.,
Bridgestone-Firestone, Carlisle Companies, Inc. ("Carlisle") and Chen Shin
Rubber Industries, Inc. ("Chen Shin"). The agricultural smaller diameter tire
market has become more competitive over the last few years with more foreign
competitors moving into the North American market.
While the consumer products market for both wheels and tires is price
sensitive, this sensitivity is offset by the demand for quality products. The
Company continues to increase its product base in the consumer products market
which has increased the competitiveness of its products. The top wheel
competitors in the consumer products market include Carlisle, Tredit Tire and
Wheel Company, Inc. and City Machine and Wheel Company, Inc. The top competitors
in the consumer products market for tires are Carlisle, Chen Shin and Duro. The
consumer small diameter tire market in North America is highly competitive due
to numerous foreign competitors.
EMPLOYEES
At December 31, 1996, the Company employed approximately 4,100 people in
the United States and Europe. Approximately 31% of the Company's employees in
the United States are covered by three collective bargaining agreements which
expire before the year 2000. The majority of employees at Titan's foreign
facilities are represented by collective bargaining agreements.
From time to time participants in the wheel and tire industry, including
the Company, have experienced strikes and other labor disturbances. The Company
believes that all relations with its employees are good.
PATENTS AND TRADEMARKS
The Company owns numerous United States and foreign patents and trademarks
and continues to apply for patent protection for many of its new products. While
it considers that its patents are significant to the operations of its business,
Titan does not consider any one of them to be of such importance that its
expiration could materially affect its business.
ENVIRONMENTAL REGULATION
The Company is subject to various federal, state, local and foreign
environmental laws and regulations in the jurisdictions in which it operates.
The Company does not currently anticipate any material adverse effect on its
operations or financial condition as a result of its efforts to comply with, or
its liabilities under, environmental laws. The Company does not currently
anticipate any material capital expenditures for environmental control
facilities. Some risk of environmental liability is inherent in the Company's
business, including with respect to Company facilities which have been used for
industrial purposes for a period of decades, and there can be no assurance that
material environmental costs will not arise in the future. In particular, the
Company might incur capital, remediation and other costs to comply with
increasingly stringent environmental laws and enforcement policies. Although it
is difficult to predict future environmental costs, the Company does not
anticipate any material adverse effect on its operations, financial condition or
competitive position as a result of future costs of environmental compliance.
For a description of an environmental proceeding involving a subsidiary of the
Company, see "-- Legal Proceedings."
33
<PAGE> 35
PROPERTIES
The Company and its subsidiaries maintain 36 facilities located in the
United States, United Kingdom, Italy, France and Germany for manufacturing and
warehousing/distribution. The facilities in the aggregate contain over 7.3
million square feet, 5.5 million square feet of which are used for
manufacturing, 1.7 million square feet for warehousing and distribution and the
balance for administrative and sales offices. Nineteen of the facilities are
leased and 17 are owned. The Company believes that with the addition of its
Brownsville facility, its properties will be adequate to support its operations
for the foreseeable future.
LEGAL PROCEEDINGS
Dico, Inc. EPA Matters. Dico, Inc. ("Dico"), one of the Company's
subsidiaries, and five major oil and chemical companies were named as
potentially responsible parties in connection with contaminants found at one of
Dico's facilities (the "Site"). The contaminants were found in the groundwater
and certain buildings located on the Site. Dico has constructed a groundwater
extraction and treatment system to restore use of affected groundwater.
Of the total estimated costs to be incurred in connection with the clean up
of the Site, $4.8 million was paid in 1994, $0.6 million in 1995 and $0.7
million in 1996. Management believes that the remaining accrual of $5.5 million
at December 31, 1996 is adequate for remaining costs to be incurred related to
the environmental matter. Dico is attempting to recover its costs from certain
of its insurers and other potentially responsible parties.
PATC Matter. In December 1995, PATC commenced litigation against the
Company on contractual matters relating to the purchase of Titan Tire. The
Company, in December 1995, also commenced litigation against PATC on contractual
matters related to such acquisition. Titan believes that these actions will not
have a material adverse effect on the financial condition or results of
operations of the Company.
General. The Company is also a party to several routine legal proceedings
arising out of the ordinary course of its business. Titan believes that none of
these actions, individually or in the aggregate, will have a material adverse
affect on its financial condition or results of operations.
34
<PAGE> 36
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Maurice M. Taylor, Jr. ................... 52 President and Chief Executive Officer and a
Director
Michael R. Samide......................... 52 Vice President and Chief Operating Officer
Kent W. Hackamack......................... 38 Vice President of Finance and Treasurer
Cheri T. Holley........................... 49 Vice President, Secretary and General Counsel
Erwin H. Billig........................... 70 Chairman of the Board
Edward J. Campbell........................ 69 Director
Richard M. Cashin, Jr. ................... 44 Director
Albert J. Febbo........................... 58 Director
Anthony L. Soave.......................... 57 Director
</TABLE>
Maurice M. Taylor has been the President and Chief Executive Officer and a
director of the Company since 1990, when Titan was acquired in a management-led
buyout by investors, including Mr. Taylor. Prior thereto, Mr. Taylor had a
significant role in the development of the Company.
Michael R. Samide, age 52, joined the Company as Vice President and Chief
Operating Officer in November of 1993, following Titan's acquisition of Dyneer
Corporation in 1993. Mr. Samide served as the President and Chief Executive
Officer of Dico, Inc., a division of Dyneer. Prior to his work with Dico, he was
President and CEO of the New Hampshire Ball Bearing Corporation for a number of
years.
Kent W. Hackamack served as Corporate Controller of the Company from May
1994 to December 1996, was appointed Treasurer in November 1994 and Vice
President of Finance in December 1996. Prior to joining the Company, Mr.
Hackamack served from 1990 to 1994 as the International Audit Manager for Pool
Energy Services Co. of Houston, Texas, addressing foreign operations accounting
and auditing issues.
Cheri T. Holley joined the Company in March 1994 as General Counsel. In
November 1994 she was named Secretary of the Company and in December 1996 she
was appointed Vice President. Before joining the Company, she was in private
practice specializing in corporate and environmental law for a number of years.
Prior to entering private practice, Ms. Holley had fifteen years of management
experience.
Erwin H. Billig has been Vice Chairman of MascoTech (a manufacturer of
transportation, architectural and other industrial products) since October 1992,
and served as the President and Chief Operating Officer of MascoTech from 1986
to September 1992. Mr. Billig is also a director of MascoTech and of Etico Ltd.
Mr. Billig has been Chairman of the Board of the Company since 1992.
Edward J. Campbell, now retired, was employed for 27 years by Tenneco. He
spent 13 of those years as President of Newport News Shipbuilding Company and 14
years at JI Case, three of those (1992-94) as President. Mr. Campbell has been a
director of Global Marine, Inc. and Zurn Industries. Mr. Campbell has been a
director of the Company since February 1995.
Richard M. Cashin, Jr. is the President of Citicorp Venture Capital, Ltd.,
and has been employed by Citicorp Venture Capital since 1980. Mr. Cashin is also
a director of Levitz Furniture Co., the Hoover Group, Cable Systems
International, and Delco Remy America. Mr. Cashin has been a director of the
Company since 1994.
Albert J. Febbo is the Vice President of Corporate Marketing for the
General Electric Corporation where he has held executive positions since March
1987. Mr. Febbo has been a director of the Company since 1993.
35
<PAGE> 37
Anthony L. Soave is the President, Chief Executive Officer and founder of
Detroit based City Management Corporation, an integrated environmental service
company operating nationwide. Mr. Soave has been a director of the Company since
1994.
The Company's Bylaws provide for three classes of directors of
approximately equal numbers designated as Class 1, Class 2 and Class 3. Each
director is elected for a three year term and the term of each class expires in
a different year. Messrs. Taylor and Campbell are Class 1 directors (whose terms
expire in 1998), Messrs. Cashin and Febbo are Class 2 directors (whose terms
expire in 1999) and Messrs. Billig and Soave are Class 3 directors (whose terms
expire in 1997).
DIRECTORS' FEES
Titan pays its non-employee directors a fee of $500 for each Board or
committee meeting attended. Titan also reimburses out-of-pocket expenses related
to the directors' attendance at such meetings. In addition, in March 1994 the
Board adopted the 1994 Non-Employee Director Stock Option Plan (the "Director
Plan") to provide for grants of stock options as a means of attracting and
retaining highly qualified independent directors for the Company. No more than
225,000 shares of the Company's Common Stock may be issued under the Director
Plan. Options granted under the Director Plan totaled 36,000 during 1995 and
45,000 during 1996. The options granted in 1995 and 1996 are exercisable at a
price of $11.11 and $16.00 per share, respectively, and expire 10 years from the
date of grant. Such options vest and become exercisable immediately. In
addition, Titan pays Mr. Billig, the Chairman of the Board, an annual fee of
$100,000 to carry out his responsibilities which include significant operational
matters, as well as corporate development matters. The Company does not have any
other consulting contracts or arrangements with any of its directors.
COMMITTEES
The Board of Directors has established the following committees of the
Board: (i) Audit and Oversight Committee (consisting of Messrs. Cashin, Febbo,
Soave and Campbell), (ii) Compensation Committee (consisting of Messrs. Billig,
Cashin, Febbo, Soave and Campbell) and (iii) Executive Committee (consisting of
Messrs. Billig, Cashin, Soave and Taylor). The Company does not have a standing
nominating committee. The Board of Directors selects nominees for election as
directors.
The Audit and Oversight Committee, which met three times in 1996,
recommends to the Board independent auditors to perform audit and non-audit
services, reviews the scope and results of such services, reviews with
management and the independent auditors any recommendations of the auditors
regarding changes and improvements in the Company's accounting procedures and
controls and management's response thereto, and reports to the Board after each
Audit and Oversight Committee meeting.
The Compensation Committee, which met twice in 1996, reviews and recommends
to the Board the salaries and all other forms of compensation of the Company's
officers.
36
<PAGE> 38
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation
received by the Company's Chief Executive Officer and other executive officers
whose aggregate annual salary and bonuses exceeded $100,000 during 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
---------------
NAME AND PRINCIPAL ANNUAL COMPENSATION SECURITIES
POSITION AS OF ------------------- UNDERLYING ALL OTHER
DECEMBER 31, 1996 YEAR SALARY BONUS OPTIONS/SARS(#) COMPENSATION
------------------ ---- ------ ----- --------------- ------------
<S> <C> <C> <C> <C> <C>
Maurice M. Taylor, Jr. ............... 1996 $300,000 $300,000 37,500 $26,875(a)
President and Chief 1995 300,000 0 1,844(a)
Executive Officer(b) 1994 300,000 210,000 1,500(a)
Michael R. Samide..................... 1996 $225,000 $225,000 14,070 $29,956(a)(c)
Vice President and 1995 225,000 0 9,495(a)
Chief Operating Officer 1994 225,000 100,000 7,012(a)
Cheri T. Holley....................... 1996 $125,000 $ 25,000 3,130 $18,545(a)
Secretary and 1995 100,000 25,000 7,586(a)
General Counsel(b) 1994 70,833 21,250 425(a)
Kent W. Hackamack..................... 1996 $125,000 $ 25,000 3,130 $17,742(a)
Treasurer and Controller 1995 89,025 25,000 6,475(a)
1994 40,000 10,000 400(a)
</TABLE>
- -------------------------
(a) Includes one or more of the following: 401(k) matching contribution, car
allowance, life insurance, and vacation pay.
(b) The President and Secretary are brother and sister.
(c) Includes exercise of stock option.
OPTIONS GRANTED IN 1996:
The following table summarizes options granted during 1996, and the values
of options outstanding on December 31, 1996, for the executive officers named
above.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES
SECURITIES PERCENT OF TOTAL EXERCISE OF STOCK PRICE APPRECIATION
UNDERLYING OPTIONS/SARS OR BASE FOR OPTION TERM(B)
OPTIONS/SARS GRANTED TO PRICE EXP. -----------------------------
NAME GRANTED(A) EMPLOYEES $/SH DATE 5% 10%
---- ------------ ---------------- -------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Maurice M. Taylor,
Jr. ............... 37,500 32.7% $16.00 Jan., 2006 $ 412,356 $ 1,013,506
Michael R. Samide.... 14,070 12.3% $16.00 Jan., 2006 154,716 380,267
Cheri T. Holley...... 3,130 2.7% $16.00 Jan., 2006 34,418 84,594
Kent W. Hackamack.... 3,130 2.7% $16.00 Jan., 2006 34,418 84,594
------ ----- ------ ---------- ------------ --------------
All Shares
Outstanding(c)..... $716,127,269 $1,141,372,024
</TABLE>
- -------------------------
(a) All options were granted on January 30, 1996. Forty percent of the options
will become exercisable on December 31, 1997 and an additional 20% will
become exercisable on each of December 31, 1998, 1999 and 2000,
respectively.
(b) Potential realizable value is based on the assumption that the Common Stock
price appreciates at the annual rate shown (compounded annually) from the
date of grant until the end of the ten-year option term. The numbers are
calculated based on the requirements promulgated by the Securities and
Exchange Commission. The actual value, if any, an executive may realize will
depend on the excess of the stock price over the exercise price on the date
the option is exercised (if the executive were to sell the shares on the
date of exercise) and there is no assurance that the value realized will be
at or near the potential realizable value as calculated in this table.
(c) All shares outstanding represent the increase in total Company shareholder
value if the stock price and assumed rates used in the stock option
assumptions are achieved multiplied by the number of shares outstanding at
the end of fiscal 1996 (26,526,992).
37
<PAGE> 39
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
SHARES OPTIONS/SARS AT FISCAL THE-MONEY OPTIONS/SARS
ACQUIRED ON VALUE YEAR END(#) AT FISCAL YEAR END ($)
NAME EXERCISE(#) REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Maurice M. Taylor, Jr.......... 0 N/A 54,000/91,500 $88,560/88,560
Michael R. Samide.............. 6,300 $28,838 11,250/32,520 $18,450/30,258
Cheri T. Holley................ 0 N/A 1,280/ 5,050 $ 2,099/ 3,149
Kent W. Hackamack.............. 0 N/A 968/ 4,582 $ 1,588/ 2,381
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company is composed of Messrs. Billig,
Cashin, Febbo, Soave and Campbell.
City Environmental Contracting, a division of City Management Corporation,
had two contracts in 1994 with Titan's Dico subsidiary to provide remediation
services with respect to the removal, transportation and disposal of pesticide
and herbicide residuals and related services at Dico's facility in Des Moines,
Iowa. Work under the contracts was completed in 1994. The cost of service was
$2.5 million. Anthony L. Soave, a director of Titan, is the sole shareholder,
president, chief executive officer and a director of City Management
Corporation.
In 1996, the Company entered into a lease transaction with the General
Electric Capital Corporation ("GECC") in connection with certain equipment
valued at $1.9 million. Albert J. Febbo is a director of the Company and is Vice
President of Corporate Marketing of General Electric Corporation, an affiliate
of GECC.
On September 30, 1996, the Company sold the assets of Tractech to a joint
venture group and private investors, including Citicorp Venture Capital, Ltd.
During the nine months ended September 30, 1996, Tractech contributed net sales
of $18.4 million and net income of $0.8 million. Richard M. Cashin, Jr., a
director of the Company, is the President of Citicorp Venture Capital, Ltd.
RELATED PARTY TRANSACTIONS
The Company sells products to companies controlled by persons related to
the Chief Executive Officer of the Company. During 1994, 1995 and 1996, combined
sales to such companies approximated $3,355,000, $4,370,000 and $4,970,000,
respectively. At December 31, 1994, 1995 and 1996 Titan had approximately
$2,170,000, $1,998,000 and $2,396,000, respectively, of accounts receivable
outstanding from those sales. Commissions paid to companies controlled by
persons related to the Chief Executive Officer of the Company approximated
$470,000, $920,000 and $1,041,000 for 1994, 1995 and 1996, respectively. These
sales and commissions were made on terms no less favorable to Titan than terms
that would have been available for comparable sales and commissions from
unaffiliated third parties.
The Company is a party to a registration rights agreement with MascoTech,
Inc., a 5% shareholder of the Company. MascoTech has the right to demand on any
one occasion that the Company register all of its shares for resale.
The Company is also a party to a registration rights agreement with 399
Venture Partners, Inc., a 5% shareholder of the Company. 399 Venture Partners
has the right to demand on any one occasion that the Company register all of its
shares for resale. On June 14, 1994 the Company entered into a letter agreement
with 399 Venture Partners whereby the Company awarded 320,535 shares of Common
Stock in exchange for the termination of certain earnout rights which were
granted in 1993 to the former shareholders of Dyneer.
38
<PAGE> 40
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of February 13, 1997 by (i) each
person who is known by the Company to own beneficially more than 5% of the
Company's Common Stock, (ii) each director and nominee for director, (iii) each
of the named executive officers and (iv) all directors and executive officers as
a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER(A) PERCENT(B)
------------------------------------ --------- ----------
<S> <C> <C>
MascoTech, Inc.............................................. 3,315,852 13.0%
21001 Van Born Road
Taylor, Michigan 48180
399 Venture Partners, Inc.,................................. 2,031,112 8.0%
399 Park Avenue
New York, New York 10043
Maurice M. Taylor, Jr....................................... 1,888,178(c,d) 7.4%
2701 Spruce Street
Quincy, Illinois 62301
Mellon Bank Corporation..................................... 1,665,000(e) 6.5%
One Mellon Bank Center
500 Grant Street
Pittsburgh, Pennsylvania 15258
Erwin H. Billig............................................. 69,975(d) *
Anthony L. Soave............................................ 69,750(d) *
Richard M. Cashin, Jr....................................... 65,179(d) *
Albert J. Febbo............................................. 24,750(d) *
Edward J. Campbell.......................................... 11,250(d) *
Michael R. Samide........................................... 11,250(d) *
Cheri T. Holley............................................. 1,280(d) *
Kent W. Hackamack........................................... 968(d) *
All Executive Officers and Directors as a Group (9
persons).................................................. 2,142,580(d) 8.4%
</TABLE>
- -------------------------
* Less than one percent.
(a) Except for voting powers held jointly with a person's spouse, represents
sole voting and investment power unless otherwise indicated.
(b) As of February 20, 1997, 25,476,082 shares were outstanding. Common Stock
not outstanding which can be acquired through the exercise of options within
60 days by a shareholder named in the table is deemed outstanding for the
purpose of computing the percentage of outstanding Common Stock owned by
such shareholder, but is not deemed outstanding for the purpose of computing
the percentage of Common Stock owned by any other shareholder.
(c) Includes, 1,798,000 shares held jointly by Mr. Taylor and his wife as to
which they share voting and dispositive power. Also includes 36,178 shares
held by Mr. Taylor as to which he has sole voting and dispositive power.
(d) Includes shares subject to options exercisable within 60 days after February
24, 1997 as follows: Mr. Taylor, 54,000 shares; Mr. Billig, 24,750 shares;
Mr. Soave, 24,750 shares; Mr. Cashin, 24,750 shares; Mr. Febbo, 24,750
shares; Mr. Samide, 11,250 shares; Mr. Campbell, 9,000 shares; Ms. Holley,
1,280 shares; Mr. Hackamack, 968 shares; all officers and directors as a
group, 175,498 shares.
(e) Based on information contained in Schedule 13G of Mellon Bank dated January
28, 1997.
39
<PAGE> 41
DESCRIPTION OF CERTAIN INDEBTEDNESS
On September 30, 1996, the Company's total consolidated debt (including
current maturities), after giving effect to the offering of the Notes and the
application of net proceeds therefrom as described under "Use of Proceeds," the
redemption of the 4 3/4% Notes and repayment of certain other indebtedness with
borrowings under the Bank Credit Facility, was approximately $183.4 million. See
"Capitalization."
BANK CREDIT FACILITY
The summary of the Bank Credit Facility contained herein does not purport
to be complete and is qualified in its entirety by reference to the provisions
of the Bank Credit Facility, a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
On September 19, 1996, the Company entered into the $175.0 million Bank
Credit Facility with a group of banks. The Company is negotiating with the banks
to increase the facility to $200.0 million. The Bank Credit Facility expires on
September 19, 2001 and may be earlier terminated by the banks upon the
occurrence of certain change-of-control events. The Bank Credit Facility
provides for two revolving lines of credit, one (the "Revolving Commitment") for
borrowings of up to $115.0 million and the other (the "Term Revolving
Commitment") for borrowings of up to $60.0 million. Borrowings may be made in
U.S. dollars or in certain European currencies. Borrowings may be made by the
Company, and all borrowings thereunder are unconditionally guaranteed by the
Company and each of its U.S. subsidiaries other than Nieman's. As of February
18, 1997, borrowings under the Bank Credit Facility aggregated approximately
$100.0 million.
Borrowings in U.S. dollars under the Bank Credit Facility will bear
interest at a floating rate based on either (at the Borrower's option) (i) the
Domestic Rate (defined as the greater of prime or the Federal Funds rate plus
one-half of one percent per annum), (ii) the Adjusted CD Rate or (iii) at
Adjusted LIBOR Rate, in each case plus the Applicable Margin. Borrowings in
certain European currencies under the Bank Credit Facility will bear interest at
the Adjusted LIBOR Rate, plus the Applicable Margin. The Applicable Margin is
0.625% for the Term Revolving Commitment. The Applicable Margin for the
Revolving Commitment (a) is 0% for loans which bear interest at the Domestic
Rate, (b) ranges from 0.25% to 0.75% for loans which bear interest at the
Adjusted LIBOR Rate depending on the Company's debt to capitalization ratio and
(c) ranges from 0.375% to 0.875% for loans which bear interest at the Adjusted
CD Rate, depending on the debt to capitalization ratio. The Applicable Margin
also varies based on the Interest Coverage Ratio and the Debt to Earnings Ratio
(each as defined in the Bank Credit Facility).
The lending banks have committed under the Revolving Commitment to provide
the Borrowers with up to $30.0 million of standby letters of credit ("L/Cs"). In
addition, under the Revolving Commitment, the Borrowers may, at their option,
invite the lending banks to bid on an uncommitted basis on short-term
borrowings, such borrowings ("Bid Loans") to bear interest at the rate agreed to
by the Borrowers and the lending banks. Aggregate amounts outstanding at any
time under Bid Loans, L/C commitments and other borrowings made under the
Revolving Commitment may not exceed the maximum borrowings permitted under the
Revolving Commitment.
Borrowings under the Bank Credit Facility are unsecured. The Bank Credit
Facility contains covenants that, among other things, limit the Company's and
its subsidiaries' ability to incur liens; merge, consolidate or dispose of
assets; make loans and investments; incur or guarantee indebtedness; engage in
certain transactions with affiliates; or pay dividends and other distributions.
The Bank Credit Facility also requires the Company to maintain certain minimum
tangible net worth and to meet an interest coverage ratio and ratios of debt to
total capitalization and debt to earnings. The lenders under the Bank Credit
Facility can require that the Company prepay indebtedness outstanding under the
Bank Credit Facility if, among other events, (i) any person or group of persons
acquires or has the right to acquire beneficial ownership representing 15% or
more of the combined voting power of all securities of the Company entitled to
vote in the election of directors or (ii) Maurice M. Taylor, Jr. for a period in
excess of 180 consecutive days, ceases to be a director or executive officer of
the Company for any reason, and an individual acceptable to the lenders is not
appointed.
40
<PAGE> 42
The Bank Credit Facility contains customary events of default, including,
without limitation, nonpayment of principal, interest, fees or other amounts
when due; violation of covenants; breach of any representation or warranty;
cross-default and cross-acceleration; bankruptcy events; material judgments;
certain ERISA matters; and invalidity of loan documents.
INDUSTRIAL REVENUE BONDS
In March 1995, $9.5 million principal amount of industrial revenue bonds
were issued by the South Carolina Jobs-Economic Development Authority for the
benefit of the Company, to finance the construction of a facility in Greenwood,
South Carolina. Interest on these bonds is at a variable rate, determined under
a formula reflecting current rates of tax-exempt issues in the State of South
Carolina, but may not exceed 12%. Interest rates for 1996 ranged from 3% to 5%.
These bonds are secured by a letter of credit and mature in February 2010. Under
certain circumstances the holders of these bonds have the right to tender the
bonds and receive payment prior to their maturity.
NOTE PAYABLE TO PATC
In August 1994, Titan Tire issued a $19.7 million subordinated note to PATC
in conjunction with the Titan Tire purchase. This note bears interest at a rate
of 7% per annum and matures in February 2000. The note is guaranteed by the
Company and includes standard events of default.
41
<PAGE> 43
DESCRIPTION OF THE NOTES
The Notes offered hereby will be issued under an Indenture to be dated as
of , 1997 (the "Indenture") between the Company and The First
National Bank of Chicago, as trustee (the "Trustee"). References to "(Section
)" mean the applicable Section of the Indenture. A copy of the form of
Indenture is filed as an exhibit to the Registration Statement of which this
Prospectus is a part and will be made available to prospective purchasers of the
Notes upon request.
The Indenture will be subject to and governed by the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). The following summaries of the
material provisions of the Indenture do not purport to be complete, and where
reference is made to particular provisions of the Indenture, such provisions,
including the definitions of certain terms, are qualified in their entirety by
reference to all of the provisions of the Indenture and those terms made a part
of the Indenture by the Trust Indenture Act. For definitions of certain
capitalized terms used in the following summary, see "-- Certain Definitions."
GENERAL
The Notes will mature on , 2007, will be limited to $150
million aggregate principal amount, and will be unsecured senior subordinated
obligations of the Company. Each Note will bear interest at the rate set forth
on the cover page hereof from , 1997 or from the most recent
interest payment date to which interest has been paid, payable semiannually on
and in each year, commencing , 1997, to the Person in
whose name the Note (or any predecessor Note) is registered at the close of
business on the or next preceding such interest
payment date. Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months. (Sections 202, 301 and 307).
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable, at the office or agency of
the Company in The City of New York maintained for such purposes (which
initially will be the corporate trust office of the Trustee); provided, however,
that payment of interest may be made at the option of the Company by check
mailed to the Person entitled thereto as shown on the security register.
(Sections 301, 305 and 1002) The Notes will be issued only in fully registered
form without coupons, in denominations of $1,000 and any integral multiple
thereof. (Section 302) No service charge will be made for any registration of
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)
Settlement for the Notes will be made in same day funds. All payments of
principal and interest will be made by the Company in same day funds. The Notes
will trade in the Same-Day Funds Settlement System of The Depository Trust
Company (the "Depository" or "DTC") until maturity, and secondary market trading
activity for the Notes will therefore settle in same day funds.
When issued, the Notes will be a new issue of securities with no
established trading market. No assurance can be given as to the liquidity of the
trading market for the Notes. See "Risk Factors -- Absence of a Public Market
for the Notes; Possible Volatility."
OPTIONAL REDEMPTION
The Notes will be subject to redemption at any time on or after
2002, at the option of the Company, in whole or in part, on not
less than 30 nor more than 60 days' prior notice in amounts of $1,000 or an
integral multiple thereof at the following redemption prices (expressed as
percentages of the principal amount), if redeemed during the 12-month period
beginning of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2002..................................................... %
2003..................................................... %
2004..................................................... %
</TABLE>
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<PAGE> 44
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the redemption date (subject to the
rights of holders of record on relevant record dates to receive interest due on
an interest payment date).
If less than all of the Notes are to be redeemed, the Trustee shall select
the Notes or portions thereof to be redeemed pro rata, by lot or by any other
method the Trustee shall deem fair and reasonable. (Sections 203, 1101, 1105 and
1107)
PURCHASE OF NOTES UPON A CHANGE OF CONTROL
If a Change of Control shall occur at any time, then each holder of Notes
shall have the right to require that the Company purchase such holder's Notes in
whole or in part in integral multiples of $1,000, at a purchase price (the
"Change of Control Purchase Price") in cash in an amount equal to 101% of the
principal amount of such Notes, plus accrued and unpaid interest, if any, to the
date of purchase (the "Change of Control Purchase Date"), pursuant to the offer
described below (the "Change of Control Offer") and in accordance with the other
procedures set forth in the Indenture.
Within 30 days of any Change of Control, the Company shall notify the
Trustee thereof and give written notice of such Change of Control to each holder
of Notes, by first-class mail, postage prepaid, at his address appearing in the
security register, stating, among other things, that a Change of Control has
occurred and the date of such event, the circumstances and relevant facts
regarding such Change of Control (including, but not limited to, information
with respect to pro forma historical income, cash flow and capitalization after
giving effect to such Change of Control); the purchase price and the purchase
date which shall be fixed by the Company on a business day no earlier than 30
days nor later than 60 days from the date such notice is mailed, or such later
date as is necessary to comply with requirements under the Exchange Act; that
any Note not tendered will continue to accrue interest; that, unless the Company
defaults in the payment of the Change of Control Purchase Price, any Notes
accepted for payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Purchase Date; and certain other
procedures that a holder of Notes must follow to accept a Change of Control
Offer or to withdraw such acceptance. (Section 1015)
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 the
Notes seeking to accept the Change of Control Offer. See "-- Ranking." The
failure of the Company to make or consummate the Change of Control Offer or pay
the Change of Control Purchase Price when due will give the Trustee and the
holders of the Notes the rights described under "Events of Default."
The term "all or substantially all" as used in the definition of "Change of
Control" has not been interpreted under New York law (which is the governing law
of the Indenture) to represent a specific quantitative test. As a consequence,
in the event the holders of the Notes elected to exercise their rights under the
Indenture and the Company elected to contest such election, there could be no
assurance as to how a court interpreting New York law would interpret the
phrase.
The existence of a holder's right to require the Company to repurchase such
holder's Notes upon a Change of Control may deter a third party from acquiring
the Company in a transaction which constitutes a Change of Control.
In addition to the obligations of the Company under the Indenture with
respect to the Notes in the event of a "Change of Control," the Bank Credit
Facility also provides that upon a "Change of Control" as defined therein the
banks may require the Company to prepay amounts outstanding under the Bank
Credit Facility. Indebtedness pursuant to the Bank Credit Facility is senior in
right of payment to the Notes under the Indenture. See "Description of Other
Indebtedness -- Bank Credit Facility."
The Company will comply with the applicable tender offer rules, including
Rule 14e-1 under the Exchange Act, and any other applicable securities laws or
regulations in connection with a Change of Control Offer.
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<PAGE> 45
RANKING
The payment of the principal of, premium, if any, and interest on, the
Notes will be subordinated, as set forth in the Indenture, in right of payment
to the prior payment in full of all Senior Indebtedness. The Notes will be
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 existing and future Subordinated Indebtedness of the Company.
(Sections 1301 and 1302)
Upon the occurrence of any default in the payment of any Designated Senior
Indebtedness beyond any applicable grace period and after the receipt by the
Trustee from representatives of holders of any Designated Senior Indebtedness
(collectively, a "Senior Representative") of written notice of such default, no
payment (other than payments previously made pursuant to the provisions
described under "-- Defeasance or Covenant Defeasance of Indenture") or
distribution of any assets of the Company or any Subsidiary of any kind or
character (excluding certain permitted equity interests or subordinated
securities) may be made on account of the principal of, premium, if any, or
interest on, the Notes, or on account of the purchase, redemption, defeasance or
other acquisition of or in respect of, the Notes unless and until such default
shall have been cured or waived (in each case in accordance with the provisions
of the instrument or agreement under which such Designated Senior Indebtedness
was issued) or shall have ceased to exist or such Designated Senior Indebtedness
shall have been discharged or paid in full after which the Company shall resume
making any and all required payments in respect of the Notes, including any
missed payments.
Upon the occurrence and during the continuance of any non-payment default
with respect to any Designated Senior Indebtedness pursuant to which the
maturity thereof may then be accelerated immediately (a "Non-payment Default")
and after the receipt by the Trustee and the Company from a Senior
Representative of written notice of such Non-payment Default, no payment (other
than payments previously made pursuant to the provisions described under "--
Defeasance or Covenant Defeasance of Indenture") or distribution of any assets
of the Company of any kind or character (excluding certain permitted equity
interests or subordinated securities) may be made by the Company or any
Subsidiary on account of the principal of, premium, if any, or interest on, the
Notes or on account of the purchase, redemption, defeasance or other acquisition
of or in respect of, the Notes for the period specified below (the "Payment
Blockage Period").
The Payment Blockage Period shall commence upon the receipt of notice of
the Non-payment Default by the Trustee and the Company from a Senior
Representative and shall end on the earliest of (i) the 179th day after such
commencement, (ii) the date on which such Non-payment Default (and all
Non-payment Defaults as to which notice is also given after such Payment
Blockage Period is initiated) is cured, waived or ceases to exist or on which
such Designated Senior Indebtedness is discharged or paid in full or (iii) the
date on which such Payment Blockage Period (and all Non-payment Defaults as to
which notice is given after such Payment Blockage Period is initiated) shall
have been terminated by written notice to the Company or the Trustee from the
Senior Representative initiating such Payment Blockage Period, after which, in
the case of each of clauses (i), (ii) and (iii), the Company will promptly
resume making any and all required payments in respect of the Notes, including
any missed payments. In no event will a Payment Blockage Period extend beyond
179 days from the date of the receipt by the Company or the Trustee of the
notice initiating such Payment Blockage Period (such 179-day period referred to
as the "Initial Period"). Any number of notices of Non-payment Defaults may be
given during the Initial Period; provided that during any period of 365
consecutive days only one Payment Blockage Period, during which payment of
principal of, premium, if any, or interest on, the Notes may not be made, may
commence and the duration of such period may not exceed 179 days. No Non-payment
Default with respect to any Designated Senior Indebtedness that existed or was
continuing on the date of the commencement of any Payment Blockage Period will
be, or can be, made the basis for the commencement of a second Payment Blockage
Period, whether or not within a period of 365 consecutive days, unless such
default has been cured or waived for a period of not less than 90 consecutive
days. (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
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<PAGE> 46
an Event of Default under the Indenture and would enable the holders of the
Notes to accelerate the maturity thereof. See "-- Events of Default."
The Indenture will provide that in the event of any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith, relative to the
Company or its assets, or any liquidation, dissolution or other winding up of
the Company, whether voluntary or involuntary, or whether or not involving
insolvency or bankruptcy, or any assignment for the benefit of creditors or any
other marshaling of assets or liabilities of the Company, all Senior
Indebtedness must be paid in full before any payment or distribution (excluding
distributions of certain permitted equity interest or subordinated securities)
is made on account of the principal of, or premium, if any, or interest on the
Notes or on account of the purchase, redemption, defeasance or other acquisition
of or in respect of, the Notes (other than payments previously made pursuant to
the provisions described under "-- Defeasance or Covenant Defeasance of
Indenture").
By reason of such subordination, in the event of liquidation 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 fully with respect to the
Notes.
"Senior Indebtedness" under the Indenture means the principal of, premium,
if any, and interest (including interest accruing after the filing of a petition
initiating any proceeding under any state, federal or foreign bankruptcy law
whether or not allowable as a claim in such proceeding) and all other monetary
obligations on, any Indebtedness of the Company (other than as otherwise
provided in this definition), whether outstanding on the date of the Indenture
or thereafter created, incurred or assumed, and whether at any time owing,
actually or contingently, 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 include the principal of, and premium, if any, and
interest (including interest accruing after the filing of a petition initiating
any proceedings under any state, federal or foreign bankruptcy laws whether or
not allowable as a claim in such proceeding), and all other monetary obligations
of every kind and nature of the Company from time to time owed to the lenders
under the Bank Credit Facility; provided, however, that any Indebtedness under
any refinancing, refunding or replacement of the Bank Credit Facility shall not
constitute Senior Indebtedness to the extent the Indebtedness thereunder is by
its express terms subordinate to any other Indebtedness of the Company.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i)
Indebtedness evidenced by the Notes, (ii) Indebtedness that is by its terms
subordinate or junior in right of payment to any Indebtedness of the Company,
(iii) Indebtedness which, when incurred and without respect to any election
under Section 1111(b) of Title 11 United States Code, is without recourse to the
Company, (iv) Indebtedness which is represented by Redeemable Capital Stock, (v)
any liability for foreign, federal, state, local or other tax owed or owing by
the Company to the extent such liability constitutes Indebtedness, (vi)
Indebtedness of the Company to a Subsidiary or any other Affiliate of the
Company or any of such Affiliate's subsidiaries and (vii) that portion of any
Indebtedness which at the time of issuance is issued in violation of the
Indenture.
"Designated Senior Indebtedness" under the Indenture means (i) all Senior
Indebtedness under, or in respect of, the Bank Credit Facility, and (ii) any
other Senior Indebtedness which at the time of determination, has an aggregate
principal amount outstanding of at least $25 million and is specifically
designated in the instrument evidencing such Senior Indebtedness or the
agreement under which such Senior Indebtedness arises as "Designated Senior
Indebtedness" by the Company.
As of September 30, 1996, on a pro forma basis after giving effect to the
sale of the Notes and the application of the estimated net proceeds thereof, the
redemption and conversion of the Company's 4 3/4% Notes and the repayment of
certain other indebtedness, the Company would have had approximately $11.6
million of Senior Indebtedness outstanding and the Company's subsidiaries would
have had approximately $129.3 million of indebtedness outstanding (including
trade payables, current, long-term and other liabilities
45
<PAGE> 47
and excluding the guarantees by certain of the Company's subsidiaries of the
Company's obligations under the Bank Credit Facility).
The Indenture will limit, but not prohibit the incurrence by the Company
and its Restricted Subsidiaries of additional Indebtedness, and the Indenture
will prohibit the incurrence by the Company of Indebtedness that is subordinated
in right of payment to any Senior Indebtedness of the Company and senior in
right of payment to the Notes.
The Notes will be effectively subordinated to all Indebtedness and other
liabilities and commitments (including trade payables and lease obligations) of
the Company's Subsidiaries. Any right of the Company to receive assets of any
such Subsidiary upon the liquidation or reorganization of any such Subsidiary
(and the consequent right of the holders of the Notes to participate in those
assets) will be effectively subordinated to the claims of that Subsidiary's
creditors, except to the extent that the Company is itself recognized as a
creditor of such Subsidiary, in which case the claims of the Company would still
be subordinate to any security in the assets of such Subsidiary and any
Indebtedness of such Subsidiary senior to that held by the Company.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness. The Company will not, and will not permit any
of its Restricted Subsidiaries to, create, issue, incur, assume, guarantee or
otherwise in any manner become directly or indirectly liable for the payment of
or otherwise incur (collectively, "incur"), any Indebtedness (including any
Acquired Indebtedness but excluding Permitted Indebtedness), unless such
Indebtedness is incurred by the Company or constitutes Acquired Indebtedness of
a Restricted Subsidiary and, in each case, the Company's Consolidated Fixed
Charge Coverage Ratio for the four full fiscal quarters for which financial
statements are available immediately preceding the incurrence of such
Indebtedness taken as one period is at least equal to or greater than 2.25:1.
(Section 1008)
For purposes of determining the outstanding principal amount of any
particular Indebtedness Incurred pursuant to this covenant, (1) Indebtedness
Incurred pursuant to the Bank Credit Facility prior to or on the date of this
Indenture shall be treated as Incurred pursuant to clause (i) under the
definition of "Permitted Indebtedness," (2) Indebtedness permitted by this
covenant need not be permitted solely by reference to one provision permitting
such Indebtedness but may be permitted in part by one such provision and in part
by one or more other provisions of this Section permitting such Indebtedness and
(3) in the event that Indebtedness or any portion thereof meets the criteria of
more than one of the types of Indebtedness described in this covenant, the
Company, in its sole discretion, shall classify such Indebtedness and only be
required to include the amount of such Indebtedness in one of such clauses.
Accordingly, Indebtedness Incurred after the date of the Indenture, whether
Incurred as reborrowings under the Bank Credit Facility or otherwise, can be
allocated as set forth in the preceding sentence.
Limitation on Restricted Payments. (a) The Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Company's Capital Stock (other than dividends
or distributions payable solely in shares of its Qualified Capital Stock or
in options, warrants or other rights to acquire shares of such Qualified
Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, the Company's Capital Stock or any Capital Stock of
any Affiliate of the Company or options, warrants or other rights to
acquire such Capital Stock;
(iii) make any principal payment on, or repurchase, redeem, defease,
retire or otherwise acquire for value, prior to any scheduled principal
payment, sinking fund payment or maturity, any Subordinated Indebtedness;
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<PAGE> 48
(iv) declare or pay any dividend or distribution on any Capital Stock
of any Restricted Subsidiary to any Person (other than (a) to the Company
or any of its Wholly Owned Restricted Subsidiaries or (b) to all holders of
Capital Stock of such Restricted Subsidiary on a pro rata basis); or
(v) make or permit the existence of any Investment in any Person
(other than any Permitted Investments)
(any of the foregoing actions described in clauses (i) through (v), other than
any such action that is a Permitted Payment (as defined below), collectively,
"Restricted Payments") (the amount of any such Restricted Payment, if other than
cash, as determined by the board of directors of the Company, whose
determination shall be conclusive and evidenced by a board resolution), unless
(1) immediately before and immediately after giving effect to such proposed
Restricted Payment on a pro forma basis, no Default or Event of Default shall
have occurred and be continuing and such Restricted Payment shall not be an
event which is, or after notice or lapse of time or both, would be, an "event of
default" under the terms of any Indebtedness of the Company or its Subsidiaries;
(2) immediately before and immediately after giving effect to such Restricted
Payment on a pro forma basis, the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the provisions described
under "-- Limitation on Indebtedness; " and (3) after giving effect to the
proposed Restricted Payment, the aggregate amount of all such Restricted
Payments declared or made after the date of the Indenture, does not exceed the
sum of:
(A) 50% of the aggregate Consolidated Net Income of the Company
accrued on a cumulative basis during the period beginning on the first day
of the full fiscal quarter immediately preceding the date of the Indenture
and ending on the last day of the Company's last fiscal quarter ending
prior to the date of the Restricted Payment (or, if such aggregate
cumulative Consolidated Net Income shall be a loss, minus 100% of such
loss);
(B) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company either (x) as capital contributions to the Company
or (y) from the issuance or sale (other than to any of its Subsidiaries) of
Qualified Capital Stock of the Company or any options, warrants or rights
to purchase such Qualified Capital Stock 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 in
clause (ii) or (iii) of paragraph (b) below);
(C) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company (other than from any of its Subsidiaries) upon the
exercise of any options, warrants or rights to purchase Qualified Capital
Stock of the Company;
(D) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company from the conversion or exchange, if any, of debt
securities or Redeemable Capital Stock of the Company or its Subsidiaries
into or for Qualified Capital Stock of the Company plus, to the extent such
debt securities or Redeemable Capital Stock were issued after the date of
the Indenture, the aggregate of Net Cash Proceeds from their original
issuance;
(E) (x) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment made after the date of the Indenture, an
amount equal to the lesser of the return of capital with respect to such
Investment and the initial amount of such Investment, in either case, less
the cost of the disposition of such Investment and (y) an amount equal to
the net reduction in Investments resulting from the redesignation of
Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case
as provided in the definition of "Investments"), not to exceed in each case
the amount of Investments previously made by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary; and
(F) $20 million.
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(b) Notwithstanding the foregoing, and in the case of clauses (ii) through
(ix) below, so long as there is no Default or Event of Default continuing, the
foregoing provisions shall not prohibit the following actions (each of clauses
(i) through (vi) being referred to as a "Permitted Payment"):
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment was
permitted by the provisions of paragraph (a) of this Section and such
payment shall have been deemed to have been paid on such date of
declaration and shall not have been deemed a "Permitted Payment" for
purposes of the calculation required by paragraph (a) of this Section;
(ii) the repurchase, redemption, or other acquisition or retirement
for value of any shares of any class of Capital Stock of the Company in
exchange for (including any such exchange pursuant to the exercise of a
conversion right or privilege in connection with which cash is paid in lieu
of the issuance of fractional shares or scrip), or out of the Net Cash
Proceeds of a substantially concurrent issue and sale for cash (other than
to any Subsidiary) of, other shares of Qualified Capital Stock of the
Company; provided that the Net Cash Proceeds from the issuance of such
shares of Qualified Capital Stock are excluded from clause (3)(B) of
paragraph (a) of this Section;
(iii) the repurchase, redemption, defeasance, retirement or
acquisition for value or payment of principal of any Subordinated
Indebtedness or Redeemable Capital Stock in exchange for, or in an amount
not in excess of the Net Cash Proceeds of, a substantially concurrent
issuance and sale for cash (other than to any Subsidiary) of any Qualified
Capital Stock of the Company, provided that the Net Cash Proceeds from the
issuance of such shares of Qualified Capital Stock are excluded from clause
(3)(B) of paragraph (a) of this Section;
(iv) the repurchase, redemption, defeasance, retirement, refinancing,
acquisition for value or payment of principal of any Subordinated
Indebtedness (other than Redeemable Capital Stock) (a "refinancing")
through the substantially concurrent issuance of new Subordinated
Indebtedness of the Company, provided that any such new Subordinated
Indebtedness (1) shall be in a principal amount that does not exceed the
principal amount so refinanced (or, if such Subordinated Indebtedness
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, then such lesser amount
as of the date of determination), plus the lesser of (I) the stated amount
of any premium or other payment required to be paid in connection with such
a refinancing pursuant to the terms of the Indebtedness being refinanced or
(II) the amount of premium or other payment actually paid at such time to
refinance the Indebtedness, plus, in either case, the amount of expenses of
the Company incurred in connection with such refinancing; (2) has an
Average Life to Stated Maturity greater than the remaining Average Life to
Stated Maturity of the Notes; (3) has a Stated Maturity for its final
scheduled principal payment later than the Stated Maturity for the final
scheduled principal payment of the Notes; and (4) is expressly subordinated
in right of payment to the Notes at least to the same extent as the
Subordinated Indebtedness to be refinanced;
(v) the repurchase, redemption, defeasance, retirement, refinancing,
acquisition for value or payment of any Redeemable Capital Stock through
the substantially concurrent issuance of new Redeemable Capital Stock of
the Company, provided that any such new Redeemable Capital Stock (1) shall
have an aggregate liquidation preference that does not exceed the aggregate
liquidation preference of the amount so refinanced; (2) has an Average Life
to Stated Maturity greater than the remaining Average Life to Stated
Maturity of the Notes; and (3) has a Stated Maturity later than the Stated
Maturity for the final scheduled principal payment of the Notes;
(vi) the repurchase by the Company of up to 5 million shares of Common
Stock pursuant to the Equity Dutch Auction, provided, however, that in the
event all such 5 million shares are not purchased pursuant to such Equity
Dutch Auction, the Company may repurchase pursuant to tender offers or open
market purchases the difference between 5 million shares of Common Stock
and the number of shares of Common Stock actually purchased in the Equity
Dutch Auction;
(vii) payments or distributions to dissenting stockholders pursuant to
applicable law, pursuant to or in connection with a consolidation, merger
or transfer of assets that complies with the provisions of the Indenture
applicable to mergers, consolidations and transfers of all or substantially
all of the property and assets of the Company;
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<PAGE> 50
(viii) the repurchase of shares, or options to purchase shares, of
Capital Stock of the Company from employees, former employees, directors or
former directors of the Company or any of its Subsidiaries (or permitted
transferees of such employees, former employees, directors or former
directors), pursuant to the terms of agreements (including employment
agreements) or plans (or amendments thereto) approved by the Board of
Directors under which such persons purchase or sell or are granted the
option to purchase or sell, shares of such stock; provided, however, that
the aggregate amount of such repurchases shall not exceed $1 million in any
calendar year (unless such repurchases are made with the proceeds of
insurance policies and the shares of Capital Stock are repurchased from the
executors, administrators, testamentary trustees, heirs, legatees or
beneficiaries) plus the aggregate Net Cash Proceeds from any reissuance
during such calendar year of Capital Stock to employees or directors of the
Company or its Subsidiaries; or
(ix) any purchase of any fractional share of Common Stock of the
Company resulting from (A) any dividend or other distribution on
outstanding shares of Common Stock of the Company that is payable in shares
of such Common Stock (including any stock split or subdivision of the
outstanding Common Stock of the Company), (B) any combination of all of the
outstanding shares of Common Stock of the Company, (C) any reorganization
or consolidation of the Company or any merger of the Company with or into
any other Person or (D) the conversion of any securities of the Company
into shares of Common Stock. (Section 1009)
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into any transaction or series of related transactions (including, without
limitation, the sale, purchase, exchange or lease of assets, property or
services) with or for the benefit of any Affiliate of the Company (other than
the Company or a Wholly Owned Restricted Subsidiary) unless such transaction or
series of related transactions is entered into in good faith and (a) such
transaction or series of related transactions is on terms that are no less
favorable to the Company or such Subsidiary, as the case may be, than those that
would be available in a comparable transaction in arm's-length dealings with an
unrelated third party, (b) with respect to any transaction or series of related
transactions involving aggregate value in excess of $1 million, the Company
delivers an officers' certificate to the Trustee certifying that such
transaction or series of related transactions complies with clause (a) above,
and (c) with respect to any transaction or series of related transactions
involving aggregate value in excess of $5 million, such transaction or series of
related transactions has been approved by a majority of the Disinterested
Directors of the Company, or in the event there is only one Disinterested
Director, by such Disinterested Director; provided, however, that this provision
shall not apply to any transaction with (i) an officer or director of the
Company entered into in the ordinary course of business (including compensation
and employee benefit arrangements with any officer, director or employee of the
Company, including under any stock option or stock incentive plans); (ii)
pursuant to an agreement or arrangement in existence on the date of the
Indenture; or (iii) pursuant to a Permitted Agreement. (Section 1010)
Limitation on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur or affirm any
Lien of any kind securing any Pari Passu Indebtedness or Subordinated
Indebtedness (including any assumption, guarantee or other liability with
respect thereto by any Restricted Subsidiary) upon any property or assets
(including any intercompany notes) of the Company or any Restricted Subsidiary
owned on the date of the Indenture or acquired after the date of the Indenture,
or any income or profits therefrom, unless the Notes are directly secured
equally and ratably with (or, in the case of Subordinated Indebtedness, prior or
senior thereto, with the same relative priority as the Notes shall have with
respect to such Subordinated Indebtedness) the obligation or liability secured
by such Lien except for Liens (A) securing any Indebtedness which became
Indebtedness pursuant to a transaction permitted under "-- Consolidation,
Merger, Sale of Assets" or securing Acquired Indebtedness which, in each case,
were created prior to (and not created in connection with, or in contemplation
of) the incurrence of such Pari Passu Indebtedness or Subordinated Indebtedness
(including any assumption, guarantee or other liability with respect thereto by
any Restricted Subsidiary) and which Indebtedness is permitted under the
provisions of "-- Limitation on Indebtedness" or (B) securing any Indebtedness
incurred in connection with any refinancing, renewal, substitutions or
replacements of any such Indebtedness described in clause (A), so long
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as the aggregate principal amount of Indebtedness represented thereby is not
increased by such refinancing plus the lesser of (i) the stated amount of any
premium or other payment required to be paid in connection with such a
refinancing pursuant to the terms of the Indebtedness being refinanced or (ii)
the amount of premium or other payment actually paid at such time to refinance
the Indebtedness, plus, in either case, the amount of expenses of the Company
incurred in connection with such refinancing, provided, however, that in the
case of clauses (A) and (B), any such Lien only extends to the assets that were
subject to such Lien securing such Indebtedness prior to the related acquisition
by the Company or its Restricted Subsidiaries. (Section 1011)
Limitation on Sale of Assets. (a) The Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, consummate an
Asset Sale unless (i) at least 75% of the consideration from such Asset Sale is
received in cash and (ii) the Company or such Subsidiary receives consideration
at the time of such Asset Sale at least equal to the Fair Market Value of the
shares or assets subject to such Asset Sale (as determined by the board of
directors of the Company and evidenced in a board resolution); provided,
however, that clause (i) shall not be applicable to Asset Sales during any 12
month period involving assets with an aggregate Fair Market Value of less than
10% of the Consolidated Net Tangible Assets of the Company as of the end of the
last fiscal quarter prior to the execution of the agreement for such Asset Sale.
(b) If all or a portion of the Net Cash Proceeds of any Asset Sale are not
required to be applied to repay permanently any Senior Indebtedness then
outstanding as required by the terms thereof, or the Company determines not to
apply such Net Cash Proceeds to the permanent prepayment of such Senior
Indebtedness, or if no such Senior Indebtedness is then outstanding, then the
Company or a Subsidiary may, within 180 days of the Asset Sale invest the Net
Cash Proceeds in properties and other assets that (as determined by the board of
directors of the Company) replace the properties and assets that were the
subject of the Asset Sale or in properties and assets that will be used in the
businesses of the Company or its Subsidiaries existing on the date of the
Indenture or in businesses reasonably related thereto. The amount of such Net
Cash Proceeds not used or invested within 180 days of the Asset Sale as set
forth in this paragraph constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $15 million, the
Company will apply the Excess Proceeds to the repayment of the Notes and any
other Pari Passu Indebtedness outstanding with similar provisions requiring the
Company to make an offer to purchase such Indebtedness with the proceeds from
any Asset Sale as follows: (A) the Company will make an offer to purchase (an
"Offer") from 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 amount
is less than the aggregate Offered Price (as defined herein) of all Notes
tendered) and (B) to the extent required by such Pari Passu Indebtedness to
permanently reduce the principal amount of such Pari Passu Indebtedness, the
Company will 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 will 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 for the Notes will be
payable in cash in an amount equal to 100% of the principal amount of the Notes
plus accrued and unpaid interest, if any, to the date (the "Offer Date") such
Offer is consummated (the "Offered Price"), 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 in
a Pari Passu Offer is less than the Pari Passu Debt Amount, the Company will use
any remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes and Pari Passu Indebtedness surrendered by holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis. Upon the completion of the purchase
of all the Notes tendered pursuant to
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an Offer and the completion of a Pari Passu Offer, the amount of Excess
Proceeds, if any, shall be reset at zero.
(d) The Indenture will provide that, if the Company becomes obligated to
make an Offer pursuant to clause (c) above, the Notes and the Pari Passu
Indebtedness shall be purchased by the Company, at the option of the holders
thereof, in whole or in part in integral multiples of $1,000, on a date that is
not earlier than 30 days and not later than 60 days from the date the notice of
the Offer is given to holders, or such later date as may be necessary for the
Company to comply with the requirements under the Exchange Act.
(e) The Indenture will provide that the Company will comply with the
applicable tender offer rules, including Rule 14e-1 under the Exchange Act, and
any other applicable securities laws or regulations in connection with an Offer.
(Section 1012)
Limitation on Issuances of Guarantees of Indebtedness. (a) The Company will
not permit any Restricted Subsidiary other than the Guarantors, directly or
indirectly, to guarantee, assume or in any other manner become liable with
respect to any Pari Passu Indebtedness or Subordinated Indebtedness of the
Company unless such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to the Indenture providing for a Guarantee of the Notes
on the same terms as the guarantee of such Indebtedness except that (A) such
guarantee need not be secured unless required pursuant to "-- Limitation on
Liens" and (B) if such Indebtedness is by its terms expressly subordinated to
the Notes, any such assumption, guarantee or other liability of such Restricted
Subsidiary with respect to such Indebtedness shall be subordinated to such
Restricted Subsidiary's Guarantee of the Notes at least to the same extent as
such Indebtedness is subordinated to the Notes pursuant to the terms of the
Indenture.
(b) Notwithstanding the foregoing, any Guarantee by a Restricted Subsidiary
of the Notes shall provide by its terms that it (and all Liens securing the
same) shall be automatically and unconditionally released and discharged upon
any sale, exchange or transfer, to any Person not an Affiliate of the Company,
of all of the Company's Capital Stock in, or all or substantially all the assets
of, such Subsidiary, which transaction is in compliance with the terms of the
Indenture and such Restricted Subsidiary is released from its guarantees of
other Indebtedness of the Company or any Restricted Subsidiaries. (Section 1013)
Limitation on Senior Subordinated Indebtedness. The Company will not, and
will not permit any Guarantor to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise in any manner become directly or indirectly
liable for or with respect to or otherwise permit to exist any Indebtedness that
is subordinate in right of payment to any Indebtedness of the Company or such
Guarantor, as the case may be, unless such Indebtedness is also pari passu with
the Notes or the Guarantee of such Guarantor or subordinate in right of payment
to the Notes or such Guarantee for at least to the same extent as the Notes or
such Guarantee are subordinate in right of payment to Senior Indebtedness or
Senior Indebtedness of such Guarantor, as the case may be. (Section 1014)
Limitation on Restricted Subsidiary Capital Stock. The Company will not
permit (a) any Restricted Subsidiary of the Company to issue, sell or transfer
any Capital Stock, except for (i) Capital Stock issued or sold to, held by or
transferred to the Company or a Wholly Owned Restricted Subsidiary, and (ii)
Capital Stock issued by a Person prior to the time (A) such Person becomes a
Restricted Subsidiary, (B) such Person merges with or into a Restricted
Subsidiary or (C) a Restricted Subsidiary merges with or into such Person;
provided that such Capital Stock was not issued or incurred by such Person in
anticipation of the type of transaction contemplated by subclause (A), (B) or
(C) or (b) any Person (other than the Company or a Wholly Owned Restricted
Subsidiary) to acquire Capital Stock of any Restricted Subsidiary from the
Company or any Restricted Subsidiary, except, in the case of clause (a) or (b),
upon the acquisition of all the outstanding Capital Stock of such Restricted
Subsidiary in accordance with the terms of the Indenture. (Section 1016)
Limitation on Dividends 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 any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to (i) pay dividends or
make any other distribution on its Capital Stock, (ii) pay any Indebtedness owed
to the Company or any other Restricted Subsidiary, (iii) make any Investment in
the Company or any other Restricted Subsidiary or (iv) transfer any of its
properties or assets to the Company or any other Restricted Subsidiary, except
for:
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(a) any encumbrance or restriction pursuant to any agreement in effect on the
date of the Indenture and listed on a schedule to the Indenture; (b) any
encumbrance or restriction, with respect to a Restricted Subsidiary that is not
a Restricted Subsidiary of the Company on the date of the Indenture, in
existence at the time such Person becomes a Restricted Subsidiary of the Company
and not incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary; (c) any encumbrance or restriction existing
under any agreement that extends, renews, refinances or replaces the agreements
containing the encumbrances or restrictions in the foregoing clauses (a) and
(b), or in this clause (c), provided that the terms and conditions of any such
encumbrances or restrictions are no more restrictive in any material respect
than those under or pursuant to the agreement evidencing the Indebtedness so
extended, renewed, refinanced or replaced; (d) in the case of clause (iv) of
this covenant, (A) any encumbrance or restriction that restricts in a customary
manner the subletting, assignment or transfer of any property or asset that is a
lease, license, conveyance or contract or similar property or asset, (B)
existing by virtue of any transfer of, agreement to transfer, option or right
with respect to, or Lien on, any property or assets of the Company or any
Restricted Subsidiary not otherwise prohibited by the Indenture or (C) arising
or agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate, detract from
the value of property or assets of the Company or any Restricted Subsidiary in
any manner material to the Company or any Restricted Subsidiary; or (e) any
encumbrance or restriction with respect to a Restricted Subsidiary and imposed
pursuant to an agreement that has been entered into for the sale or disposition
of all or substantially all of the Capital Stock of, or property and assets of,
such Restricted Subsidiary. (Section 1017)
Limitation on Unrestricted Subsidiaries. The Company will not make, and
will not permit its Restricted Subsidiaries to make, any Investment in
Unrestricted Subsidiaries if, at the time thereof, the aggregate amount of such
Investments would exceed the amount of Restricted Payments then permitted to be
made pursuant to the "-- Limitation on Restricted Payments" covenant. Any
Investments in Unrestricted Subsidiaries permitted to be made pursuant to this
covenant (i) will be treated as a Restricted Payment in calculating the amount
of Restricted Payments made by the Company and (ii) may be made in cash or
property. (Section 1018)
Provision of Financial Statements. Whether or not the Company is subject to
Section 13(a) or 15(d) of the Exchange Act, the Company will, to the extent
permitted under the Exchange Act, file with the Commission the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to Sections 13(a) or 15(d) if the Company
were so subject, such documents to be filed with the Commission on or prior to
the date (the "Required Filing Date") by which the Company would have been
required so to file such documents if the Company were so subject. The Company
will also in any event (x) within 15 days of each Required Filing Date (i)
transmit by mail to all holders, as their names and addresses appear in the
security register, without cost to such holders and (ii) file with the Trustee
copies of the annual reports, quarterly reports and other documents which the
Company would have been required to file with the Commission pursuant to
Sections 13(a) or 15(d) of the Exchange Act if the Company were subject to
either of such Sections and (y) if filing such documents by the Company with the
Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective holder at the Company's cost. If any
Guarantor's financial statements would be required to be included in the
financial statements filed or delivered pursuant to the Indenture if the Company
were subject to Section 13(a) or 15(d) of the Exchange Act, the Company shall
include such Guarantor's financial statements in any filing or delivery pursuant
to the Indenture. (Section 1019)
Additional Covenants. The Indenture also contains covenants with respect to
the following matters: (i) payment of principal, premium and interest; (ii)
maintenance of an office or agency in The City of New York; (iii) arrangements
regarding the handling of money held in trust; (iv) maintenance of corporate
existence; (v) payment of taxes and other claims; (vi) maintenance of
properties; and (vii) maintenance of insurance.
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CONSOLIDATION, MERGER, SALE OF ASSETS
The Company will not, in a single transaction or through a series of
related transactions, consolidate with or merge with or into any other Person or
sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets to any Person or group of
affiliated Persons, or permit any of its Subsidiaries to enter into any such
transaction or series of related transactions if such transaction or series of
related transactions, in the aggregate, would result in a sale, assignment,
conveyance, transfer, lease or disposition of all or substantially all of the
properties and assets of the Company and its Subsidiaries on a Consolidated
basis to any other Person or group of affiliated Persons, unless at the time and
after giving effect thereto (i) either (a) the Company will be the continuing
corporation or (b) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which acquires
by sale, assignment, conveyance, transfer, lease or disposition all or
substantially all of the properties and assets of the Company and its
Subsidiaries on a Consolidated basis (the "Surviving Entity") will be a
corporation duly organized and validly existing under the laws of the United
States of America, any state thereof or the District of Columbia and such Person
expressly assumes, by a supplemental indenture, in a form satisfactory to the
Trustee, all the obligations of the Company under the Notes and the Indenture,
as the case may be, and the Notes and the Indenture will remain in full force
and effect as so supplemented; (ii) immediately before and immediately after
giving effect to such transaction on a pro forma basis (and treating any
Indebtedness not previously an obligation of the Company or any of its
Subsidiaries which becomes the obligation of the Company or any of its
Subsidiaries as a result of such transaction as having been incurred at the time
of such transaction), no Default or Event of Default will have occurred and be
continuing; (iii) immediately after giving effect to such transaction on a pro
forma basis (and treating any Indebtedness not previously an obligation of the
Company or any of its Restricted Subsidiaries which becomes the obligation of
the Company or any of its Restricted Subsidiaries as a result of such
transaction as having been incurred at the time of such transaction), the
Consolidated Net Worth of the Company (or the Surviving Entity if the Company is
not the continuing obligor under the Indenture) is equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction;
(iv) immediately before and immediately after giving effect to such transaction
on a pro forma basis (on the assumption that the transaction occurred on the
first day of the four-quarter period for which financial statements are
available ending immediately prior to the consummation of such transaction with
the appropriate adjustments with respect to the transaction being included in
such pro forma calculation), the Company (or the Surviving Entity if the Company
is not the continuing obligor under the Indenture) could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under the provisions
of "-- Certain Covenants -- Limitation on Indebtedness;" (v) at the time of the
transaction each Guarantor, if any, unless it is the other party to the
transactions described above, will have by supplemental indenture confirmed that
its Guarantees shall apply to such Person's obligations under the Indenture and
the Notes; (vi) at the time of the transaction if any of the property or assets
of the Company or any of its Subsidiaries would thereupon become subject to any
Lien, the provisions of "-- Certain Covenants -- Limitation on Liens" are
complied with; and (vii) at the time of the transaction the Company or the
Surviving Entity will have delivered, or caused to be delivered, to the Trustee,
in form and substance reasonably satisfactory to the Trustee, an officers'
certificate and an opinion of counsel, each to the effect that such
consolidation, merger, transfer, sale, assignment, conveyance, transfer, lease
or other transaction and the supplemental indenture in respect thereof comply
with the Indenture and that all conditions precedent therein provided for
relating to such transaction have been complied with. (Section 801)
The Indenture will also contain a provision which limits the ability of
each Guarantor to, in a single transaction or through a series of related
transactions, consolidate with or merge with or into any other Person (other
than the Company or any Guarantor) or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets on a
Consolidated basis to any Person or group of affiliated Persons (other than the
Company or any Guarantor) without meeting certain exceptions.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the two immediately preceding paragraphs
in which the Company or any Guarantor, as the case may be, is not the continuing
corporation, the successor Person formed or remaining shall succeed to, and be
substituted
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for, and may exercise every right and power of, the Company, and the Company or
any Guarantor, as the case may be, would be discharged from all obligations and
covenants under the Indenture and the Notes or its Guarantee, as the case may
be. (Section 802)
EVENTS OF DEFAULT
An Event of Default will occur under the Indenture if:
(i) there shall be a default in the payment of any interest on any
Note when it becomes due and payable, and such default shall continue for a
period of 30 days;
(ii) there shall be a default in the payment of the principal of (or
premium, if any, on) any Note at its Maturity (upon acceleration, optional
or mandatory redemption, required repurchase or otherwise);
(iii) there shall be a default in the performance, or breach, of any
covenant or agreement of the Company or any Guarantor under the Indenture
or any Guarantee (other than a default in the performance, or breach, of a
covenant or agreement which is specifically dealt with in clause (i), (ii)
or (iv)) and such default or breach shall continue for a period of 30 days
after written notice has been given, by certified mail, (x) to the Company
by the Trustee or (y) to the Company and the Trustee by the holders of at
least 25% in aggregate principal amount of the outstanding Notes;
(iv) (a) there shall be a default in the performance or breach of the
provisions described in "-- Consolidation, Merger, Sale of Assets;" (b) the
Company shall have failed to make or consummate an Offer required under the
provisions of "-- Certain Covenants -- Limitation on Sale of Assets;" or
(c) the Company shall have failed to make or consummate a Change of Control
Offer required under the provisions of "Purchase of Notes Upon a Change of
Control;"
(v) one or more defaults shall have occurred under any of the
agreements, indentures or instruments under which the Company, any
Guarantor or any Subsidiary then has outstanding Indebtedness in excess of
$10 million, individually or in the aggregate, and either (a) such default
results from the failure to pay such Indebtedness at its stated final
maturity or (b) such default or defaults have resulted in the acceleration
of the maturity of such Indebtedness;
(vi) either (a) the collateral agent under the Bank Credit Facility or
(b) if the Bank Credit Facility shall no longer be in force and effect, any
holder of at least $10 million in aggregate principal amount of
Indebtedness of the Company or any Restricted Subsidiary shall commence
judicial proceedings to foreclose upon assets of the Company or any of its
Restricted Subsidiaries having an aggregate Fair Market Value, individually
or in the aggregate, in excess of $10 million or shall have exercised any
right under applicable law or applicable security documents to take
ownership of any such assets in lieu of foreclosure;
(vii) any Guarantee shall for any reason cease to be, or shall for any
reason be asserted in writing by any Guarantor or the Company not to be, in
full force and effect and enforceable in accordance with its terms except
to the extent contemplated by the Indenture and any such Guarantee;
(viii) one or more judgments, orders or decrees for the payment of
money in excess of $10 million, either individually or in the aggregate,
shall be rendered against the Company, any Guarantor or any Subsidiary or
any of their respective properties and shall not be discharged and either
(a) any creditor shall have commenced an enforcement proceeding upon such
judgment, order or decree or (b) there shall have been a period of 60
consecutive days during which a stay of enforcement of such judgment or
order, by reason of an appeal or otherwise, shall not be in effect;
(ix) there shall have been the entry by a court of competent
jurisdiction of (a) a decree or order for relief in respect of the Company,
any Guarantor or any Subsidiary in an involuntary case or proceeding under
any applicable Bankruptcy Law or (b) a decree or order adjudging the
Company, any Guarantor or any Subsidiary bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment or composition of or in respect of
the Company, any Guarantor or any Subsidiary under any applicable federal
or state law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator (or other similar
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official) of the Company, any Guarantor or any Subsidiary or of any
substantial part of their respective properties, or ordering the winding up
or liquidation of their respective affairs, and any such decree or order
for relief shall continue to be in effect, or any such other decree or
order shall be unstayed and in effect, for a period of 60 consecutive days;
or
(x) (a) the Company, any Guarantor or any Subsidiary commences a
voluntary case or proceeding under any applicable Bankruptcy Law or any
other case or proceeding to be adjudicated bankrupt or insolvent, (b) the
Company, any Guarantor or any Subsidiary consents to the entry of a decree
or order for relief in respect of the Company, such Guarantor or such
Subsidiary in an involuntary case or proceeding under any applicable
Bankruptcy Law or to the commencement of any bankruptcy or insolvency case
or proceeding against it, (c) the Company, any Guarantor or any Subsidiary
files a petition or answer or consent seeking reorganization or relief
under any applicable federal or state law, (d) the Company, any Guarantor
or any Subsidiary (I) consents to the filing of such petition or the
appointment of, or taking possession by, a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Company, any
Guarantor or such Subsidiary or of any substantial part of their respective
properties, (II) makes an assignment for the benefit of creditors or (III)
admits in writing its inability to pay its debts generally as they become
due or (e) the Company, any Guarantor or any Subsidiary takes any corporate
action in furtherance of any such actions in this paragraph (x). (Section
501)
If an Event of Default (other than as specified in clauses (ix) and (x) of
the prior paragraph) shall occur and be continuing with respect to the
Indenture, the Trustee or the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding may, and the Trustee at the
request of such holders shall, declare all unpaid principal of, premium, if any,
and accrued interest on all Notes to be due and payable, by a notice in writing
to the Company (and to the Trustee if given by the holders of the Notes) and
upon any such declaration, such principal, premium, if any, and interest shall
become due and payable immediately. If an Event of Default specified in clause
(ix) or (x) of the prior paragraph occurs with respect to the Company and is
continuing, then all the Notes shall ipso facto become and be due and payable
immediately in an amount equal to the principal amount of the Notes, together
with accrued and unpaid interest, if any, to the date the Notes become due and
payable, without any declaration or other act on the part of the Trustee or any
holder. Thereupon, the Trustee may, at its discretion, proceed to protect and
enforce the rights of the holders of Notes by appropriate judicial proceedings.
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the holders of a
majority in aggregate principal amount of Notes outstanding by written notice to
the Company and the Trustee, may rescind and annul 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
then outstanding, (iii) the principal of and premium, if any, on any Notes then
outstanding which have become due otherwise than by such declaration of
acceleration and interest thereon at a rate borne by the Notes and (iv) to the
extent that payment of such interest is lawful, interest upon overdue interest
at the rate borne by the Notes; and (b) all Events of Default, other than the
non-payment of principal of the Notes which have become due solely by such
declaration of acceleration, have been cured or waived as provided in the
Indenture. No such rescission shall affect any subsequent default or impair any
right consequent thereon. (Section 502)
If payment of the Notes is accelerated because of an Event of Default, the
Trustee shall promptly notify the agent under the Bank Credit Facility.
The holders of not less than a majority in aggregate principal amount of
the Notes outstanding may on behalf of the holders of all outstanding Notes
waive any past default under the Indenture and its consequences, 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
by such modification or amendment. (Section 513)
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The Company is also required to notify the Trustee within five business
days of the occurrence of any Default. (Section 501) The Company is required to
deliver to the Trustee, on or before a date not more than 60 days after the end
of each fiscal quarter and not more than 120 days after the end of each fiscal
year, a written statement as to compliance with the Indenture, including whether
or not any Default has occurred. (Section 1021) The Trustee is under no
obligation to exercise any of the rights or powers vested in it by the Indenture
at the request or direction of any of the holders of the Notes unless such
holders offer to the Trustee security or indemnity satisfactory to the Trustee
against the costs, expenses and liabilities which might be incurred thereby.
(Section 602)
The Trust Indenture Act contains limitations on the rights of the Trustee,
should it become a creditor of the Company or any Guarantor, if any, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions, provided that if it acquires any
conflicting interest it must eliminate such conflict upon the occurrence of an
Event of Default or else resign.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, elect to have the
obligations of the Company, any Guarantor and any other obligor upon the Notes
discharged with respect to the outstanding Notes ("defeasance"). Such defeasance
means that the Company, any such Guarantor and any other obligor under the
Indenture shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Notes, except for (i) the rights of holders of
such outstanding Notes to receive payments in respect of the principal of,
premium, if any, and interest on such Notes when such payments are due, (ii) the
Company's obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes, and
the maintenance of an office or agency for payment and money for security
payments held in trust, (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 have the obligations of
the Company and any Guarantor released with respect to certain covenants that
are described in the Indenture ("covenant defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or an
Event of Default with respect to the Notes. In the event covenant defeasance
occurs, certain events (not including non-payment, bankruptcy and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Notes. (Sections 401, 402 and 403)
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 be sufficient, in the opinion of a nationally recognized firm of
independent public accountants or a nationally recognized investment banking
firm, to pay and discharge the principal of, premium, if any, and interest on
the outstanding Notes on the Stated Maturity (or on any date after ,
2002 (such date being referred to as the "Defeasance Redemption Date"), if at or
prior to electing either defeasance or covenant defeasance, the Company has
delivered to the Trustee an irrevocable notice to redeem all of the outstanding
Notes on the Defeasance Redemption Date); (ii) in the case of defeasance, the
Company shall have delivered to the Trustee an opinion of independent counsel in
the United States stating that (A) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since the date
of the Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such opinion of
independent counsel in the United States shall confirm 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 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; (iii) in the case of covenant
defeasance, the Company shall have delivered to the Trustee an opinion of
independent counsel in the United States 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 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
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defeasance had not occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit or insofar as clauses
(ix) or (x) under the first paragraph under -- "Events of Default" are
concerned, at any time during the period ending on the 91st day after the date
of deposit; (v) such defeasance or covenant defeasance shall not cause the
Trustee for the Notes to have a conflicting interest as defined in the Indenture
and for purposes of the Trust Indenture Act with respect to any securities of
the Company or any Guarantor; (vi) such defeasance or covenant defeasance shall
not result in a breach or violation of, or constitute a Default under, the
Indenture or any other material agreement or instrument to which the Company,
any Guarantor or any Subsidiary is a party or by which it is bound; (vii) such
defeasance or covenant defeasance shall not result in the trust arising from
such deposit constituting an investment company within the meaning of the
Investment Company Act of 1940, as amended, unless such trust shall be
registered under such Act or exempt from registration thereunder; (viii) the
Company will have delivered to the Trustee an opinion of independent counsel in
the United States to the effect that 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; (ix) the Company shall have delivered to the Trustee an officers'
certificate stating that the deposit was not made by the Company with the intent
of preferring the holders of the Notes or any Guarantee over the other creditors
of the Company or any Guarantor with the intent of defeating, hindering,
delaying or defrauding creditors of the Company, any Guarantor or others; (x) no
event or condition shall exist that would prevent the Company from making
payments of the principal of, premium, if any, and interest on the Notes on the
date of such deposit or at any time ending on the 91st day after the date of
such deposit; and (xi) the Company will have delivered to the Trustee an
officers' certificate and an opinion of independent counsel, each stating that
all conditions precedent provided for relating to either the defeasance or the
covenant defeasance, as the case may be, have been complied with. (Section 404)
SATISFACTION AND DISCHARGE
The Indenture will 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
under the Indenture when (a) either (i) all such Notes theretofore authenticated
and delivered (except lost, stolen or destroyed Notes which have been replaced
or paid or Notes whose payment has been deposited in trust or segregated and
held in trust by the Company and thereafter repaid to the Company or discharged
from such trust as provided for in the Indenture) have been delivered to the
Trustee for cancellation or (ii) all Notes not theretofore delivered to the
Trustee for cancellation (x) have become due and payable, (y) will become due
and payable at their Stated Maturity within one year, or (z) are to be called
for redemption within one year under arrangements satisfactory to the applicable
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company; and the Company or any Guarantor has irrevocably
deposited or caused to be deposited with the Trustee as trust funds in trust an
amount in United States dollars sufficient to pay and discharge the entire
indebtedness on the Notes not theretofore delivered to the Trustee for
cancellation, including principal of, premium, if any, and accrued interest at
such Maturity, Stated Maturity or redemption date; (b) the Company or any
Guarantor has paid or caused to be paid all other sums payable under the
Indenture by the Company and any Guarantor; and (c) the Company has delivered to
the Trustee an officers' certificate and an opinion of independent counsel each
stating that (i) all conditions precedent under the Indenture relating to the
satisfaction and discharge of such Indenture have been complied with and (ii)
such satisfaction and discharge will not result in a breach or violation of, or
constitute a default under, the Indenture or any other material agreement or
instrument to which the Company, any Guarantor or any Subsidiary is a party or
by which the Company, any Guarantor or any Subsidiary is bound. (Section 1301)
MODIFICATIONS AND AMENDMENTS
Modifications and amendments of the Indenture may be made by the Company,
each Guarantor, if any, and the Trustee with the consent of the holders of at
least a majority of aggregate principal amount of the Notes then outstanding;
provided, however, that no such modification or amendment may, without the
consent of the holder of each outstanding Note affected thereby: (i) change the
Stated Maturity of the principal of, or
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any installment of interest on, or change to an earlier date any redemption
date of, or waive a default in the payment of the principal or interest on, any
such Note or reduce the principal amount thereof or the rate of interest
thereon or any premium payable upon the redemption thereof, or change the coin
or currency in which the principal of any such Note or any premium or the
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment after the Stated Maturity thereof (or, in the
case of redemption, on or after the redemption date); (ii) amend, change or
modify the obligation of the Company to make and consummate an Offer with
respect to any Asset Sale or Asset Sales in accordance with "-- Certain
Covenants -- Limitation on Sale of Assets" or the obligation of the Company to
make and consummate a Change of Control Offer in the event of a Change of
Control in accordance with "-- Purchase of Notes Upon a Change of Control,"
including, in each case, amending, changing or modifying any definitions
relating thereto; (iii) reduce the percentage in principal amount of such
outstanding Notes, the consent of whose holders is required for any such
supplemental indenture, or the consent of whose holders is required for any
waiver or compliance with certain provisions of the Indenture; (iv) modify any
of the provisions relating to supplemental indentures requiring the consent of
holders or relating to the waiver of past defaults or relating to the waiver of
certain covenants, except to increase the percentage of such outstanding Notes
required for such actions or to provide that certain other provisions of the
Indenture cannot be modified or waived without the consent of the holder of
each such Note affected thereby; (v) except as otherwise permitted under
"Consolidation, Merger, Sale of Assets," consent to the assignment or transfer
by the Company or any Guarantor of any of its rights and obligations under the
Indenture; or (vi) amend or modify any of the provisions of the Indenture
relating to the subordination of the Notes or any Guarantee thereof in any
manner adverse to the holders of the Notes or any such Guarantee. (Section 902)
Notwithstanding the foregoing, without the consent of any holders of the
Notes, the Company, any Guarantor and the Trustee may modify or amend the
Indenture: (a) to evidence the succession of another Person to the Company or a
Guarantor, and the assumption by any such successor of the covenants of the
Company or such Guarantor in the Indenture and in the Notes and in any Guarantee
in accordance with "-- Consolidation, Merger, Sale of Assets;" (b) to add to the
covenants of the Company, any Guarantor or any other obligor upon the Notes for
the benefit of the holders of the Notes or to surrender any right or power
conferred upon the Company or any Guarantor or any other obligor upon the Notes,
as applicable, in the Indenture, in the Notes or in any Guarantee; (c) to cure
any ambiguity, or to correct or supplement any provision in the Indenture, the
Notes or any Guarantee which may be defective or inconsistent with any other
provision in the Indenture, the Notes or any Guarantee or make any other
provisions with respect to matters or questions arising under the Indenture, the
Notes or any Guarantee; provided that, in each case, such provisions shall not
adversely affect the interest of the holders of the Notes; (d) to comply with
the requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act; (e) to add a
Guarantor under the Indenture; (f) to evidence and provide the acceptance of the
appointment of a successor Trustee under the Indenture; or (g) to mortgage,
pledge, hypothecate or grant a security interest in favor of the Trustee for the
benefit of the holders of the Notes as additional security for the payment and
performance of the Company's and any Guarantor's obligations under the
Indenture, in any property, or assets, including any of which are required to be
mortgaged, pledged or hypothecated, or in which a security interest is required
to be granted to the Trustee pursuant to the Indenture or otherwise. (Section
901)
The holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture. (Section 1021)
GOVERNING LAW
The Indenture, the Notes and any Guarantee will be governed by, and
construed in accordance with, the laws of the State of New York, without giving
effect to the conflicts of law principles thereof.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of
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any such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue as Trustee with such conflict or resign as Trustee. (Sections 608
and 611)
The holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
occurs (which has not been cured), the Trustee will be required, in the exercise
of its power, to use the degree of care of a prudent man in the conduct of his
own affairs. Subject to such provisions, the Trustee will be under no obligation
to exercise any of its rights or powers under the Indenture at the request of
any holder of Notes unless such holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense. (Section 602)
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Restricted Subsidiary or (ii) assumed in connection
with the acquisition of assets from such Person, in each case, 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.
Acquired Indebtedness shall be deemed to be incurred on the date of the related
acquisition of assets from any Person or the date the acquired Person becomes a
Restricted Subsidiary, as the case may be.
"Affiliate" means, with respect to any specified Person: (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person; (ii) any other Person that
owns, directly or indirectly, 5% or more of such specified Person's Capital
Stock or any officer or director of any such specified Person or other Person
or, with respect to any natural Person, any person having a relationship with
such Person by blood, marriage or adoption not more remote than first cousin; or
(iii) any other Person 5% or more of the Voting Stock of which is beneficially
owned or held directly or indirectly by such specified Person. For the purposes
of this definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person, directly
or indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback transaction) (collectively, a "transfer"), directly or
indirectly, in one or a series of related transactions, of: (i) any Capital
Stock of any Restricted Subsidiary; (ii) all or substantially all of the
properties and assets of any division or line of business of the Company or its
Restricted Subsidiaries; or (iii) any other properties or assets of the Company
or any Restricted Subsidiary other than in the ordinary course of business. For
the purposes of this definition, the term "Asset Sale" shall not include any
transfer of properties and assets (A) that is governed by the provisions
described under "-- Consolidation, Merger, Sale of Assets," (B) that is by the
Company to any Guarantor, or by any Restricted Subsidiary to the Company or any
Wholly Owned Restricted Subsidiary in accordance with the terms of the
Indenture, (C) that is of obsolete equipment in the ordinary course of business
or (D) the Fair Market Value of which in the aggregate does not exceed
$1,000,000 in any transaction or series of related transactions.
"Average Life to Stated Maturity" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years from the date of determination to the
date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal payment by (ii)
the sum of all such principal payments.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as
amended, or any similar United States federal or state law relating to
bankruptcy, insolvency, receivership, winding up, liquidation, reorganization or
relief of debtors or any amendment to, succession to or change in any such law.
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"Bank Credit Facility" means the Multicurrency Credit Agreement, dated as
of September 19, 1996, among the Company, the Banks Party Thereto, and Harris
Trust and Savings Bank, as Agent, as such agreement, in whole or in part, may be
amended, renewed, extended, substituted, refinanced, restructured, replaced,
supplemented or otherwise modified from time to time (including, without
limitation, any successive renewals, extensions, substitutions, refinancings,
restructurings, replacements, supplementations or other modifications of the
foregoing.
"Banks" means the lenders under the Bank Credit Facility.
"Capital Lease Obligation" of any Person means any obligation of such
Person and its Subsidiaries on a Consolidated basis under any capital lease of
real or personal property which, in accordance with GAAP, has been recorded as a
capitalized lease obligation.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock or other equity interests whether now outstanding or issued after
the date of the Indenture.
"Change of Control" means the occurrence of any of the following events:
(i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have beneficial ownership of all shares
that such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 35% 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 election to such board or whose nomination for election by the
stockholders 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," other
than Permitted Holders, owns immediately after such transaction, directly or
indirectly, more than 35% 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 " -- Consolidation, Merger, Sale of Assets."
"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 the 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.
"Commodity Price Protection Agreement" means any forward contract,
commodity swap, commodity option or other similar financial agreement or
arrangement relating to, or the value which is dependent upon, fluctuations in
commodity prices.
"Common Stock" means the common stock, no par value per share, of the
Company.
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"Company" means Titan Wheel International, Inc., a corporation incorporated
under the laws of Illinois, until a successor Person shall have become such
pursuant to the applicable provisions of the Indenture, and thereafter "Company"
shall mean such successor Person.
"Consolidated Fixed Charge Coverage Ratio" of any Person means, for any
period, the ratio of (a) the sum of Consolidated Net Income (Loss), Consolidated
Interest Expense, Consolidated Income Tax Expense and Consolidated Non-cash
Charges deducted in computing Consolidated Net Income (Loss) in each case, for
such period, of such Person and its Restricted Subsidiaries on a Consolidated
basis, all determined in accordance with GAAP to (b) the sum of Consolidated
Interest Expense for such period and cash and non-cash dividends paid on any
Preferred Stock and Redeemable Capital Stock of such Person during such period
in each case after giving pro forma effect to (i) the incurrence of the
Indebtedness giving rise to the need to make such calculation and (if
applicable) the application of the net proceeds therefrom, including to
refinance other Indebtedness, as if such Indebtedness was incurred, and the
application of such proceeds occurred, on the first day of such period; (ii) the
incurrence, repayment or retirement of any other Indebtedness by the Company and
its Restricted Subsidiaries since the first day of such period as if such
Indebtedness was incurred, repaid or retired at the beginning of such period
(except that, in making such computation, the amount of Indebtedness under any
revolving credit facility shall be computed based upon the average daily balance
of such Indebtedness during such period); (iii) in the case of Acquired
Indebtedness or any acquisition occurring at the time of the incurrence of such
Indebtedness, the related acquisition, assuming such acquisition had been
consummated on the first day of such period; and (iv) any acquisition or
disposition by the Company and its Restricted Subsidiaries of any company or any
business or any assets out of the ordinary course of business, whether by
merger, stock purchase or sale or asset purchase or sale, or any related
repayment of Indebtedness, in each case since the first day of such applicable
period, assuming such acquisition or disposition had been consummated on the
first day of such period; provided that (i) in making such computation, the
Consolidated Interest Expense attributable to interest on any Indebtedness
computed on a pro forma basis and (A) bearing a floating interest rate shall be
computed as if the rate in effect on the date of computation had been the
applicable rate for the entire period and (B) which was not outstanding during
the period for which the computation is being made but which bears, at the
option of such Person, a fixed or floating rate of interest, shall be computed
by applying at the option of such Person either the fixed or floating rate and
(ii) in making such computation, the Consolidated Interest Expense of such
Person attributable to interest on any Indebtedness under a revolving credit
facility computed on a pro forma basis shall be computed based upon the average
daily balance of such Indebtedness during the applicable period.
"Consolidated Income Tax Expense" of any Person means, for any period, the
provision for federal, state, local and foreign income taxes of such Person and
its Consolidated Restricted Subsidiaries for such period as determined in
accordance with GAAP.
"Consolidated Interest Expense" of any Person means, without duplication,
for any period, the sum of (a) the interest expense of such Person and its
Restricted Subsidiaries for such period, on a Consolidated basis, including,
without limitation, (i) amortization of debt discount, (ii) the net costs
associated with Interest Rate Agreements, Currency Hedging Agreements and
Commodity Price Protection Agreements (including amortization of discounts),
(iii) the interest portion of any deferred payment obligation and (iv) accrued
interest, plus (b) (i) the interest component of the Capital Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by such Person and its
Restricted Subsidiaries during such period and (ii) all capitalized interest of
such Person and its Restricted Subsidiaries plus (c) the interest expense under
any Guaranteed Debt of such Person and any Restricted Subsidiary to the extent
not included under clause (a)(iv) above, in each case as determined on a
Consolidated basis in accordance with GAAP.
"Consolidated Net Income (Loss)" of any Person means, for any period, the
Consolidated net income (or loss) of such Person and its Restricted Subsidiaries
for such period on a Consolidated basis as determined in accordance with GAAP,
adjusted, to the extent included in calculating such net income (or loss), by
excluding, without duplication, (i) all extraordinary gains or losses (less all
fees and expenses relating thereto), (ii) the portion of net income (or loss) of
such Person and its Restricted Subsidiaries on a Consolidated basis 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
Consolidated Restricted
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Subsidiaries, (iii) net income (or loss) of any Person combined with such Person
or any of its Restricted Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination, (iv) any gain or
loss, net of taxes, realized upon the termination of any employee pension
benefit plan, (v) net gains (or losses) (less all fees and expenses relating
thereto) in respect of dispositions of assets other than in the ordinary course
of business, (vi) the net income of any Restricted Subsidiary to the extent that
the declaration 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 regulation applicable to that
Subsidiary or its stockholders, (vii) any restoration to income of any
contingency reserve, except to the extent provision for such reserve was made
out of income accrued at any time following the date of the Indenture, or (viii)
any gain arising from the acquisition of any securities, or the extinguishment,
under GAAP, of any Indebtedness of such Person.
"Consolidated Net Tangible Assets" of any Person means, as of any date, (a)
all amounts that would be shown as assets on a Consolidated balance sheet of
such Person and its Subsidiaries prepared in accordance with GAAP, less (b) the
amount thereof constituting goodwill and other intangible assets as calculated
in accordance with GAAP.
"Consolidated Net Worth" of any Person, as of a date, means the
Consolidated stockholders' equity (excluding Redeemable Capital Stock) of such
Person and its Restricted Subsidiaries, as of such date, as determined in
accordance with GAAP.
"Consolidated Non-cash Charges" of any Person means, for any period, the
aggregate depreciation, amortization and other non-cash charges of such Person
and its subsidiaries on a Consolidated basis for such period, as determined in
accordance with GAAP (excluding any non-cash charge which requires an accrual or
reserve for cash charges for any future period).
"Consolidation" means, with respect to any Person, the consolidation of the
accounts of such Person and each of its subsidiaries if and to the extent the
accounts of such Person and each of its subsidiaries would normally be
consolidated with those of such Person, all in accordance with GAAP. The term
"Consolidated" shall have a similar meaning.
"Currency Hedging Arrangements" means one or more of the following
agreements which shall be entered into by one or more financial institutions:
foreign exchange contracts, currency swap agreements or other similar agreements
or arrangements designed to protect against the fluctuations in currency values.
"Default" means any event which is, or after notice or passage of any time
or both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series
of related transactions, a member of the board of directors of the Company who
does not have any material direct or indirect financial interest in or with
respect to such transaction or series of related transactions.
"Equity Dutch Auction" shall mean the tender offer of the Company, dated
February 25, 1997, to purchase up to 5 million shares of Common Stock on the
terms described therein, as such tender offer may be supplemented or amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy. Fair Market Value shall be determined by the board
of directors of the Company acting in good faith and shall be evidenced by a
resolution of the board of directors.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, which
are in effect on the date of the Indenture.
"Guarantee" means the guarantee by any Guarantor of the Company's Indenture
Obligations.
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"Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person referred to in the definition of Indebtedness
below guaranteed directly or indirectly in any manner by such Person, or in
effect guaranteed directly or indirectly by such Person through an agreement (i)
to pay or purchase such Indebtedness or to advance or supply funds for the
payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as
lessee or lessor) property, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such Indebtedness or to assure
the holder of such Indebtedness against loss, (iii) to supply funds to, or in
any other manner invest in, the debtor (including any agreement to pay for
property or services without requiring that such property be received or such
services be rendered), (iv) to maintain working capital or equity capital of the
debtor, or otherwise to maintain the net worth, solvency or other financial
condition of the debtor or (v) otherwise to assure a creditor against loss;
provided that the term "guarantee" shall not include endorsements for collection
or deposit, in either case in the ordinary course of business.
"Guarantor" means any Restricted Subsidiary which is a guarantor of the
Notes, including any Person that is required after the date of the Indenture to
execute a guarantee of the Notes pursuant to the "Limitations on Liens" covenant
or the "Limitation on Issuance of Guarantees of Indebtedness" covenant until a
successor replaces such party pursuant to the applicable provisions of the
Indenture and, thereafter, shall mean such successor.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness 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 arising 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 issued under letter of credit facilities,
acceptance facilities or other similar facilities, (ii) all obligations of such
Person evidenced by bonds, notes, debentures or other similar instruments, (iii)
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 payables arising in the ordinary course of business, (iv) all
obligations under Interest Rate Agreements, Currency Hedging Agreements or
Commodity Price Protection Agreements of such Person, (v) all Capital Lease
Obligations of such Person, (vi) all Indebtedness referred to in clauses (i)
through (v) above 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 or
with respect to 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, (vii) all Guaranteed Debt of such
Person, (viii) all Redeemable Capital Stock issued by such Person valued at the
greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends, and (ix) any amendment, supplement, modification,
deferral, renewal, extension, refunding or refinancing of any liability of the
types referred to in clauses (i) through (viii) above. For purposes hereof, 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 to be
determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock.
"Indenture Obligations" means the obligations of the Company and any other
obligor under the Indenture or under the Notes including any Guarantor, to pay
principal of, premium, if any, and interest when due and payable, and all other
amounts due or to become due under or in connection with the Indenture, the
Notes and the performance of all other obligations to the Trustee and the
holders under the Indenture and the Notes, according to the respective terms
thereof.
"Interest Rate Agreements" means one or more of the following agreements
which shall be entered into by one or more financial institutions: interest rate
protection agreements (including, without limitation, interest rate swaps, caps,
floors, collars and similar agreements) and/or other types of interest rate
hedging agreements from time to time.
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"Investment" means, with respect to any Person, directly or indirectly, any
advance, loan (including guarantees), or other extension of credit 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, acquisition or ownership by such Person of any Capital Stock, bonds,
notes, debentures or other securities issued or owned by any other Person and
all other items that would be classified as investments on a balance sheet
prepared in accordance with GAAP, and shall include (i) the designation of a
Restricted Subsidiary as an Unrestricted Subsidiary and (ii) the Fair Market
Value of the Capital Stock (or any other Investment), held by the Company or any
of its Restricted Subsidiaries, of (or in) any Person that has ceased to be a
Restricted Subsidiary. For purposes of the definition of "Unrestricted
Subsidiary" and the "Limitation on Restricted Payments" covenant, (i)
"Investment" shall include the Fair Market Value of the assets (net of
liabilities (other than the liabilities to the Company or any of its Restricted
Subsidiaries)) of any Restricted Subsidiary at the time that such Restricted
Subsidiary is designated an Unrestricted Subsidiary, (ii) the Fair Market Value
of the assets (net of liabilities (other than liabilities to the Company or any
of its Restricted Subsidiaries)) of any Unrestricted Subsidiary at the time that
such Unrestricted Subsidiary is designated a Restricted Subsidiary shall be
considered a reduction in outstanding Investments and (iii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its Fair
Market Value at the time of such transfer.
"Lien" means any mortgage or deed of trust, charge, pledge, lien (statutory
or otherwise), privilege, security interest, assignment, deposit, arrangement,
easement, hypothecation, claim, preference, priority or other encumbrance upon
or with respect to any property of any kind (including any conditional sale,
capital lease or other title retention agreement, any leases in the nature
thereof, and any agreement to give any security interest), real or personal,
movable or immovable, now owned or hereafter acquired.
"Maturity" means, when used with respect to the Notes, the date on which
the principal of the Notes becomes due and payable as therein provided or as
provided in the Indenture, whether at Stated Maturity, the Offer Date or the
redemption date and whether by declaration of acceleration, Offer in respect of
Excess Proceeds, Change of Control Offer in respect of a Change of Control, call
for redemption or otherwise.
"Net Cash Proceeds" means (a) with respect to any Asset Sale by any Person,
the proceeds thereof (without duplication in respect of all Asset Sales) in the
form of cash or Temporary Cash Investments including payments in respect of
deferred payment obligations when received in the form of, or stock or other
assets when disposed of for, cash or Temporary Cash Investments (except to the
extent that such obligations are financed or sold with recourse to the Company
or any Restricted Subsidiary) net of (i) brokerage commissions and other
reasonable fees and expenses (including fees and expenses of counsel and
investment bankers) related to such Asset Sale, (ii) provisions for all taxes
payable as a result of such Asset Sale, (iii) payments made to retire
Indebtedness where payment of such Indebtedness is secured by the assets or
properties the subject of such Asset Sale, (iv) amounts required to be paid to
any Person (other than the Company or any Restricted Subsidiary) owning a
beneficial interest in the assets subject to the Asset Sale and (v) appropriate
amounts to be provided by the Company or any Restricted Subsidiary, as the case
may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any Restricted
Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as reflected in an officers'
certificate delivered to the Trustee and (b) with respect to any issuance or
sale of Capital Stock or options, warrants or rights to purchase Capital Stock,
or debt securities or Capital Stock that have been converted into or exchanged
for Capital Stock as referred to under "-- Certain Covenants -- Limitation on
Restricted Payments," the proceeds of such issuance or sale in the form of cash
or Temporary Cash Investments including payments in respect of deferred payment
obligations when received in the form of, or stock or other assets when disposed
of for, cash or Temporary Cash Investments (except to the extent that such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary), net of attorney's fees, accountant's fees and brokerage,
consultation, underwriting and other fees and expenses actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
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"Pari Passu Indebtedness" means (a) any Indebtedness of the Company that is
pari passu in right of payment to the Notes and (b) with respect to any
Guarantee, Indebtedness which ranks pari passu in right of payment to such
Guarantee.
"Permitted Agreement" means any written agreement between a Permitted
Venture, on the one hand, and the Company or any Restricted Subsidiary, on the
other hand, pursuant to which the Company sells products produced by the Company
in the ordinary course of its business at a purchase price not less than the
Company's cost.
"Permitted Holders" means (a) Maurice M.Taylor, Jr., (b) trusts for the
benefit of Mr. Taylor or for the benefit of Mr. Taylor's spouse and children or
trusts for the benefit of any such trust, (c) entities controlled by Mr. Taylor,
(d) in the event of the death or incapacity of Taylor, his estate (and
executors, administrators, committees or other personal representatives), heirs
or testamentary legatees and (e) MascoTech, Inc. and any of its subsidiaries and
any successors of MascoTech, Inc. and such subsidiaries.
"Permitted Indebtedness" means:
(i) Indebtedness outstanding at any time incurred pursuant to the Bank
Credit Facility in an aggregate principal amount not to exceed an amount
equal to the greater of (A) $250 million, less any amount of Indebtedness
permanently repaid and (B) the sum of (x) 90% of the consolidated book
value of the accounts receivable of the Company and its Restricted
Subsidiaries plus (y) 60% of the consolidated book value of the inventory
of the Company and its Restricted Subsidiaries, in each case determined in
accordance with GAAP;
(ii) Indebtedness of the Company pursuant to the Notes and
Indebtedness of any Guarantor pursuant to a Guarantee of the Notes;
(iii) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the date of the Indenture and listed on a schedule thereto;
(iv) Indebtedness of the Company owing to a Restricted Subsidiary;
provided that any Indebtedness of the Company owing to a Restricted
Subsidiary is made pursuant to an intercompany note in the form attached to
the Indenture and is subordinated in right of payment from and after such
time as the Notes shall become due and payable (whether at Stated Maturity,
acceleration or otherwise) to the payment and performance of the Company's
obligations under the Notes; provided, further, that any disposition,
pledge or transfer of any such Indebtedness to a Person (other than a
disposition, pledge or transfer to a Restricted Subsidiary) shall be deemed
to be an incurrence of such Indebtedness by the Company not permitted by
this clause (iv);
(v) Indebtedness of a Wholly Owned Restricted Subsidiary owing to the
Company or another Wholly Owned Restricted Subsidiary; provided that any
such Indebtedness is made pursuant to an intercompany note in the form
attached to the Indenture; provided, further, that (a) any disposition,
pledge or transfer of any such Indebtedness to a Person shall be deemed to
be an incurrence of such Indebtedness by the obligor not permitted by this
clause (v), (other than the Company or any wholly-owned subsidiary) and (b)
any transaction pursuant to which any Wholly Owned Restricted Subsidiary,
which has Indebtedness owing to the Company or any other Wholly Owned
Restricted Subsidiary, ceases to be a Wholly Owned Restricted Subsidiary
shall be deemed to be the incurrence of Indebtedness by such Wholly Owned
Restricted Subsidiary that is not permitted by this clause (v);
(vi) guarantees of any Restricted Subsidiary made in accordance with
the provisions of "-- Certain Covenants -- Limitation on Issuances of
Guarantees of Indebtedness;"
(vii) obligations of the Company entered into in the ordinary course
of business (a) pursuant to Interest Rate Agreements designed to protect
the Company or any Restricted Subsidiary against fluctuations in interest
rates in respect of Indebtedness of the Company or any Restricted
Subsidiary as long as such obligations do not exceed the aggregate
principal amount of such Indebtedness then outstanding, (b) under any
Currency Hedging Arrangements, which if related to Indebtedness do not
increase the amount of such Indebtedness other than as a result of foreign
exchange fluctuations, or
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(c) under any Commodity Price Protection Agreements, which if related to
Indebtedness do not increase the amount of such Indebtedness other than as
a result of foreign exchange fluctuations;
(viii) Indebtedness of the Company and its Restricted Subsidiaries
represented by Capital Lease Obligations or Purchase Money Obligations or
other Indebtedness incurred or assumed in connection with the acquisition
or development of real or personal, movable or immovable, property in each
case incurred for the purpose of financing or refinancing all or any part
of the purchase price or cost of construction or improvement of property
used in the business of the Company, in an aggregate principal amount
pursuant to this clause (viii) not to exceed $20 million outstanding at any
time; provided that the principal amount of any Indebtedness permitted
under this clause (viii) did not in each case at the time of incurrence
exceed the Fair Market Value, as determined by the Company in good faith,
of the acquired or constructed asset or improvement so financed;
(ix) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or
from guarantees or letters of credit, surety bonds or performance bonds
securing any obligation of the Company or any of its Restricted
Subsidiaries pursuant to such agreements, in any case incurred in
connection with the disposition of any business, assets or Restricted
Subsidiary of the Company (other than guarantees of Indebtedness incurred
by any Person acquiring all or any portion of such business, assets or
Restricted Subsidiary of the Company for the purpose of financing such
acquisition), in a principal amount not to exceed the actual proceeds
actually received by the Company or any Restricted Subsidiary in connection
with such disposition;
(x) any renewals, extensions, substitutions, refundings, refinancings
or replacements (collectively, a "refinancing") of any Indebtedness
described in clauses (ii) and (iii) of this definition of "Permitted
Indebtedness," including any successive refinancings so long as the
borrower under such refinancing is the Company or, if not the Company, the
same as the borrower of the Indebtedness being refinanced and the aggregate
principal amount of Indebtedness represented thereby is not increased by
such refinancing plus the lesser of (I) the stated amount of any premium or
other payment required to be paid in connection with such a refinancing
pursuant to the terms of the Indebtedness being refinanced or (II) the
amount of premium or other payment actually paid at such time to refinance
the Indebtedness, plus, in either case, the amount of expenses of the
Company incurred in connection with such refinancing and (A) in the case of
any refinancing of Indebtedness that is Subordinated Indebtedness, such new
Indebtedness is made subordinated to the Notes at least to the same extent
as the Indebtedness being refinanced and (B) in the case of Pari Passu
Indebtedness or Subordinated Indebtedness, as the case may be, such
refinancing does not reduce the Average Life to Stated Maturity or the
Stated Maturity of such Indebtedness; and
(xi) Indebtedness of the Company and its Subsidiaries in addition to
that described in clauses (i) through (x) above, and any renewals,
extensions, substitutions, refinancings or replacements of such
Indebtedness, so long as the aggregate principal amount of all such
Indebtedness shall not exceed $20 million outstanding at any one time in
the aggregate.
"Permitted Investment" means (i) Investments in any Restricted Subsidiary
or any Person which, as a result of such Investment, (a) becomes a Restricted
Subsidiary or (b) is merged or consolidated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, the Company
or any Restricted Subsidiary, provided, in the case of both (a) and (b), that
such Person's primary business is related, ancillary or complementary to the
businesses of the Company and its Restricted Subsidiaries on the date of such
Investment; (ii) Indebtedness of the Company or a Restricted Subsidiary
described under clauses (iv), (v) and (vi) of the definition of "Permitted
Indebtedness;" (iii) Investments in any of the Notes; (iv) Temporary Cash
Investments; (v) Investments acquired by the Company or any Restricted
Subsidiary in connection with an Asset Sale permitted under "-- Certain
Covenants -- Limitation on Sale of Assets" to the extent such Investments are
non-cash proceeds as permitted under such covenant; (vi) Investments in
existence on the date of the Indenture; (vii) guarantees of Indebtedness of a
Wholly Owned Restricted Subsidiary given by the Company or another Wholly Owned
Restricted Subsidiary and guarantees of Indebtedness of the Company given by any
Restricted Subsidiary, in each case, in accordance with the terms of the
Indenture; (viii) Investments in a Permitted Venture in an aggregate amount
measured at the time of Investment not to
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exceed at any one time outstanding 20% of Consolidated Net Tangible Assets of
the Company at or prior to June 30, 1999 and 15% of Consolidated Net Tangible
Assets of the Company on July 1, 1999 and thereafter, in each case as of the end
of the last fiscal quarter; and (ix) Investments in an aggregate amount not to
exceed $20 million at any one time outstanding, of which up to $10 million may
consist of Capital Stock of the Company. In connection with any assets or
property contributed or transferred to any Person as an Investment, such
property and assets shall be equal to the Fair Market Value (as determined by
the Company's Board of Directors) at the time of Investment.
"Permitted Venture" means any entity (i) in which the Company or any
Restricted Subsidiary owns Capital Stock, (ii) which is not a Restricted
Subsidiary and in which no other Affiliate of the Company (other than a
Restricted Subsidiary) has an Investment and (iii) which operates in the
business of the Company or its Restricted Subsidiaries existing on the date of
the Indenture or in businesses reasonably related thereto.
"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 Capital Stock of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over the
Capital Stock of any other class in such Person.
"Purchase Money Obligation" means any Indebtedness secured by a Lien on
assets related to the business of the Company and any additions and accessions
thereto, which are purchased by at any time after the Notes are issued; provided
that (i) the security agreement or condition sales or other title retention
contract pursuant to which the Lien on such assets is created (collectively a
"Purchase Money Security Agreement") shall be entered into within 90 days after
the purchase or substantial completion of the construction of such assets and
shall at all times be confined solely to the assets so purchased or acquired,
any additions and accessions thereto and any proceeds therefrom, (ii) at no time
shall the aggregate principal amount of the outstanding Indebtedness secured
thereby be increased, except in connection with the purchase of additions and
accession thereto and except in respect of fees and other obligations in respect
of such Indebtedness and (iii) (A) the aggregate outstanding principal amount of
Indebtedness secured thereby (determined on a per asset basis is the case of any
additions and accessions) shall not at the time such Purchase Money Security
Agreement in entered into exceed 100% of the purchase price to the Company of
the assets subject thereto or (B) the Indebtedness secured thereby shall be with
recourse solely to the assets so purchased or acquired, any additions and
accessions thereto and any proceeds therefrom.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any Capital Stock that, either by its
terms or by the terms of any security into which it is convertible or
exchangeable 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
principal of the Notes or is redeemable at the option of the holder thereof at
any time prior to any such Stated Maturity, or is convertible into or
exchangeable for debt securities at any time prior to any such Stated Maturity
at the option of the holder thereof.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute.
"Senior Guarantor Indebtedness" means Indebtedness of a Guarantor which
secures or guarantees any Senior Indebtedness.
"Stated Maturity" means, when used with respect to any Indebtedness or any
installment of interest thereon, the dates specified in such Indebtedness as the
fixed date on which the principal of such Indebtedness or such installment of
interest, as the case may be, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Guarantor subordinated in right of payment to the Notes or the Guarantee of such
Guarantor, as the case may be.
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"Subsidiary" means any Person, a majority of the equity ownership or the
Voting Stock of which is at the time owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries; provided that any Unrestricted Subsidiary shall not be
deemed a Subsidiary under the Notes.
"Temporary Cash Investments" means (i) any evidence of Indebtedness,
maturing not more than one year after the date of acquisition, issued by the
United States of America, or an instrumentality or agency thereof, and
guaranteed fully as to principal, premium, if any, and interest by the United
States of America, (ii) any certificate of deposit (or, with respect to non-U.S.
banking institutions, similar instruments) maturing not more than one year after
the date of acquisition, issued by, or time deposit of, a commercial banking
institution that is a member of the Federal Reserve System or a commercial
banking institution organized and located in a country recognized by the United
States of America, in each case, that has combined capital and surplus and
undivided profits of not less than $500 million (or the foreign currency
equivalent thereof), whose debt has a rating, at the time as of which any
investment therein is made, of "P-1" (or higher) according to Moody's Investors
Service, Inc. ("Moody's") or any successor rating agency or "A-1" (or higher)
according to Standard & Poor's Rating Group, a division of McGraw Hill, Inc.
("S&P"), or any successor rating agency, (iii) commercial paper, maturing not
more than one year after the date of acquisition, issued by a corporation (other
than an Affiliate or Subsidiary of the Company) organized and existing under the
laws of the United States of America with a rating, at the time as of which any
investment therein is made, of "P-1" (or higher) according to Moody's or "A-1"
(or higher) according to S&P and (iv) any money market deposit accounts issued
or offered by a domestic commercial bank or a commercial banking institution
organized and located in a country recognized by the United States of America,
in each case having capital and surplus in excess of $500 million (or the
foreign currency equivalent thereof); provided that the short term debt of such
commercial bank has a rating, at the time of Investment, of "P-1" (or higher)
according to Moody's or "A-1" (or higher) according to S&P.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, or
any successor statute.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be an Unrestricted Subsidiary (as designated by
the Board of Directors of the Company, as provided below) and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company
may designate any Subsidiary of the Company (including any newly acquired or
newly formed Subsidiary) to be an Unrestricted Subsidiary if all of the
following conditions apply: (a) neither the Company nor any of its Subsidiaries
provides credit support for Indebtedness of such Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness), (b) such
Subsidiary is not liable, directly or indirectly, with respect to any
Indebtedness other than Unrestricted Subsidiary Indebtedness, (c) any Investment
in such Subsidiary made as a result of designating such Subsidiary an
Unrestricted Subsidiary shall not violate the provisions of the "-- Certain
Covenants -- Limitation on Unrestricted Subsidiaries" covenant and such
Unrestricted Subsidiary is not party to any agreement, contract, arrangement or
understanding at such time with the Company or any Subsidiary of the Company
other than a Permitted Agreement unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to the Company or
such Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company or, in the event such condition is
not satisfied, the value of such agreement, contract, arrangement or
understanding to such Subsidiary shall be deemed a Restricted Investment, and
(d) such Unrestricted Subsidiary does not own any Capital Stock in any
Subsidiary of the Company which is not simultaneously being designated an
Unrestricted Subsidiary. Any such designation by the Board of Directors of the
Company shall be evidenced to the Trustee by filing with the Trustee a board
resolution giving effect to such designation and an officers' certificate
certifying that such designation complies with the foregoing conditions and
shall be deemed a Restricted Payment on the date of designation in an amount
equal to the greater of (1) the net book value of such Investment or (2) the
fair market value of such Investment as determined in good faith by the
Company's Board of Directors. The Board of Directors of the Company may
designate any Unrestricted Subsidiary as a Restricted Subsidiary; provided that
(i) immediately after giving effect to such designation, the Company could incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to
the restrictions under "-- Certain Covenants
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- -- Limitation on Indebtedness " and (ii) all Indebtedness of such Subsidiary
shall be deemed to be incurred on the date such Subsidiary becomes a Subsidiary.
"Unrestricted Subsidiary Indebtedness" of any Unrestricted Subsidiary means
Indebtedness of such Unrestricted Subsidiary (i) as to which neither the Company
nor any Subsidiary is directly or indirectly liable (by virtue of the Company or
any such Subsidiary being the primary obligor on, guarantor of, or otherwise
liable in any respect to, such Indebtedness), except Guaranteed Debt of the
Company or any Subsidiary to any Affiliate, in which case (unless the incurrence
of such Guaranteed Debt resulted in a Restricted Payment at the time of
incurrence) the Company shall be deemed to have made a Restricted Payment equal
to the principal amount of any such Indebtedness to the extent guaranteed at the
time such Affiliate is designated an Unrestricted Subsidiary and (ii) which,
upon the occurrence of a default with respect thereto, does not result in, or
permit any holder of any Indebtedness of the Company or any Restricted
Subsidiary to declare, a default on such Indebtedness of the Company or any
Restricted Subsidiary or cause the payment thereof to be accelerated or payable
prior to its Stated Maturity.
"Voting Stock" means Capital Stock of the class or classes 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 a corporation (irrespective of whether or not at the time Capital
Stock of any other class or classes shall have or might have voting power by
reason of the happening of any contingency).
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of which
is owned by the Company or another Wholly Owned Subsidiary.
BOOK-ENTRY DELIVERY AND FORM
The certificates representing the Notes will be issued in fully registered
form. Except as described in the next paragraph, the Notes initially will be
represented by a single, permanent global Note, in definitive, fully registered
form without interest coupons (the "Global Note") and will be deposited with the
Trustee as custodian for DTC and registered in the name of Cede & Co. or such
other nominee as DTC may designate.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provision of Section 17A of the Exchange Act. DTC was created to hold securities
for its participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
Upon the issuance of the Global Note, DTC or its custodian will credit, on
its internal system, the respective principal amount of the individual
beneficial interests represented by such Global Note to the accounts of persons
who have accounts with DTC. Such accounts initially will be designated by or on
behalf of the Initial Purchasers. Ownership of beneficial interests in the
Global Note will be limited to persons who have accounts with DTC
("participants") or persons who hold interests through participants. Ownership
of beneficial interests in the Global Note will be shown on, and the transfer of
that ownership will be effected only though, records maintained by DTC or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants).
QIBs may hold their interests in the Global Note directly through DTC if they
are participants in such system, or indirectly through organizations which are
participants in such system.
So long as DTC or its nominee is the registered owner or holder of the
Global Note, DTC or such nominee, as the case may be, will be considered the
sole record owner or holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. No beneficial owners of an interest
in
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the Global Note will be able to transfer that interest except in accordance with
DTC's applicable procedures in addition to those provided for under the
Indenture.
Payments of the principal of, premium, if any, and interest on the Global
Note will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. Neither the Company, the Trustee, nor any paying agent will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal of, premium, if any, or interest in respect of the Global Note will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial ownership interests in the principal amount of such Global
Note, as shown on the records of DTC or its nominee. The Company also expects
that payments by participants to owners of beneficial interests in such Global
Note held through such participants will be governed by standing instructions
and customary practices, as is now the case with securities held for the
accounts of customers registered in the names of nominees for such customers.
Such payments will be the responsibility of such participants.
Transfer between participants in DTC will be effected in the ordinary way
in accordance with DTC rules. If a Holder requires physical delivery of
Certificated Notes for any reason, including to sell Notes to persons in states
which require such delivery of such Notes or to pledge such Notes, such holder
must transfer its interest in the Global Note, in accordance with the normal
procedures of DTC and the procedures set forth in the Indenture.
DTC has advised the Company that DTC will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more participants to whose
account the DTC interests in the Global Note are credited and only in respect of
such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Global Note
for Certificated Notes, which it will distribute to its participants.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Notes. Upon any such issuance,
the Trustee is required to register such Certificated Notes in the name of, and
cause the same to be delivered to, such person or persons (or the nominee of any
thereof). In addition, if DTC is at any time unwilling or unable to continue as
a depositary for the Global Note and a successor depositary is not appointed by
the Company within 90 days, the Company will issue Certificated Notes in
exchange for the Global Note.
70
<PAGE> 72
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement") among the Company and each of Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch"), Smith Barney Inc., Schroder
Wertheim & Co. Incorporated, Dean Witter Reynolds Inc. and A.G. Edwards & Sons,
Inc. (collectively, the "Underwriters"), the Company has agreed to sell to each
of the Underwriters and each of the Underwriters severally has agreed to
purchase from the Company the aggregate principal amount of the Notes set forth
opposite its name below. The Purchase Agreement 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.
<TABLE>
<CAPTION>
UNDERWRITER PRINCIPAL AMOUNT
----------- ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... $
Smith Barney Inc. ..........................................
Schroder Wertheim & Co. Incorporated........................
Dean Witter Reynolds Inc....................................
A.G. Edwards & Sons, Inc....................................
------------
Total.......................................... $150,000,000
============
</TABLE>
The Underwriters propose to offer the Notes to the public at the public
offering price set forth on the cover page of this Prospectus, and 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, the public offering price,
concession and discount may be changed.
There is no public trading 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 any automated dealer quotation system. The Company
has been advised by the Underwriters that they presently intend to make a market
in the Notes after the consummation of the Offering contemplated hereby,
although they are under no obligation to do so and may discontinue any
market-making activities at any time without any 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 trading market for
the Notes does not develop, the market price and liquidity of the Notes may be
adversely affected. If the Notes are traded, they may trade at a discount from
their initial offering price, depending on prevailing interest rates, the market
for similar securities, the performance of the Company and certain other
factors.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
The Company has agreed that it will not, without the prior written consent
of Merrill Lynch, for a period of 90 days after the date of this Prospectus,
directly or indirectly, issue, sell or offer to sell, grant any option for the
sale of, or otherwise dispose of, or register for sale, any debt securities,
other than the initial sale of the Notes.
Until the distribution of the Notes is completed, rules of the Commission
may limit the ability of the Underwriters and certain selling group members to
bid for and purchase the Notes. As an exception to these rules, the Underwriters
are permitted to engage in certain transactions that stabilize the price of the
Notes. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Notes.
If the Underwriters create a short position in the Notes in connection with
the offering, i.e., if they sell more Notes than are set forth on the cover page
of this Prospectus, the Underwriters may reduce that short position by
purchasing Notes in the open market.
71
<PAGE> 73
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Notes. In addition, neither the
Company nor any of the Underwriters makes any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
Merrill Lynch, Smith Barney Inc., and Schroder Wertheim & Co. Incorporated
served as underwriters of the Company's equity offering in June 1995. The
Company has retained Smith Barney Inc. to act as Dealer Manager in connection
with the Offer to Purchase, for which services Smith Barney Inc. will receive
customary fees.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the
Company by Armstrong, Teasdale, Schlafly & Davis (a partnership including
professional corporations), St. Louis, Missouri. Certain legal matters relating
to the Notes offered hereby will be passed upon for the Underwriters by Fried,
Frank, Harris, Shriver & Jacobson (a partnership including professional
corporations), New York, New York. Armstrong, Teasdale, Schlafly & Davis will
rely on Fried, Frank, Harris, Shriver & Jacobson for purposes of New York law,
and Fried, Frank, Harris, Shriver & Jacobson will rely on Armstrong, Teasdale,
Schlafly & Davis for purposes of Illinois law.
EXPERTS
The consolidated financial statements of Titan Wheel International, Inc.
and subsidiaries as of December 31, 1994 and 1995 and for each of the years in
the three-year period ended December 31, 1995, included in this Prospectus, have
been so included in reliance on the report of Price Waterhouse LLP, independent
accountants, given upon the authority of said firm as experts in accounting and
auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy and information statements and other information
filed by the Company with the Commission may be inspected and copied at the
offices of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and the Commission's Regional Offices at 7 World Trade Center, Suite
1300, New York, New York 10048 and 500 West Madison St., Suite 1400, Chicago,
Illinois 60661-2511. Copies of such materials may also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such material may also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov.
Titan's Common Stock is listed on the New York Stock Exchange under the
symbol "TWI." Reports, proxy and information statements and other information
concerning Titan may be inspected at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York 10005.
This Prospectus, which constitutes part of a registration statement (the
"Registration Statement") filed by the Company with the Commission under the
Securities Act, omits certain of the information contained in the Registration
Statement. Reference is hereby made to the Registration Statement and the
exhibits thereto, which may be obtained at the public reference facilities
maintained by the Commission as provided in the preceding paragraph, for further
information with respect to the Company and the securities offered hereby.
72
<PAGE> 74
Statements contained herein concerning the provisions of such documents are
necessarily summaries of such documents, and each such statement is qualified in
its entirety by reference to the copy of the applicable document filed with the
Commission.
In accordance with the Indenture governing the Notes, Titan will furnish
the holders of the Notes with annual reports containing audited financial
information and quarterly reports containing summary financial information for
the first three quarters of each fiscal year.
73
<PAGE> 75
TITAN WHEEL INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
TITAN WHEEL INTERNATIONAL, INC.
-- CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants......................... F-2
Consolidated Balance Sheets as of December 31, 1994 and
1995................................................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1993, 1994
and 1995............................................... F-4
Consolidated Statements of Changes in Stockholders' Equity
as of December 31, 1993, 1994
and 1995............................................... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1993, 1994
and 1995............................................... F-6
Notes to Consolidated Financial Statements................ F-7
-- CONDENSED INTERIM FINANCIAL STATEMENTS
Consolidated Condensed Balance Sheets (Unaudited) as of
December 31, 1995 and September 30, 1996............... F-24
Consolidated Condensed Statements of Operations
(Unaudited) for the Three and Nine-Month Periods Ended
September 30, 1995 and 1996............................ F-25
Consolidated Condensed Statements of Cash Flows
(Unaudited) for the Nine-Month Periods Ended September
30, 1995 and 1996...................................... F-26
Notes to Unaudited Consolidated Condensed Interim
Financial Statements................................... F-27
</TABLE>
F-1
<PAGE> 76
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Titan Wheel International, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of cash flows and of changes in
stockholders' equity present fairly, in all material respects, the financial
position of Titan Wheel International, Inc. and its subsidiaries at December 31,
1994 and 1995, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
St. Louis, Missouri
February 13, 1996
F-2
<PAGE> 77
TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1995
---- ----
(ALL AMOUNTS IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 7,241 $ 14,211
Marketable securities..................................... 31 32
Accounts receivable (net of allowance of $2,213 and
$4,970, respectively).................................. 70,179 107,137
Inventories (Note 3)...................................... 106,963 124,928
Prepaid and other current assets.......................... 7,944 18,592
-------- --------
Total current assets................................. 192,358 264,900
Property, plant and equipment, net (Note 4)................. 143,323 178,286
Other assets (Note 6)....................................... 28,429 17,701
Goodwill (Note 5)........................................... 36,350 51,248
-------- --------
Total assets......................................... $400,460 $512,135
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt (Note 7)................ $ 3,195 $ 26,419
Accounts payable.......................................... 35,989 58,592
Other current liabilities (Note 8)........................ 33,212 28,631
-------- --------
Total current liabilities............................ 72,396 113,642
Deferred income taxes (Note 11)............................. 10,778 15,704
Other long-term liabilities (Note 9)........................ 31,209 24,612
Long-term debt (Note 7)..................................... 178,341 142,305
-------- --------
Total liabilities.................................... 292,724 296,263
-------- --------
Contingencies (Notes 18 and 19)
Stockholders' equity (Note 17)
Preferred stock, Class A, no par, $7.50 stated value,
4,000,000 shares authorized, 1,000,000 and 0 issued and
outstanding, respectively.............................. 7,500 0
Common stock, no par, 60,000,000 shares authorized,
16,275,294 and 22,477,086 issued and outstanding,
respectively........................................... 16 23
Additional paid-in capital................................ 62,587 152,283
Common stock warrants..................................... 10,000 0
Retained earnings......................................... 27,220 64,142
Cumulative translation adjustment......................... 413 8
Treasury stock at cost: 0 and 78,817 shares,
respectively........................................... 0 (584)
-------- --------
Total stockholders' equity........................... 107,736 215,872
-------- --------
Total liabilities and stockholders' equity.................. $400,460 $512,135
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 78
TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1994 1995
---- ---- ----
(ALL AMOUNTS IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C> <C>
Net sales (Note 10)......................................... $150,441 $407,000 $623,183
Cost of sales............................................... 125,172 338,568 507,457
-------- -------- --------
Gross profit................................................ 25,269 68,432 115,726
Selling, general and administrative expenses................ 10,722 28,343 40,615
Research and development expenses........................... 1,405 2,093 2,056
-------- -------- --------
Income from operations...................................... 13,142 37,996 73,055
Other (income) expense
Interest expense.......................................... 3,242 8,503 12,045
Minority interest......................................... 0 0 1,210
Other..................................................... (214) (614) (3,480)
-------- -------- --------
Income before income taxes.................................. 10,114 30,107 63,280
Provision for income taxes (Note 11)........................ 3,753 11,627 25,297
-------- -------- --------
Net income.................................................. $ 6,361 $ 18,480 $ 37,983
======== ======== ========
Earnings per common share (Note 16):
Primary................................................... $ .46 $ 1.14 $ 1.91
Fully diluted............................................. .46 .89 1.50
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 79
TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
PREFERRED PREFERRED COMMON COMMON
SHARES STOCK SHARES STOCK
--------- --------- --------- ------
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA
<S> <C> <C> <C> <C>
BALANCE JANUARY 1, 1993............ 0 $ 0 13,688,116 $14
Net income.......................
Dividends paid on common stock...
Cancellation of pledged shares
held in escrow................. (5,475,616)
Shares issued in initial public
offering....................... 5,287,500
Shares issued in Dyneer
transaction.................... 2,317,664 2
Foreign currency translation
adjustment.....................
---------- ------- ---------- ---
BALANCE DECEMBER 31, 1993.......... 0 0 15,817,664 16
Net income.......................
Dividends paid on common stock...
Exercise of Dyneer options....... 441,392
Issuance of stock under 401(k)
Plan........................... 16,238
Preferred stock issued........... 1,000,000 7,500
Dividends on preferred stock.....
Common stock warrants issued.....
Foreign currency translation
adjustment.....................
---------- ------- ---------- ---
BALANCE DECEMBER 31, 1994.......... 1,000,000 7,500 16,275,294 16
Net income.......................
Dividends paid on common stock...
Shares issued in public
offering....................... 4,312,500 5
Conversion of subordinated
notes.......................... 1,405,120 2
Dyneer contingent
consideration.................. 426,688
Exercise of Dyneer options....... 48,391
Issuance of stock under 401(k)
plan........................... 87,910
Repurchase of preferred stock.... (1,000,000) (7,500)
Dividends on preferred stock.....
Repurchase of common stock
warrants.......................
Foreign currency translation
adjustment.....................
Treasury stock transactions...... (78,817)
---------- ------- ---------- ---
BALANCE DECEMBER 31, 1995.......... 0 $ 0 22,477,086 $23
========== ======= ========== ===
<CAPTION>
ADDITIONAL COMMON CUMULATIVE
PAID-IN STOCK RETAINED TRANSLATION TREASURY
CAPITAL WARRANTS EARNINGS ADJUSTMENT STOCK
---------- -------- -------- ----------- --------
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1993............ $ 3,588 $ 0 $ 3,036 $ 2 $ 0
Net income....................... 6,361
Dividends paid on common stock... (195)
Cancellation of pledged shares
held in escrow.................
Shares issued in initial public
offering....................... 32,206
Shares issued in Dyneer
transaction.................... 21,994
Foreign currency translation
adjustment..................... (280)
-------- -------- ------- ----- -----
BALANCE DECEMBER 31, 1993.......... 57,788 0 9,202 (278) 0
Net income....................... 18,480
Dividends paid on common stock... (432)
Exercise of Dyneer options....... 4,602
Issuance of stock under 401(k)
Plan........................... 197
Preferred stock issued...........
Dividends on preferred stock..... (30)
Common stock warrants issued..... 10,000
Foreign currency translation
adjustment..................... 691
-------- -------- ------- ----- -----
BALANCE DECEMBER 31, 1994.......... 62,587 10,000 27,220 413 0
Net income....................... 37,983
Dividends paid on common stock... (1,031)
Shares issued in public
offering....................... 64,560
Conversion of subordinated
notes.......................... 17,414
Dyneer contingent
consideration.................. 4,717
Exercise of Dyneer options....... 600
Issuance of stock under 401(k)
plan........................... 1,353
Repurchase of preferred stock....
Dividends on preferred stock..... (30)
Repurchase of common stock
warrants....................... (10,000)
Foreign currency translation
adjustment..................... (405)
Treasury stock transactions...... 1,052 (584)
-------- -------- ------- ----- -----
BALANCE DECEMBER 31, 1995.......... $152,283 $ 0 $64,142 $ 8 $(584)
======== ======== ======= ===== =====
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE> 80
TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1994 1995
---- ---- ----
(ALL AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 6,361 $ 18,480 $ 37,983
Adjustments to reconcile net income to net cash provided
by (used for) operating activities
Depreciation and amortization.......................... 5,333 17,428 23,428
(Increase) decrease in current assets, excluding the
effects of acquisitions:
Accounts receivable.................................... 1,603 (24,845) 38
Inventories............................................ (10,306) (25,493) 7,161
Prepaid and other current assets....................... 3,765 (6,423) (7,314)
Increase (decrease) in current liabilities, excluding the
effects of acquisitions:
Accounts payable....................................... (8,019) 5,830 (4,624)
Other current liabilities.............................. 290 8,251 (16,124)
Other..................................................... (5,804) (1,598) (3,057)
-------- -------- --------
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES... (6,777) (8,370) 37,491
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash acquired (Note 2)............... (3,992) (41,904) (17,143)
Capital expenditures...................................... (5,427) (15,249) (20,191)
(Purchase) sale of marketable securities.................. (3,500) 3,469 0
Other..................................................... 98 0 0
-------- -------- --------
NET CASH (USED FOR) INVESTING ACTIVITIES............... (12,821) (53,684) (37,334)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of preferred stock & warrants...... 0 17,500 0
Repurchase of preferred stock & warrants.................. 0 0 (17,500)
Proceeds from long-term borrowings........................ 1,000 54,144 58,120
Repayments on long-term debt.............................. (87,936) (27,524) (97,529)
Proceeds from stock offerings............................. 32,206 0 64,860
Proceeds from convertible note offering................... 103,500 0 0
Payments of financing fees................................ (3,448) (344) (102)
Dividends paid............................................ (90) (462) (1,061)
Other..................................................... 0 137 25
-------- -------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES.............. 45,232 43,451 6,813
Net increase (decrease) in cash and cash equivalents........ 25,634 (18,603) 6,970
Cash and cash equivalents, beginning of year................ 210 25,844 7,241
-------- -------- --------
Cash and cash equivalents, end of year...................... $ 25,844 $ 7,241 $ 14,211
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 81
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND ACQUISITIONS OF THE COMPANY
Titan Wheel International, Inc. ("Titan" or the "Company"), which was
incorporated in 1983, grew during the 1980's through acquiring, revitalizing and
amalgamating the operations of several of the largest wheel manufacturers
serving the agricultural and off-highway construction equipment markets. In
1990, Titan was acquired in a management led buyout by investors which included
Maurice M. Taylor, Jr., the Company's Chief Executive Officer and MascoTech,
Inc. ("MascoTech"). The Company completed its initial public offering in May
1993, resulting in issuance of 5,287,500 shares and net proceeds of $32.2
million. A portion of these proceeds was used to re-pay $9 million of
subordinated debt to Runnymede Development Corporation and shares pledged to
secure the debt were returned.
Acquisitions
Each of the following acquisitions was accounted for under the purchase
method of accounting.
Automotive Wheels acquisition
Effective February 28, 1993, the Company acquired all of the outstanding
capital stock of Automotive Wheels, Inc. ("Automotive Wheels") from MascoTech
for $8.8 million. Automotive Wheels assembles steel wheels for sale to original
equipment manufacturers ("OEMs") in the North American automobile industry. It
also manufactures steel and aluminum rims which are sold to manufacturers of
wheels for the automobile and light truck after-market. Operating results of
Automotive Wheels from February 28, 1993, have been included in the Consolidated
Statement of Operations.
Dyneer Corporation acquisition
During November 1993, the Company completed its acquisition of Dyneer
Corporation ("Dyneer"), a company engaged in the manufacturing of wheels and
tires for lawn and garden equipment, golf cars, recreation and industrial
trailers, traction enhancing differential systems, mechanical transmission
components and systems used in transportation vehicles and mobile equipment.
Operating results of Dyneer from November 12, 1993, have been included in the
Consolidated Statement of Operations.
The Company exchanged 2,317,664 shares of its common stock and options to
purchase an additional 441,392 shares of its common stock for all of Dyneer's
outstanding common stock and all options and warrants to purchase Dyneer common
stock. The exchange was preliminarily valued at approximately $28.4 million and
resulted in the recording of goodwill in the amount of $23.1 million, which is
being amortized on a straight-line basis over 40 years. In 1994, goodwill was
increased by $11.2 million resulting from the reallocation of preliminary
estimates and adjustment of certain pre-acquisition contingencies, the most
significant of which related to environmental liabilities.
The purchase agreement provided for an earnout based upon the performance
of Tractech, a division of Dyneer, and an earnout based upon the extent of
environmental remediation costs incurred by Dyneer. During 1994, the Company
reached an agreement to settle both earnouts for a total of 426,688 shares of
Titan's common stock and options to purchase 82,791 shares of the Company's
common stock at an exercise price of $.31 per share. The shares of Titan common
stock and options were issued on February 1, 1995. The consideration was
recorded as a purchase price accounting adjustment based on the fair value of
the shares and options on the issuance date. The transaction discussed above
resulted in additional goodwill of $4.4 million in 1995, which is being
amortized over its remaining life.
Dotson Wheel acquisition
During November 1993, the Company completed the purchase of certain assets
of Dotson Wheel, a producer of steel wheels and rims for
earthmoving/construction equipment, for a purchase price of
F-7
<PAGE> 82
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
approximately $5.1 million. The transaction was effected through TD Wheels of
Virginia, Inc. ("TD Wheels"), a wholly-owned subsidiary of the Company.
Operating results of TD Wheels have been included from the date of acquisition
of November 24, 1993.
Nieman's Limited acquisition
On January 27, 1994, the Company purchased all of the outstanding stock of
Nieman's Limited ("Nieman's") for approximately $1.2 million and repaid $5.3
million of Nieman's debt. The purchase agreement also includes certain earnout
provisions. No purchase price adjustments were recorded during 1994 or 1995 as a
result of such earnout provisions. Nieman's is a distributor of tires, wheels,
axle assemblies and component parts to OEMs. Operating results have been
included from the date of acquisition of January 27, 1994.
Titan Tire acquisition
Effective July 16, 1994, Titan Tire Corporation ("Titan Tire") acquired the
agricultural tire business of Pirelli Armstrong Tire Corporation ("PATC"). In
the purchase, Titan Tire acquired certain assets, primarily inventory and
equipment and assumed certain liabilities. Titan Tire is engaged in engineering
and manufacturing tires for the agricultural market. Operating results of Titan
Tire have been included in the Consolidated Statement of Operations from July
16, 1994, the effective date of acquisition.
The total purchase price consisted of: (i) $10 million obtained through the
issuance to PATC of warrants to purchase 2,250,000 shares of the Company's
common stock at an exercise price of $24.44 per share (see Note 17); (ii) $7.5
million obtained through the issuance to PATC of one million shares of the
Titan's Series A preferred stock convertible into 281,250 shares of the
Company's common stock (see Note 17); (iii) $5 million obtained through the
Company's regular line of credit. In addition, Titan Tire issued a subordinated
note due February 11, 2000, to PATC for approximately $19.7 million with a 7%
fixed interest rate (see Note 7). At the time of the purchase, Titan Tire also
recorded a purchase price adjustment for a $16.8 million liability which had
been recorded by PATC for employee related benefits which were not assumed by
Titan. The purchase price was assigned to the net assets acquired based on their
fair value at the date of acquisition. The fair value of net assets acquired
initially exceeded the purchase price by approximately $11 million and the
excess was allocated to reduce the value assigned to machinery and equipment. At
December 31, 1995, the $16.8 million liability was reversed. However, the
Company estimates that its ultimate liability for matters unrelated to this
liability will not exceed $6.5 million and has accrued that amount at December
31, 1995. The net reduction in purchase price resulted in an additional
reduction in the value assigned to machinery and equipment.
Sirmac Group acquisition
On November 21, 1994, the Company acquired 50 percent of the common stock
of the Sirmac SpA and Siria SpA of Italy (the "Sirmac Group", or "Sirmac").
Under certain conditions, Titan has the option to buy the remaining stock of the
Sirmac Group from the other shareholders. The Sirmac Group is a major European
manufacturer of specialty wheels and other products for the agricultural and
earthmoving/construction markets. Titan paid cash of approximately $9.5 million
for the common stock. In addition, Titan loaned $9.5 million to the Sirmac Group
as part of the purchase. The note receivable from the Sirmac Group bears
interest at the Italian prime rate and is payable on December 31, 1997.
The Company accounted for the investment under the equity method from the
date of acquisition until June 30, 1995. Effective July 1, 1995, Titan was able
to exert control over the Sirmac Group by making day to day operational
decisions; therefore, the Company began consolidating the Sirmac Group in its
financial statements. If Sirmac had been consolidated for the entire year, net
income and earnings per share would not have been affected.
F-8
<PAGE> 83
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Steel Wheels acquisition
On February 10, 1995, the Company acquired Lemmerz UK Limited ("Steel
Wheels"), a division of Lemmerz Holding GmbH. Steel Wheels is a Kidderminster,
England-based manufacturer of steel wheels for off-road and specialty vehicles.
The purchase price was approximately $15.2 million, obtained through Titan's
revolving credit facility. Results of operations have been included from the
date of acquisition of February 10, 1995.
Grasdorf Titan GmbH acquisition
On December 28, 1995, the Company purchased a portion of Metallbau Grasdorf
GmbH of Germany. Metallbau Grasdorf GmbH, located near Hannover, Germany, is a
manufacturer of wheels and rims for the earthmoving and agricultural equipment
markets. Titan purchased the manufacturing segment of the business for $2.3
million, and renamed it Grasdorf Titan GmbH ("Titan GmbH").
Pro forma results (unaudited)
Assuming the above acquisitions occurred on January 1, 1994, unaudited pro
forma net sales, net income and earnings per share for 1994 would have been $534
million, $23 million and $1.06, respectively. Such pro forma results are not
necessarily indicative of future results of operations or the results of
operations that would have been reported had the acquisitions been completed as
of January 1, 1994. Net sales, net income and earnings per share for 1995 would
not have been significantly different.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The policies utilized by the Company in the preparation of the financial
statements conform to generally accepted accounting principles and require
management to make estimates and assumptions that affect the reported amount of
assets and liabilities, and disclosure of contingent assets and liabilities, at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual amounts could differ from these
estimates and assumptions.
Basis of consolidation
The consolidated financial statements include the accounts of the Company
and its wholly and majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
Revenue recognition
Sales revenue and cost of sales are recorded by the Company when products
are shipped to customers.
Inventories
Inventories are valued at the lower of cost or market, cost determined
using the last-in, first-out method ("LIFO"), except for 61% of inventories,
which are valued using the first-in, first-out ("FIFO") method. Inventory at
foreign divisions is valued using the FIFO method.
Foreign currency translation
Gains and losses arising from the settlement of foreign currency
transactions are charged to the related period's Consolidated Statement of
Operations. Translation adjustments arising from the translation of foreign
subsidiary financial statements are recorded as a separate component of
stockholders' equity.
F-9
<PAGE> 84
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Customer pallets
Returnable pallets are billed to customers and upon return, credit memos
are issued. The Company records a liability for the estimated pallets to be
returned.
Fixed assets
Property, plant and equipment have been recorded at cost. Depreciation is
provided using the straight-line method over the following estimated useful
lives of the related assets:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements.................................. 25
Machinery and equipment..................................... 10
Tools, dies and molds....................................... 5
</TABLE>
Maintenance and repairs are expensed as incurred. When property, plant and
equipment are retired or otherwise disposed of, the related cost and accumulated
depreciation are eliminated and any gain or loss on disposition is included in
other income.
Deferred financing costs
Deferred financing costs are primarily costs incurred in connection with
the Company's convertible note issuance and credit facilities. The costs
associated with the convertible note issuance are being amortized over a period
of seven years, the term of the notes. The costs associated with the credit
facilities are being amortized over their respective terms.
Start up costs
The Company capitalizes pre-operating costs that are directly related to
the construction of new plant and production facilities until the facility is
operational. Such costs are amortized over five years.
Goodwill
Goodwill for domestic and foreign divisions are amortized over 40 and 25
years respectively, on a straight-line basis. At each balance sheet date,
management reviews the carrying value of goodwill compared to undiscounted
annual cash flows to assess recoverability from future operations.
Income taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standard No. 109 (SFAS 109). Under SFAS 109, the deferred
income tax provision is determined using the liability method whereby deferred
tax assets and liabilities are recognized based upon temporary differences
between the financial statement and income tax basis of assets and liabilities.
Statement of cash flows
For purposes of the Consolidated Statement of Cash Flows, the Company
considers financial investments with an original maturity of three months or
less to be cash equivalents.
F-10
<PAGE> 85
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Investing activities during 1993, including certain noncash transactions,
related to the Company's business acquisitions involved the following (in
thousands):
<TABLE>
<CAPTION>
AUTOMOTIVE DOTSON
WHEELS DYNEER WHEEL
---------- ------ ------
<S> <C> <C> <C>
Fair value of assets acquired, other than cash and
cash equivalents:
Current assets.................................... $ 6,157 $ 55,921 $ 5,208
Property, plant and equipment..................... 4,276 53,439 2,719
Other assets...................................... 800 24,121 0
Liabilities assumed................................. (2,560) (107,630) (2,958)
Notes issued........................................ (8,688) 0 0
Common stock and options issued..................... 0 (26,813) 0
------- --------- -------
Cash (acquired) paid................................ $ (15) $ (962) $ 4,969
======= ========= =======
</TABLE>
In addition, the Company issued a $1,263,000 note payable related to the
purchase of a building adjacent to its Quincy, Illinois facility.
Investing activities during 1994, including certain noncash transactions,
related to the Company's business acquisitions involved the following (in
thousands):
<TABLE>
<CAPTION>
THE
NIEMAN'S SIRMAC TITAN
DYNEER LTD. GROUP TIRE
------ -------- ------ -----
<S> <C> <C> <C> <C>
Fair value of assets acquired, other than
cash and cash equivalents:
Current assets............................ $(4,092) $ 7,318 $ 0 $ 15,170
Property, plant and equipment............. (1,860) 1,344 0 52,866
Other assets.............................. 11,152 3,612 19,000 4,000
Liabilities assumed......................... (5,830) (11,240) 0 (29,793)
Notes issued................................ 0 0 0 (19,743)
------- -------- ------- --------
Cash (acquired) paid........................ $ (630) $ 1,034 $19,000 $ 22,500
======= ======== ======= ========
</TABLE>
Investing activities during 1995, including certain noncash transactions,
related to the Company's business acquisitions involved the following (in
thousands):
<TABLE>
<CAPTION>
THE
STEEL SIRMAC TITAN TITAN
DYNEER WHEELS GROUP TIRE GMBH
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Fair value of assets acquired, other
than cash and cash equivalents:
Current assets..................... $ 311 $ 17,029 $ 54,117 $(6,000) $ 0
Property, plant and equipment 0 18,746 25,225 (9,500) 2,268
Other assets....................... 4,395 4,898 (3,440) 6,000 0
Liabilities assumed.................. 611 (25,473) (76,227) 9,500 0
Common stock and options issued...... (5,317) 0 0 0 0
------- -------- -------- ------- ------
Cash (acquired) paid................. $ 0 $ 15,200 $ (325) $ 0 $2,268
======= ======== ======== ======= ======
</TABLE>
The Company paid $5,074,000, $8,373,000 and $11,817,000 for interest and
$2,004,000, $8,357,000 and $27,141,000 for income taxes in 1993, 1994 and 1995,
respectively.
F-11
<PAGE> 86
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Fair value of financial instruments
The Company records all financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable, other accruals, and notes
payable at cost which approximates fair value. The convertible subordinated
notes are the only significant financial instrument of the Company with a fair
value different than the recorded value. At December 31, 1994 and 1995, the fair
value of the convertible subordinated notes, based on quoted market values, was
approximately $109.5 million and $112.6 million respectively, compared to a
recorded value of $103.5 million and $85.9 million, respectively.
Financial instruments with off-balance sheet risk
The Sirmac Group has debt with a principal balance of approximately $6
million at December 31, 1995, which is denominated in French francs. The debt is
subject to currency fluctuations between the Italian lire and the French franc.
Foreign currency losses incurred for the year ended December 31, 1995, were
immaterial to Titan's consolidated net income. The Company's activity with
derivative financial instruments in 1995 was minimal and the impact on 1995
operations was insignificant.
Environmental liabilities
Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and that do not contribute to current or future
revenue generation are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable and the costs are reasonably
estimable.
Stock-based compensation
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-based
Compensation" (SFAS 123) which defines the fair value based method of accounting
for stock option, purchase and awards plans. SFAS 123 allows companies to use
the fair value method defined in the Statement or to continue use of the
intrinsic value method as outlined in Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25). The Company currently
utilizes and plans to continue its use of APB 25 for accounting for employee
stock options and related instruments. In 1996, however, the Company will
provide the fair value disclosures required by SFAS 123. SFAS 123 is not
expected to have an impact on the Company's financial position or results of
operations.
Equity investment in affiliate
From November 21, 1994, through June 30, 1995, the Company recorded its
investment in the Sirmac Group at equity, adjusting its cost to recognize
Titan's share of the gain or loss of the Sirmac Group subsequent to the date of
investment and amortizing the differences between the Company's cost and the
underlying equity in net assets of the Sirmac Group at the date of investment.
Equity earnings for the six months ended June 30, 1995 approximating $1 million
have been included in other income in the Consolidated Statement of Operations.
As discussed in Note 1, Titan began consolidating Sirmac in its financial
statements, effective July 1, 1995.
Reclassification
Certain amounts from prior years have been reclassified to conform with the
current year presentation.
F-12
<PAGE> 87
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
3. INVENTORIES
Inventories at December 31, 1994 and 1995 comprised the following (in
thousands):
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Raw material................................................ $ 34,735 $ 37,273
Work-in-process............................................. 13,497 19,904
Finished goods.............................................. 56,086 68,947
-------- --------
104,318 126,124
LIFO reserve................................................ 2,645 (1,196)
-------- --------
$106,963 $124,928
======== ========
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1994 and 1995 comprised the
following (in thousands):
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Land and improvements....................................... $ 4,326 $ 4,974
Buildings and improvements.................................. 25,790 39,809
Machinery and equipment..................................... 101,612 142,579
Tools, dies and molds....................................... 33,871 36,489
Construction in process..................................... 9,750 8,428
-------- --------
175,349 232,279
Less: Accumulated depreciation.............................. (32,026) (53,993)
-------- --------
$143,323 $178,286
======== ========
</TABLE>
5. GOODWILL (IN THOUSANDS):
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Goodwill.................................................... $37,352 $53,554
Less: Accumulated amortization.............................. (1,002) (2,306)
------- -------
$36,350 $51,248
======= =======
</TABLE>
Amortization of goodwill for the years 1993, 1994 and 1995 totaled $72,000,
$930,000 and $1,304,000 respectively. Of the total $16.2 million increase in
goodwill in 1995, $4.7 million is from the acquisition of Steel Wheels, $7.1
million is from the acquisition of the Sirmac Group and the remaining $4.4
million is the result of additional contingent consideration paid to former
Dyneer shareholders as discussed in Note 1.
F-13
<PAGE> 88
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
6. OTHER ASSETS
Other assets at December 31, 1994 and 1995 comprised the following (in
thousands):
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
PATC receivables............................................ $ 4,000 $ 9,935
Deferred financing costs.................................... 3,315 2,933
Start-up costs (Note 2)..................................... 0 2,174
Notes receivable from Sirmac (Note 1)....................... 9,656 0
Investment in Sirmac (Note 2)............................... 9,350 0
Other....................................................... 2,108 2,659
------- -------
$28,429 $17,701
======= =======
</TABLE>
7. LONG-TERM DEBT
Long-term debt at December 31, 1994 and 1995 comprised the following (in
thousands):
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Bank borrowings:
Revolving credit -- Titan................................. $ 37,500 $ 0
Revolving credit -- Sirmac................................ 0 28,677
Term loan -- Titan Tire................................... 14,464 12,322
Term loan -- Steel Wheels................................. 0 7,299
Industrial revenue bond -- Greenwood........................ 0 9,500
Note payable to PATC........................................ 19,743 19,743
Subordinated convertible notes.............................. 103,500 85,936
Other....................................................... 6,329 5,247
-------- --------
181,536 168,724
Less: Amounts due within one year........................... 3,195 26,419
-------- --------
$178,341 $142,305
======== ========
</TABLE>
In July 1994, the Company entered into a credit facility ("Facility") with
a group of banks which terminates in July 1999. The Facility provides for
unsecured revolving credit of up to $100 million, which is also available for
documentary trade and/or standby letters of credit. Debt outstanding for this
facility totalled $37.5 million and $0 respectively, at December 31, 1994 and
1995. The Facility allows Titan to borrow funds under four interest options.
Titan paid rates ranging from 5 1/2% to 9% in 1995. The Facility is subject to
dividend limitations, under which Titan may not declare dividends in the event
the declaration would cause the Company to be in default of certain financial
covenants. The Facility also contains certain financial and other less
restrictive covenants.
Included in bank borrowings at December 31, 1995, is $22.5 million of
short-term and $6.2 million of long-term debt of the Sirmac Group. The
borrowings have been financed primarily through lines of credit, for which
Sirmac Group accounts receivable are pledged to the banks as collateral. The
current rate of interest on such lines is approximately 11%.
On September 15, 1994, Titan Tire entered into a credit facility which
provides for a term loan of $15 million and a revolving line of credit of up to
$20 million. The term loan bears interest at the London Interbank Rate ("LIBOR")
plus 2 1/4% and the revolving line of credit bears interest at LIBOR plus 2%.
These rates were adjusted downward based upon an amendment to the credit
facility in 1995. The LIBOR rate was 6% and 5 3/4%, respectively, at December
31, 1994 and 1995. Payments on the term loan are due quarterly
F-14
<PAGE> 89
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
through September 30, 1999. There were minimal borrowings under the line of
credit agreement in 1994 or 1995. Substantially all assets of Titan Tire are
pledged as collateral for the credit facility. The credit facility restricts
Titan Tire, including limits on additional borrowings, operating and capital
leases and contains certain financial covenants.
In May 1995, the Company established a $14.4 million credit facility in
conjunction with the purchase of Steel Wheels (see Note 1). The facility
consists of an $8 million variable interest rate term loan and a $6.4 million
revolving line of credit. Interest rates for the term loan averaged 8 1/2% for
1995. At December 31, 1995, the line of credit balance is zero. The credit
facility contains several financial covenants.
In March 1995, the Company issued $9.5 million of industrial revenue bonds
("IRB") to finance the construction of a facility in Greenwood, South Carolina.
The bonds carry tax exempt variable interest rates based upon corresponding
tax-exempt IRB issues in the state of South Carolina. Rates for 1995 ranged from
3 1/4% to 5 1/2%. The bonds are secured by a letter of credit established by the
Company and are due in February 2010.
As discussed in Note 1, on August 11, 1994, Titan Tire issued a
subordinated note for $19.7 million with a fixed interest rate of 7% to PATC in
conjunction with the Titan Tire purchase. The note matures on February 11, 2000.
On November 18, 1993, the Company issued $103.5 million principal amount of
4 3/4% subordinated convertible notes ("Notes"). The Notes are due December 1,
2000. Each Note is convertible into common stock at a price of $12.50 per share
after January 24, 1994. See Note 17 for discussion of 1995 note conversions. The
Notes are redeemable at any time on or after December 10, 1996, at the option of
the Company in whole or in part, at certain redemption prices, together with
accrued interest.
Other debt primarily consists of loans from local and state entities,
industrial revenue bonds and various other long-term notes.
Aggregate maturities of long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
1996........................................................ $ 26,419
1997........................................................ 10,275
1998........................................................ 4,266
1999........................................................ 7,652
2000 and thereafter......................................... 120,112
--------
$168,724
========
</TABLE>
F-15
<PAGE> 90
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
8. OTHER CURRENT LIABILITIES
Other current liabilities at December 31, 1994 and 1995 comprised the
following (in thousands):
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Accrued wages and commissions............................... $ 6,998 $ 9,585
Warranty reserves........................................... 4,309 2,828
Workers' compensation reserve............................... 975 2,535
Customer deposits/pallet reserves........................... 4,009 2,324
Accrued property and other taxes............................ 2,289 1,930
Accrued health care benefits................................ 2,502 1,740
Income taxes................................................ 5,961 0
Other....................................................... 6,169 7,689
------- -------
$33,212 $28,631
======= =======
</TABLE>
9. OTHER LONG-TERM LIABILITIES
Other long-term liabilities at December 31, 1994 and 1995 comprised the
following (in thousands):
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
PATC reserve (Note 1)....................................... $16,830 $ 6,500
Environmental liability (Note 20)........................... 5,251 4,919
Employee benefits -- Sirmac................................. 0 4,907
Supplemental retirement liability (Note 13)................. 2,418 2,434
Long-term warranty reserve.................................. 3,000 2,262
Other....................................................... 3,710 3,590
------- -------
$31,209 $24,612
======= =======
</TABLE>
10. SALES TO MAJOR MARKETS AND CUSTOMERS
The Company's operations are conducted within one business segment, the
production, manufacture and sale primarily of a full line of wheels, rims, tires
and components for the agricultural, consumer, earthmoving/ construction,
engineered products, and military equipment markets. Sales to major markets in
1993, 1994 and 1995 comprised the following (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Agricultural........................................ $ 74,901 $156,015 $275,976
Consumer............................................ 23,703 140,073 170,717
Earthmoving/Construction............................ 32,792 75,555 133,523
Engineered Products................................. 6,172 22,511 38,920
Military............................................ 12,873 12,846 4,047
-------- -------- --------
$150,441 $407,000 $623,183
======== ======== ========
</TABLE>
Export sales from the United States represent less than ten percent of
total sales. Sales to Deere & Company represented 19%, 15% and 12% of total
sales in 1993, 1994 and 1995, respectively.
Although the Company is directly affected by the economic well-being of the
above markets and significant customers, management does not believe significant
credit risk exists at December 31, 1995. The Company performs ongoing credit
evaluations of its customers' financial condition and does not require
F-16
<PAGE> 91
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
collateral. Historically, the Company has not experienced significant losses
related to receivables from individual customers or groups of customers in any
particular industry.
11. INCOME TAXES
Income before income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Domestic............................................... $10,410 $28,203 $54,074
Foreign................................................ (296) 1,904 9,206
------- ------- -------
$10,114 $30,107 $63,280
======= ======= =======
</TABLE>
The provision for income taxes was as follows (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Current
Federal............................................... $2,530 $ 9,789 $14,397
State................................................. 647 2,187 3,406
Foreign............................................... 2 265 1,613
------ ------- -------
3,179 12,241 19,416
------ ------- -------
Deferred
Federal............................................... 454 (367) 4,840
State................................................. 120 (247) 1,041
------ ------- -------
574 (614) 5,881
------ ------- -------
Provision for income taxes.............................. $3,753 $11,627 $25,297
====== ======= =======
</TABLE>
Deferred tax assets (liabilities) at December 31, 1994 and 1995,
respectively, are comprised of the following (in thousands):
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Returnable pallets.......................................... $ 1,231 $ 673
Employee benefits and related costs......................... 2,560 3,558
EPA reserve................................................. 2,991 2,329
Postretirement benefits..................................... 5,069 730
Other....................................................... 4,735 3,827
-------- --------
Gross deferred tax assets................................... $ 16,586 $ 11,117
======== ========
Fixed assets................................................ $(20,042) $(20,739)
Inventory................................................... (630) (1,227)
Other....................................................... (1,325) (369)
-------- --------
Gross deferred tax liabilities.............................. (21,997) (22,335)
-------- --------
Net deferred tax liabilities................................ $ (5,411) $(11,218)
======== ========
</TABLE>
The tax benefits from any future recognition of deductible temporary
differences relative to recent acquisitions, present at the date of such
acquisition, will adjust the related purchase accounting and be applied to
reduce noncurrent assets.
F-17
<PAGE> 92
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The provision for income taxes differs from the amount of income tax
determined by applying the statutory U.S. federal income tax rate to pre-tax
income as a result of the following:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. federal tax rate............................. 34.0% 35.0% 35.0%
State taxes (net)........................................... 5.0 4.2 4.6
Other (net)................................................. (1.9) (0.6) 0.4
---- ----- -----
Effective tax rate.......................................... 37.1% 38.6% 40.0%
==== ===== =====
</TABLE>
Federal income taxes are provided on earnings of foreign subsidiaries
except to the extent that such earnings are expected to be indefinitely
reinvested abroad.
12. RELATED PARTY TRANSACTIONS
The Company sells products to companies controlled by persons related to
the Chief Executive Officer of the Company. During 1993, 1994 and 1995, combined
sales approximated $2,597,000, $3,355,000 and $4,370,000, respectively. At
December 31, 1994 and 1995, Titan had approximately $2,170,000 and $1,998,000,
respectively, of accounts receivable outstanding from those sales. Commissions
paid to companies controlled by persons related to the Chief Executive Officer
of the Company approximated $252,000, $470,000 and $920,000 respectively, for
1993, 1994 and 1995. These sales and commissions were made on terms no less
favorable to Titan than comparable sales and commissions to unaffiliated third
parties.
13. EMPLOYEE BENEFIT PLANS
Pension plans
The Company has a contributory defined benefits pension plan covering
certain hourly employees of its French & Hecht division ("F&H"). The plan was
frozen in July 1993. The Company also sponsors a contributory defined benefits
plan covering all eligible bargaining employees of the Des Moines, Iowa location
of Dico, Inc. ("Dico"), a wholly-owned subsidiary of Dyneer. The Dico plan was
frozen July 1995. The Company's policy is to fund pension costs as accrued,
which is consistent with the funding requirements of federal laws and
regulations.
F-18
<PAGE> 93
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The components of net periodic pension cost and the reconciliation of the
funded status of the Dico, Inc. and F&H plans, in aggregate, at December 31,
1994 and 1995, are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Components of net periodic pension cost
Service cost.............................................. $ 126 $ 199
Interest cost............................................. 501 572
Actual return on assets................................... (327) (1,182)
Net amortization and deferral............................. (744) 792
------- -------
Net periodic pension cost (income).......................... $ (444) $ 381
======= =======
Reconciliation of funded status
Actuarial present value of benefit obligations
Vested benefit obligation.............................. $ 6,543 $ 6,148
Non-vested benefit obligation.......................... 376 29
------- -------
Accumulated benefit obligation.............................. $ 6,919 $ 6,177
======= =======
Projected benefit obligation................................ $ 7,333 $ 6,484
Actual plan assets at fair value............................ 5,423 5,177
------- -------
Plan assets greater (less) than projected benefit
obligation................................................ (1,910) (1,307)
Unrecognized net loss....................................... 1,376 761
Unrecognized transition liability........................... (59) (52)
Minimum liability adjustment................................ (904) (403)
------- -------
Accrued pension cost recognized in the balance sheet........ $(1,497) $(1,001)
======= =======
Major assumptions:
Discount rate............................................. 7 1/4-8%1/2 7 1/4%
Rate of return on plan assets............................. 8 1/2% 8 1/2%
</TABLE>
The Company also has an obligation to provide supplemental benefits to five
former officers/shareholders of Dyneer. The present value of the unfunded
benefit obligation accrued at December 31, 1994 and 1995, of $2,418,000 and
$2,434,000, respectively, is actuarially determined and is discounted at an
annual interest rate of 8 1/2% and 7 1/4%, respectively. Expense for the year
ended December 31, 1994 and 1995 was $163,000 and $183,000, respectively.
401(k)
The Company sponsors two 401(k) retirement savings plans (the "401(k)
Plan"), one plan for the benefit of all employees who are not covered by a
collective bargaining arrangement, and a second plan for the employees covered
by a collective bargaining arrangement. Plan participants may contribute up to
17% of their annual compensation, up to a maximum of $9,240 in 1995. Employees
are fully vested with respect to their contributions. In 1993 and the first six
months of 1994, Titan provided a 25% matching cash contribution on the
employee's contribution. Beginning on July 1, 1994, Titan amended its 401(k)
Plan to provide a 50% match in the form of the Company's common stock on the
first 6% of the employee's contribution. Titan issued 87,910 shares of common
stock in connection with the 401(k) Plan during 1995. Expenses related to the
401(k) Plan were $120,000, $917,000 and $1,468,000 for 1993, 1994 and 1995,
respectively.
14. STOCK OPTION PLAN
During 1993, the Company adopted the 1993 Stock Incentive Plan (the
"Plan"). A total of 1,125,000 shares of common stock are reserved under the
Plan. Under the Plan, stock options (both incentive and non-qualified),
restricted stock awards and performance awards may be granted to key employees
or consultants at the market price at date of grant. Options granted under the
Plan were for 0, 178,625 and
F-19
<PAGE> 94
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
165,780 shares during 1993, 1994 and 1995, respectively. There were 0, 26,865
and 17,460 shares cancelled in 1993, 1994 and 1995, respectively, leaving an
outstanding balance of 300,080 shares at December 31, 1995. No options were
exercised under the plan for 1993, 1994 and 1995. Options under the plan vest
and become exercisable at a rate of 40% on December 31 of the year following the
date of grant, and an additional 20% each year thereafter. The options are
exercisable at a price of $11.11 per share and expire ten years from date of
grant.
In 1994, the Company adopted a Non-Employee Director Stock Option Plan
("Director Plan") as of March 31, 1994, to provide for grants of stock options
as a means of attracting and retaining highly qualified independent directors
for the Company. No more than 225,000 shares of Titan's common stock may be
issued under the Director's Plan. Options granted under the Director Plan were
27,000 and 36,000 during 1994 and 1995, respectively, and were issued at
approximately the market price at the date of grant. No options have been
cancelled or exercised through December 31, 1995. Such options vest and become
exercisable immediately. The options are exercisable at a prices ranging from
$11.11 to $11.70 per share, and expire 10 years from date of grant.
15. GEOGRAPHIC SEGMENT INFORMATION
The Company's foreign operations are conducted primarily in Italy, the
United Kingdom and Ireland. A summary of Titan's operations by geographical area
for the three years ended December 31, 1995, follows (in thousands):
<TABLE>
<CAPTION>
UNITED
STATES FOREIGN ELIMINATIONS CONSOLIDATED
------ ------- ------------ ------------
<S> <C> <C> <C> <C>
1993
Revenues
Customers............................. $147,841 $ 2,600 $ 0 $150,441
Intercompany.......................... 13,108 0 (13,108) 0
-------- -------- -------- --------
Total revenues $160,949 $ 2,600 $(13,108) $150,441
======== ======== ======== ========
Income (loss) from operations........... $ 13,273 $ (131) $ 0 $ 13,142
======== ======== ======== ========
Identifiable assets..................... $255,925 $ 5,341 $ 0 $261,266
======== ======== ======== ========
1994
Revenues
Customers............................. $386,142 $ 20,858 $ 0 $407,000
Intercompany.......................... 77,834 2,661 (80,495) 0
-------- -------- -------- --------
Total revenues..................... $463,976 $ 23,519 $(80,495) $407,000
======== ======== ======== ========
Income (loss) from operations........... $ 36,170 $ 2,278 $ (452) $ 37,996
======== ======== ======== ========
Identifiable assets..................... $390,289 $ 10,171 $ 0 $400,460
======== ======== ======== ========
1995
Revenues
Customers............................. $524,233 $ 98,950 $ 0 $623,183
Intercompany.......................... 85,619 3,559 (89,178) 0
-------- -------- -------- --------
Total revenues..................... $609,852 $102,509 $(89,178) $623,183
======== ======== ======== ========
Income (loss) from operations........... $ 62,978 $ 10,087 $ (10) $ 73,055
======== ======== ======== ========
Identifiable assets..................... $395,593 $117,682 $ (1,140) $512,135
======== ======== ======== ========
</TABLE>
F-20
<PAGE> 95
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
16. EARNINGS PER SHARE
Earnings per share for 1993, 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Primary earnings per share.................................. $.46 $1.14 $1.91
==== ===== =====
Fully diluted earnings per share............................ $.46 $ .89 $1.50
==== ===== =====
</TABLE>
Earnings per share are based on the weighted average common shares
outstanding after giving retroactive effect to an approximately 858-for-1 stock
split approved by the Board of Directors on March 29, 1993. As discussed in Note
17, during 1995 the Board of Directors declared two 3-for-2 stock splits, which
were paid March 15 and August 31, 1995. All share and per share data for the
periods presented in the consolidated financial statements and notes thereto
have been adjusted to reflect the splits.
Weighted average common shares used in the computation of earnings per
share for the respective years are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Primary......................................... 13,946,101 16,255,942 19,933,034
Fully diluted................................... 14,935,102 24,646,099 27,459,606
</TABLE>
Primary and fully diluted earnings per share of common stock for 1993, 1994
and 1995 assumes the exercise of common stock options for each year as they are
common stock equivalents with a dilutive effect.
Fully diluted earnings per share of common stock for 1994 and 1995 assumes
the conversion of the Company's $103.5 million and $85.9 million convertible
subordinated notes due December 1, 2000, and the elimination of the related
after-tax interest expense and amortization of deferred financing fees. The
subordinated convertible notes did not have a dilutive effect on earnings in
1993. Additionally, fully diluted earnings per share of common stock for 1994
and 1995 assumed the conversion of the Company's Class A noncumulative
convertible preferred stock. The convertible preferred stock was repurchased in
June 1995. Conversion of the common stock warrants issued in the Titan Tire
acquisition was not assumed in 1994 or 1995, as the effect was anti-dilutive.
17. STOCKHOLDERS' EQUITY
The following discusses significant transactions which occurred during
1995. Significant equity transactions which occurred during 1993 and 1994 are
discussed in Note 1.
On June 7, 1995, the Company issued 4,312,500 shares of common stock at a
price of $15.83 per share. Excluding fees, Titan received $64.9 million, before
related offering costs of $300,000. With $17.5 million of the proceeds from the
June 1995 stock offering, Titan repurchased the convertible preferred stock and
common stock warrants issued to PATC in the Titan Tire acquisition.
During the year $17.6 million of the Company's 4 3/4% subordinated
convertible notes were converted into the Company's common stock. At a
conversion price per share of $12.50, these conversions resulted in the issuance
of 1.4 million additional common shares.
As discussed in Note 1, during 1995, the Company issued 426,688 shares of
Titan common stock and options to purchase 82,791 shares. The issuance of stock
increased additional paid-in capital by $4.7 million. Former Dyneer shareholders
exercised options to purchase a total of 48,391 shares of the Company's common
stock resulting in an increase of approximately $600,000 in additional paid-in
capital including a tax benefit of approximately $52,000.
F-21
<PAGE> 96
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
During 1995, the Company repurchased 150,000 shares of Titan common stock
from the Chief Executive Officer of the Company. Subsequently, 71,183 of these
shares were issued as compensation to a former employee, resulting in an
increase of approximately $1,052,000 in additional paid-in capital, including a
tax benefit of $348,000. A portion of the remaining treasury shares were
withheld for payment of payroll taxes, the accrual of which represents the cost
basis of the treasury stock remaining at December 31, 1995.
On January 24, 1995, the Board of Directors declared a 3-for-2 stock split,
payable as a stock dividend on March 15, 1995, to shareholders of record at the
close of business on February 15, 1995. On July 14, 1995, the Board of Directors
declared a second 3-for-2 stock split payable as a stock dividend on August 31,
1995, to shareholders of record at the close of business on July 31, 1995. All
share and per share data for the periods presented in the consolidated financial
statements and notes thereto have been adjusted to reflect the splits.
In conjunction with the related stock splits noted above, the Board of
Directors authorized an increase in the annual cash dividend from $.03 to $.06
per share. The Company paid cash dividends of $.02, $.03 and $.05 per share of
common stock during 1993, 1994 and 1995, respectively.
18. LEASE COMMITMENTS
The Company leases buildings, machinery, equipment and airplanes under
operating leases. Certain lease agreements provide for renewal options and
require payment of property taxes, maintenance and insurance. Total rental
expense approximated $602,000, $1,467,000 and $1,547,000 for the years ended
December 31, 1993, 1994 and 1995, respectively.
At December 31, 1995, future minimum rental commitments under noncancelable
operating leases with initial or remaining terms in excess of one year are as
follows: $1,630,000 in 1996; $1,155,000 in 1997; $924,000 in 1998; $718,000 in
1999; and $423,000 in 2000.
19. LITIGATION
General
The Company is party to several routine legal proceedings arising out of
the normal course of business. Titan believes that none of these actions,
individually or in the aggregate, will have a material adverse effect on the
financial condition or results of operations of the Company.
In December 1995, PATC commenced litigation against the Company on
contractual matters relating to the purchase of Titan Tire. The Company, in
December 1995, also commenced litigation against PATC on contractual matters
related to such acquisition. Titan believes that these actions will not have a
material adverse effect on the financial condition or results of operations of
the Company.
20. ENVIRONMENTAL MATTERS
Dico, one of the Company's subsidiaries, and five major oil and chemical
companies were named as potentially responsible parties in connection with
contaminants found at one of Dico's facilities ("the Site"). The contaminants
were found in the ground water and certain buildings located on the Site. Dico
has constructed a groundwater extraction and treatment system to restore use of
affected groundwater.
During 1994, the Company adjusted the purchase price allocation for the
Dyneer (Dico's parent company) acquisition with respect to the EPA matter. Of
the total estimate of $10.7 million of costs to be incurred in connection with
the clean up of the Site, $4.8 million was paid in 1994, and $600,000 in 1995.
Management believes that the remaining accrual of $5.3 million at December 31,
1995 is adequate for remaining costs to be incurred related to the environmental
matter. Dico is attempting to recover its costs from certain of its insurers and
other potentially responsible parties.
F-22
<PAGE> 97
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
21. SUPPLEMENTARY DATA -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED
QUARTER ENDED: MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 DECEMBER 31
-------- ------- ------------ ----------- -----------
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
1994
Net sales........................... $ 91,873 $102,671 $ 97,827 $114,629 $407,000
Gross profit........................ 14,603 16,514 16,723 20,592 68,432
Net income.......................... 3,819 5,055 4,281 5,325 18,480
Per share amounts:
Primary.......................... $ .24 $ .31 $ .26 $ .33 $ 1.14
Fully diluted.................... .19 .24 .21 .25 .89
1995
Net sales........................... $157,732 $157,640 $149,528 $158,283 $623,183
Gross profit........................ 28,763 28,157 27,753 31,053 115,726
Net income.......................... 9,298 10,033 8,906 9,746 37,983
Per share amounts:
Primary.......................... $ .56 $ .55 $ .40 $ .43 $ 1.91
Fully diluted.................... .40 .42 .33 .35 1.50
</TABLE>
NOTE: The annual earnings per share amounts do not necessarily agree to the sum
of the quarters as a result of changes in the market prices of the
Company's common stock and the application of the treasury stock method.
F-23
<PAGE> 98
TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(AMOUNTS IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 56,146 $ 14,211
Marketable securities..................................... 39 32
Accounts receivable (net of allowance of $5,100 and
$4,970, respectively).................................. 93,979 107,137
Inventories............................................... 126,054 124,928
Prepaid and other current assets.......................... 47,090 18,592
-------- --------
Total current assets................................... 323,308 264,900
Property, plant and equipment, net........................ 186,892 178,286
Other assets.............................................. 19,384 17,701
Goodwill.................................................. 41,626 51,248
-------- --------
Total assets........................................... $571,210 $512,135
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt......................... $ 14,009 $ 26,419
Accounts payable.......................................... 53,743 58,592
Other current liabilities................................. 38,761 28,631
-------- --------
Total current liabilities.............................. 106,513 113,642
Deferred income taxes..................................... 15,219 15,704
Other long-term liabilities............................... 25,574 24,612
Long-term debt............................................ 181,710 142,305
-------- --------
Total liabilities...................................... 329,016 296,263
-------- --------
Stockholders' equity
Common stock, no par, 60,000,000 shares authorized,
22,295,541 and 22,477,086 and outstanding,
respectively........................................... 23 23
Additional paid-in capital................................ 154,688 152,283
Retained earnings......................................... 93,823 64,142
Cumulative translation adjustments........................ (355) 8
Treasury stock at cost: 399,165 and 78,817 shares,
respectively........................................... (5,985) (584)
-------- --------
Total stockholders' equity............................. 242,194 215,872
-------- --------
Total liabilities and stockholders' equity.................. $571,210 $512,135
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated condensed
financial statements.
F-24
<PAGE> 99
TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales........................................... $145,682 $149,528 $489,969 $464,900
Cost of sales....................................... 121,901 121,775 402,656 380,227
Realignment costs................................... 10,324 0 10,324 0
-------- -------- -------- --------
Gross profit...................................... 13,457 27,753 76,989 84,673
Selling, general and administrative expenses........ 11,754 10,767 33,930 29,488
Research and development expenses................... 720 554 2,205 1,599
Gain on sale of assets.............................. (15,332) 0 (16,330) 0
-------- -------- -------- --------
Income from operations............................ 16,315 16,432 57,184 53,586
Interest expense.................................... 2,528 2,381 7,779 8,794
Minority interest................................... 0 423 2,082 423
Other (income)...................................... (1,076) (1,215) (2,189) (2,688)
-------- -------- -------- --------
Income before income taxes........................ 14,863 14,843 49,512 47,057
Provision for income taxes.......................... 5,648 5,937 18,815 18,820
-------- -------- -------- --------
Net income.......................................... $ 9,215 $ 8,906 $ 30,697 $ 28,237
======== ======== ======== ========
Earnings per common share:
Primary........................................... $ .41 $ .40 $ 1.36 $ 1.51
Fully diluted..................................... $ .34 $ .33 $ 1.12 $ 1.15
Average common shares outstanding:
Primary........................................... 22,462 22,390 22,617 19,080
Fully diluted (See Note 1)........................ 29,315 29,346 29,480 26,824
</TABLE>
- -------------------------
(1) The computations of fully diluted earnings per share for the three and nine
months ending September 30, 1996 and 1995, assume the conversion of the
4 3/4% convertible notes, issued November, 1993, due December, 2000.
The accompanying notes are an integral part of the consolidated condensed
financial statements.
F-25
<PAGE> 100
TITAN WHEEL INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1996 1995
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 30,697 $ 28,237
Depreciation and amortization............................. 20,991 17,480
Gain on sale of assets.................................... (16,330) 0
Realignment costs......................................... 10,324 0
(Increase)/decrease in receivables........................ 9,406 (17,740)
(Increase)/decrease in inventories........................ (17,695) 10,821
(Increase)/decrease in other assets....................... 4,805 (9,017)
(Decrease) in accounts payable............................ (2,960) (1,324)
Increase/(decrease) in other accrued liabilities.......... 6,802 (2,384)
Other, net................................................ 742 (2,570)
-------- --------
Net cash provided by operating activities.............. 46,782 23,503
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net................................. (19,073) (17,581)
Proceeds from sale of assets.............................. 1,896 0
Acquisitions, net of cash acquired........................ (9,415) (14,900)
-------- --------
Net cash (used for) investing activities............... (26,592) (32,481)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock offering.............................. 0 64,860
Payment of debt........................................... (32,053) (91,846)
Proceeds from long-term borrowings........................ 60,000 58,038
Repurchase of preferred stock & stock warrants............ 0 (17,500)
Repurchase of common stock................................ (5,150) 0
Dividends paid............................................ (1,014) (724)
Other, net................................................ (38) (114)
-------- --------
Net cash provided by financing activities.............. 21,745 12,714
Net increase in cash and cash equivalents................... 41,935 3,736
Cash and cash equivalents at beginning of period............ 14,211 7,241
-------- --------
Cash and cash equivalents at end of period.................. $ 56,146 $ 10,977
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated condensed
financial statements.
F-26
<PAGE> 101
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
A. ACCOUNTING POLICIES
In the opinion of Titan Wheel International, Inc. ("Titan" or the
"Company"), the accompanying unaudited consolidated condensed financial
statements contain all adjustments, which are normal and recurring in nature,
necessary to present fairly its financial position as of September 30, 1996, the
results of operations for the three and nine month periods ended September 30,
1996 and 1995, and cash flows for the nine months ended September 30, 1996 and
1995.
Accounting policies have continued without change and are described in the
Summary of Significant Accounting Policies contained in the Company's 1995
Annual Report on Form 10-K. For additional information regarding the Company's
financial condition, refer to the footnotes accompanying the financial
statements as of and for the year ended December 31, 1995 filed in conjunction
with the Company's 1995 Annual Report on Form 10-K. Details in those notes have
not changed significantly except as a result of normal interim transactions and
certain matters discussed below.
B. INVENTORIES
Inventories by component are as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Raw materials............................................... $ 40,489 $ 37,273
Work in process............................................. 16,321 19,904
Finished goods.............................................. 69,180 68,947
-------- --------
125,990 126,124
LIFO reserve................................................ 64 (1,196)
-------- --------
$126,054 $124,928
======== ========
</TABLE>
C. FIXED ASSETS
Property, plant and equipment, net reflects accumulated depreciation of
$70.3 million and $54.0 million at September 30, 1996, and December 31, 1995,
respectively.
F-27
<PAGE> 102
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
D. LONG-TERM DEBT:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt comprised the following:
Bank borrowings
Revolving credit -- Sirmac................................ $ 16,994 $ 28,677
Term loan -- Titan........................................ 60,000 0
Term loan -- Titan Tire................................... 0 12,322
Term loan -- Steel Wheels................................. 0 7,299
Industrial revenue bond -- Greenwood...................... 9,500 9,500
Note payable to PATC...................................... 19,743 19,743
Subordinated convertible notes............................ 85,279 85,936
Other..................................................... 4,203 5,247
-------- --------
195,719 168,724
Less -- amounts due within one year......................... 14,009 26,419
-------- --------
$181,710 $142,305
======== ========
</TABLE>
Aggregate maturities of long-term debt at September 30, 1996, are as
follows (in thousands):
<TABLE>
<S> <C> <C>
October 1 -- December 31, 1996............................ $ 13,389
1997...................................................... 777
1998...................................................... 1,045
1999...................................................... 585
2000 and thereafter....................................... 179,923
--------
$195,719
========
</TABLE>
On September 20, 1996, the Company entered into a new $175 million credit
facility with a group of banks ("Facility"). The Facility provides for an
unsecured $60 million term loan due September, 2001, and a $115 million
revolving line, which is also available for documentary trade and/or standby
letters of credit. The $60 million term loan was used, in part, to pay down debt
comprised of certain other credit facilities and term loans.
E. PURCHASE OF REMAINING INTEREST IN SIRMAC
On November 21, 1994, the Company acquired 50% of the common stock of the
Sirmac Group which was initially accounted for under the equity method. The
Sirmac Group, located in Italy, is a manufacturer of specialty wheels and other
products for the agricultural and construction markets. Effective July 1, 1995,
Titan was able to exert control over the Sirmac Group by making day to day
operational decisions; therefore, the Company began consolidating the Sirmac
Group in its financial statements. Effective July 23, 1996, the Company acquired
the remaining 50% of the Sirmac Group.
Had the acquisition of 100% of the Sirmac Group occurred on January 1,
1995, net sales for the nine month period ended September 30, 1995, would have
been $508.6 million on a proforma basis. Net sales for 1996 would not have been
different, as the Sirmac Group was consolidated with the Company beginning July
1, 1995. Net income and fully diluted earnings per share would have been $32.2
million and $1.16 for the nine month period ended September 30, 1996, on a
proforma basis.
F-28
<PAGE> 103
TITAN WHEEL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
F. SALE OF ASSETS
On September 30, 1996, the Company sold the assets of Tractech to a joint
venture group and private investors. Tractech, which produces no-spin
differentials, contributed annual sales of approximately $25 million. During the
three and nine months ended September 30, 1996, Tractech contributed net sales
of $6.1 and $18.4 million respectively, net income of $2.3 and $.8 million
respectively, and fully diluted earnings per share of $.09 and $.03
respectively. The Company has recorded a pretax gain of $15.3 million after
related expenses as a result of the transaction in the third quarter of 1996.
This follows the sale of the assets of Automation International, Inc. in the
second quarter of 1996.
G. REALIGNMENT COSTS
During the third quarter of 1996, the Company has recorded a pretax
realignment charge of $10.3 million. These costs consist primarily of a
write-off of start-up costs and inventory associated with the elimination of
non-core products including golf car assemblies, automotive Original Equipment
Manufacturers (OEM) wheels, and axles. This is part of the Company's overall
strategy to concentrate its resources on tire and wheel manufacturing, and is
consistent with the sale of assets mentioned in footnote F.
H. STOCK REPURCHASE PROGRAM
On May 23, 1996, the Board of Directors of the Company authorized the
repurchase of up to five million shares (approximately 22 percent of the
outstanding shares) of Titan Wheel International, Inc. common stock. The Company
may make these common stock purchases periodically in the open market. As of
September 30, 1996, the Company had purchased 350,000 shares under the
aforementioned program. During October 1996, the Company purchased an additional
285,500 shares under the program.
I. ENVIRONMENTAL MATTER
At September 30, 1996, the Company has an accrual of $5.6 million for
remaining costs associated with its Dico Inc. Des Moines, Iowa site.
J. SUPPLEMENTARY DATA -- 1996 QUARTERLY FINANCIAL INFORMATION
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS
------------------------------------ ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 SEPTEMBER 30
-------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales....................................... $177,257 $167,030 $145,682 $489,969
Gross profit.................................... 33,123 30,409 13,457 76,989
Net income...................................... 11,006 10,476 9,215 30,697
Per share amounts:
Primary....................................... $.49 $.46 $.41 $1.36
Fully diluted................................. .40 .38 .34 1.12
</TABLE>
F-29
<PAGE> 104
Photograph depicting Jayco pop-up
camper with
Titan wheels and tires
Titan entered the off-highway
tire business in 1993 with a
focus on providing complete
wheel and tire assemblies to
its customers. Through
numerous acquisitions, Titan
has become a leading global
manufacturer of steel wheels
and tires for off-highway
vehicles.
Photograph depicting AGCO tractor
with Titan wheels and tires
Photograph depicting John Deere
Gator
with Titan wheels and tires
[Titan Wheel Logo]
<PAGE> 105
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE NOTES IN
ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF
THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 10
Use of Proceeds....................... 15
Capitalization........................ 16
Selected Financial Information........ 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
Business.............................. 26
Management............................ 35
Executive Compensation................ 37
Related Party Transactions............ 38
Security Ownership of Certain
Beneficial Owners and Management.... 39
Description of Certain Indebtedness... 40
Description of the Notes.............. 42
Underwriting.......................... 71
Legal Matters......................... 72
Experts............................... 72
Available Information................. 72
Index to Financial Statements......... F-1
</TABLE>
======================================================
======================================================
$150,000,000
LOGO
TITAN WHEEL
INTERNATIONAL, INC.
% SENIOR SUBORDINATED NOTES
DUE 2007
---------------------------
PROSPECTUS
---------------------------
MERRILL LYNCH & CO.
SMITH BARNEY INC.
SCHRODER WERTHEIM & CO.
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
, 1997
======================================================
<PAGE> 106
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with
the issuance and distribution of the securities registered hereby, other than
underwriting discounts and commissions:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 45,455
NASD filing fee............................................. 15,500
Blue sky fees and expenses.................................. 25,000
Printing fees............................................... 75,000
Legal fees and expenses..................................... 60,000
Accounting fees and expenses................................ 25,000
Trustee fees................................................ 3,500
Miscellaneous............................................... 26,000
--------
Total..................................................... $275,455
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 5/8.75 of the Illinois Business Corporation Act of 1983, as
amended, and Article Six of the registrant's By-laws provide for indemnification
of the registrant's directors and officers in a variety of circumstances, which
may include liabilities under the Securities Act of 1933, as amended.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(a) EXHIBITS
A list of exhibits is set forth in the Exhibit Index appearing elsewhere in
this Registration Statement and is incorporated herein by reference.
(b) FINANCIAL STATEMENT SCHEDULES*
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
IX -- Valuation Reserves.................................... S-1
</TABLE>
- -------------------------
* Schedules other than those listed above have been omitted because of the
absence of the conditions under which they are required or because the
required information is presented in the financial statements or the notes
thereto.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been
II-1
<PAGE> 107
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.
(b) The undersigned registrant hereby undertakes that:
(1) 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 the
registration statement as of the time it was declared effective.
(2) 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.
II-2
<PAGE> 108
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment of Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in St. Louis,
Missouri on March 4, 1997.
TITAN WHEEL INTERNATIONAL, INC.
By: MAURICE M. TAYLOR, JR.
------------------------------------
Maurice M. Taylor, Jr.
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
of Registration Statement has been signed by the following persons in the
capacities indicated on March 4, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
MAURICE M. TAYLOR, JR. Director, President and Chief Executive Officer
- --------------------------------------------------- (Principal Executive Officer)
Maurice M. Taylor, Jr.
KENT W. HACKAMACK Vice President - Finance and Treasurer
- --------------------------------------------------- (Principal Financial Officer and Principal
Kent W. Hackamack Accounting Officer)
* Director
- ---------------------------------------------------
Erwin H. Billig
* Director
- ---------------------------------------------------
Edward J. Campbell
* Director
- ---------------------------------------------------
Richard M. Cashin, Jr.
* Director
- ---------------------------------------------------
Albert J. Febbo
ANTHONY L. SOAVE Director
- ---------------------------------------------------
Anthony L. Soave
*By: CHERI T. HOLLEY
----------------------------------------------
Cheri T. Holley, Attorney-in-fact
</TABLE>
II-3
<PAGE> 109
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- ---------- ----------- --------
<S> <C> <C>
1* Form of Purchase Agreement
3(a)(1) Restated Articles of Incorporation of the Company
3(b)** Amendment dated May 19, 1994 to Articles of Incorporation of
Company
3(c)(2) By-laws of the Company
4(a)(3) Registration Rights Agreement dated November 12, 1993,
between the Company and 399 Venture Partners, Inc.
4(b)* Form of Indenture between the Company and The First National
Bank of Chicago
Note: Pursuant to the provisions of paragraph (b)(4)(iii) of
Item 601 of Regulation S-K, the Company hereby undertakes to
furnish to the Commission upon request copies of the
instruments pursuant to which the Company and its combined
subsidiaries holds long-term debt of the Company, none of
which instruments governs indebtedness exceeding 10% of the
total assets of the Company on a combined basis.
4(c)(4) Multicurrency Credit Agreement dated September 19, 1996
among the Company, Harris Bank and the banks named therein
5* Opinion of Armstrong, Teasdale, Schlafly & Davis as to
Legality
10(a)(5) Sublease dated June 20, 1988 between the Company and
Kelsey-Hayes Company
10(b)(6) Lease dated April 1, 1973 between Kelsey-Hayes Company and
the Town of Walcott, Iowa
10(c)(5) Indenture dated as of April 1, 1973 between Town of Walcott,
Iowa and First Trust and Savings Bank, as Trustee
10(d)(7) 1994 Non-Employee Director Stock Option Plan
10(e)(1) 1993 Stock Incentive Plan
11** Computation of Earnings per Common Share
12** Computation of Ratio of Earnings to Fixed Charges
21* Subsidiaries of the Company
23(a)* Consent of Price Waterhouse LLP
23(b)* Consent of Armstrong, Teasdale, Schlafly & Davis (included
in Exhibit 5)
24** Power of Attorney (included on Page II-3)
25** Statement of Eligibility of Trustee
</TABLE>
(footnotes on following page)
II-4
<PAGE> 110
- -------------------------
* Filed herewith.
** Previously filed.
(1) Incorporated by reference to the exhibit filed with Amendment No. 2 to the
Company's Registration Statement on Form S-1 (No. 33-60518).
(2) Incorporated by reference to the exhibit filed with the Company's
Registration Statement on Form S-4 (No. 33-69228).
(3) Incorporated by reference to the exhibit filed with the Company's Annual
Report on Form 10-K for its year ended December 31, 1994.
(4) Incorporated by reference to exhibit 9(b)(i) filed with the Company's Issuer
Tender Offer Statement on Schedule 13E-4 on February 24, 1997.
(5) Incorporated by reference to the exhibit filed with Amendment No. 1 to the
Company's Registration Statement on Form S-1 (No. 33-60518).
(6) Incorporated by reference to the exhibit filed with the Company's
Registration Statement on Form S-1 (No. 33-60518).
(7) Incorporated by reference to the exhibit filed with the Company's
Registration Statement on Form S-1 (No. 33-70140).
II-5
<PAGE> 111
ITEM 16(B)
TITAN WHEEL INTERNATIONAL, INC.
SCHEDULE IX -- VALUATION RESERVES
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS OF YEAR
----------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Year ended December 31, 1993
Reserve deducted in the balance sheet
from the assets to which it applies
Allowance for doubtful accounts...... $ 643,000 $ 542,000 $ (38,000) $1,147,000
========== ========== =========== ==========
Reserve for plant closure............ $2,417,000 $ -0- $(2,022,000)(1) $ 395,000
========== ========== =========== ==========
Year ended December 31, 1994
Reserve deducted in the balance sheet
from the assets to which it applies
Allowance for doubtful accounts...... $1,147,000 $1,449,000 $ (383,000)(2) $2,213,000
========== ========== =========== ==========
Reserve for plant closure............ $ 395,000 $ -0- $ (395,000)(1) $ -0-
========== ========== =========== ==========
Year ended December 31, 1995
Reserve deducted in the balance sheet
from the assets to which it applies
Allowance for doubtful accounts...... $2,213,000 $3,154,000 $ (397,000)(3) $4,970,000
========== ========== =========== ==========
</TABLE>
- -------------------------
(1) Represents utilization of the reserve established in 1991
(2) Net of recoveries of $84,000
(3) Net of recoveries of $28,000
S-1
<PAGE> 1
DRAFT 3/4/97
TITAN WHEEL INTERNATIONAL, INC.
(an Illinois Corporation)
$150,000,000
___% Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
Dated: _________, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
PURCHASE AGREEMENT............................................................................ 1
SECTION 1. Representations and Warranties.................................................... 2
(a) Representations and Warranties by the Company......................... 2
(i) Compliance with Registration Requirements..................... 3
(ii) Independent Accountants....................................... 3
(iii) Financial Statements.......................................... 4
(iv) No Material Adverse Change in Business........................ 4
(v) Good Standing of the Company.................................. 4
(vi) Good Standing of the Subsidiaries............................. 4
(vii) Capitalization................................................ 5
(viii) Authorization of Agreement.................................... 5
(ix) Authorization of the Indenture................................ 5
(x) Authorization of the Securities............................... 5
(xi) Description of the Securities and the Indenture............... 6
(xii) Absence of Defaults and Conflicts............................. 6
(xiii) Absence of Labor Dispute...................................... 6
(xiv) Absence of Proceedings........................................ 7
(xv) Accuracy of Exhibits.......................................... 7
(xvi) Possession of Intellectual Property........................... 7
(xvii) Absence of Further Requirements............................... 7
(xviii) Possession of Licenses and Permits............................ 8
(xix) Title to Property............................................. 8
(xx) Compliance with Cuba Act...................................... 8
(xxi) Investment Company Act........................................ 8
(xxii) Defaults on Senior Indebtedness............................... 9
(xxiii) Stabilization or Manipulation................................. 9
(xxiv) Related Party Transactions.................................... 9
(xxv) Environmental Laws............................................ 9
(xxvi) Registration Rights........................................... 10
(xxvii) Accounting Controls........................................... 10
(b)Officer's Certificates......................................................... 10
SECTION 2. Sale and Delivery to Underwriters; Closing........................................ 10
(a)Securities..................................................................... 10
(b)Payment........................................................................ 10
(c)Denominations; Registration.................................................... 11
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 3. Covenants of the Company.............................................................. 11
(a) Compliance with Securities Regulations and Commission Requests............ 11
(b) Filing of Amendments...................................................... 11
(c) Delivery of Registration Statements....................................... 12
(d) Delivery of Prospectuses.................................................. 12
(e) Continued Compliance with Securities Laws................................. 12
(f) Blue Sky Qualifications................................................... 12
(g) Rule 158.................................................................. 13
(h) Use of Proceeds........................................................... 13
(i) Restriction on Sale of Securities......................................... 13
(j) Reporting Requirements.................................................... 13
(k) Interim Financial Statements.............................................. 13
(l) Periodic Reports.......................................................... 13
SECTION 4. Payment of Expenses................................................................... 14
(a) Expenses.................................................................. 14
(b) Termination of Agreement.................................................. 14
SECTION 5. Conditions of Underwriters' Obligations............................................... 14
(a) Effectiveness of Registration Statement................................... 14
(b) Opinion of Counsel for the Company........................................ 15
(c) Opinion of Counsel for the Underwriters................................... 15
(d) Officers' Certificate..................................................... 15
(e) Accountant's Comfort Letter............................................... 15
(f) Bring-down Comfort Letter................................................. 16
(g) Maintenance of Rating..................................................... 16
(h) No Objection.............................................................. 16
(i) Indenture................................................................. 16
(j) Chief Financial Officer's Certificate..................................... 16
(k) Additional Documents...................................................... 16
(l) Termination of Agreement.................................................. 16
SECTION 6. Indemnification....................................................................... 17
(a) Indemnification of Underwriters........................................... 17
(b) Indemnification of Company, Directors and Officers........................ 17
(c) Actions against Parties; Notification..................................... 18
(d) Settlement without Consent if Failure to Reimburse........................ 18
SECTION 7. Contribution.......................................................................... 19
SECTION 8. Representations, Warranties and Agreements to Survive Delivery........................ 20
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 9. Termination of Agreement.............................................. 20
(a) Termination; General.................................................. 20
(b) Liabilities........................................................... 21
SECTION 10. Default by One or More of the Underwriters............................ 21
SECTION 11. Notices............................................................... 21
SECTION 12. Parties............................................................... 22
SECTION 13. GOVERNING LAW AND TIME................................................ 22
SECTION 14. Effect of Headings.................................................... 22
SCHEDULES
Schedule A - List of Underwriters............................................ Sch A-1
Schedule B - Pricing Information............................................. Sch B-1
EXHIBITS
Exhibit A - Form of Opinion of Company's Counsel............................. A-1
Exhibit B - Form of Accountant's Comfort Letter Pursuant
to Section 5(d).................................................. B-1
</TABLE>
<PAGE> 5
Draft of March 4, 1997
$150,000,000
TITAN WHEEL INTERNATIONAL, INC.
(an Illinois Corporation)
Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
____________, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Smith Barney Inc.
Schroder Wertheim & Co.
Dean Witter Reynolds Inc.
A.G. Edwards & Sons, Inc.
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Titan Wheel International, Inc., an Illinois corporation (the "Company"),
confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") and each of the other Underwriters named in
Schedule A hereto (collectively, the "Underwriters", which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Merrill Lynch is acting as representative (in such capacity,
the "Representative"), with respect to the issue and sale by the Company and the
purchase by the Underwriters, acting severally and not jointly, of the
respective principal amounts set forth in said Schedule A of $150,000,000
aggregate principal amount of the Company's Senior Subordinated Notes due 2007
(the "Securities"). The Securities are to be issued pursuant to an indenture
dated as of _______, 1997 (the "Indenture") between the Company and The First
National Bank of Chicago, as trustee (the "Trustee").
<PAGE> 6
The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the Representative deems advisable after
this Agreement has been executed and delivered and the Indenture has been
qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act").
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-22279) covering the
registration of the Securities under the Securities Act of 1933, as amended
(the "1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will
either (i) prepare and file a prospectus in accordance with the provisions of
Rule 430A ("Rule 430A") of the rules and regulations of the Commission under
the 1933 Act (the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule
424(b)") of the 1933 Act Regulations or (ii) if the Company has elected to rely
upon Rule 434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term
sheet (a "Term Sheet") in accordance with the provisions of Rule 434 and Rule
424(b). The information included in such prospectus or in such Term Sheet, as
the case may be, that was omitted from such registration statement at the time
it became effective but that is deemed to be part of such registration
statement at the time it became effective (a) pursuant to paragraph (b) of Rule
430A is referred to as "Rule 430A Information" or (b) pursuant to paragraph (d)
of Rule 434 is referred to as "Rule 434 Information." Each prospectus used
before such registration statement became effective, and any prospectus that
omitted, as applicable, the Rule 430A Information or the Rule 434 Information,
that was used after such effectiveness and prior to the execution and delivery
of this Agreement, is herein called a "preliminary prospectus." Such
registration statement, including the exhibits thereto and schedules thereto at
the time it became effective and including the Rule 430A Information and the
Rule 434 Information, as applicable, is herein called the "Registration
Statement." Any registration statement filed pursuant to Rule 462(b) of the
1933 Act Regulations is herein referred to as the "Rule 462(b) Registration
Statement," and after such filing the term "Registration Statement" shall
include the Rule 462(b) Registration Statement. The final prospectus in the
form first furnished to the Underwriters for use in connection with the
offering of the Securities is herein called the "Prospectus." If Rule 434 is
relied on, the term "Prospectus" shall refer to the preliminary prospectus
dated March ___, 1997 together with the Term Sheet and all references in this
Agreement to the date of the Prospectus shall mean the date of the Term Sheet.
For purposes of this Agreement, all references to the Registration Statement,
any preliminary prospectus, the Prospectus or any Term Sheet or any amendment
or supplement to any of the foregoing shall be deemed to include the copy filed
with the Commission pursuant to its Electronic Data Gathering, Analysis and
Retrieval system ("EDGAR").
SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) Representations and Warranties by the Company. The Company represents
and warrants to each Underwriter as of the date hereof and as of the Closing
Time referred to in Section 2(b) hereof, and agrees with each Underwriter, as
follows:
2
<PAGE> 7
(i) Compliance with Registration Requirements. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and any
request on the part of the Commission for additional information has been
complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time, the Registration Statement, the Rule
462(b) Registration Statement and any amendments and supplements thereto
complied and will comply in all material respects with the requirements
of the 1933 Act and the 1933 Act Regulations and the 1939 Act and the
rules and regulations of the Commission under the 1939 Act (the "1939 Act
Regulations"), and did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
Neither the Prospectus nor any amendments or supplements thereto, at the
time the Prospectus or any such amendment or supplement was issued and at
the Closing Time, included or will include an untrue statement of a
material fact or omitted or will omit to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If Rule 434 is
used, the Company will comply with the requirements of Rule 434 and the
Prospectus shall not be "materially different", as such term is used in
Rule 434, from the prospectus included in the Registration Statement at
the time it became effective. The representations and warranties in this
subsection shall not apply to statements in or omissions from the
Registration Statement or Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statement or Prospectus.
Each preliminary prospectus and the prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when
so filed in all material respects with the 1933 Act Regulations and each
preliminary prospectus and the Prospectus delivered to the Underwriters
for use in connection with this offering was identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(ii) Independent Accountants. The accountants who certified the
financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required by
the 1933 Act and the 1933 Act Regulations.
3
<PAGE> 8
(iii) Financial Statements. The financial statements included in
the Registration Statement and the Prospectus, together with the related
schedules and notes, present fairly the financial position of the Company
and its consolidated subsidiaries at the dates indicated and the
statement of operations, stockholders' equity and cash flows of the
Company and its consolidated subsidiaries for the periods specified; said
financial statements have been prepared in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved. The supporting schedules included in
the Registration Statement present fairly in accordance with GAAP the
information required to be stated therein. The selected financial data
and the summary financial information included in the Prospectus present
fairly the information shown therein and have been compiled on a basis
consistent with that of the audited financial statements included in the
Registration Statement.
(iv) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Registration Statement and
the Prospectus, except as otherwise stated therein, (A) there has been no
material adverse change in the condition (financial or otherwise),
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business (a "Material Adverse Effect"), (B) there have
been no transactions entered into by the Company or any of its
subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company and its subsidiaries considered
as one enterprise, and (C) there has been no dividend or distribution of
any kind declared, paid or made by the Company on any class of its
capital stock.
(v) Good Standing of the Company.. The Company has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Illinois and has corporate power and authority
to own, lease and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its obligations
under this Agreement, the Indenture and the Securities; and the Company
is duly qualified as a foreign corporation to transact business and is in
good standing in each other jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure so to qualify or to be
in good standing would not result in a Material Adverse Effect.
(vi) Good Standing of Subsidiaries. Each subsidiary of the Company
(each a "Subsidiary" and, collectively, the "Subsidiaries") has been duly
organized and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, has corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and is duly qualified as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would
not result in a Material Adverse Effect; except as otherwise disclosed in
4
<PAGE> 9
the Registration Statement, all of the issued and outstanding capital
stock of each such Subsidiary has been duly authorized and validly
issued, is fully paid and non-assessable and is owned by the Company,
directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity; none of
the outstanding shares of capital stock of any Subsidiary was issued in
violation of the preemptive or similar rights of any securityholder of
such Subsidiary. The only subsidiaries of the Company are the
subsidiaries listed on Exhibit 21 to the Registration Statement.
(vii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus in the
column entitled "As Adjusted" under the caption "Capitalization" (except
for subsequent issuances, if any, pursuant to this Agreement, pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectus or pursuant to the exercise of convertible securities or
options referred to in the Prospectus). The shares of issued and
outstanding capital stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable; and none of the
outstanding shares of capital stock of the Company was issued in
violation of the preemptive or other similar rights of any securityholder
of the Company arising by operation of law, under the charter or bylaws
of the Company, under any agreement to which the Company or any of its
Subsidiaries is a party or otherwise.
(viii) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Company.
(ix) Authorization of the Indenture. The Indenture has been duly
authorized by the Company and duly qualified under the 1939 Act and, when
duly executed and delivered by the Company and the Trustee, will
constitute a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting enforcement of
creditors' rights generally and except as enforcement thereof is subject
to general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(x) Authorization of the Securities. The Securities have been duly
authorized and, at the Closing Time, will have been duly executed by the
Company and, when authenticated, issued and delivered in the manner
provided for in the Indenture and delivered against payment of the
purchase price therefor as provided in this Agreement, will constitute
valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as the enforcement thereof
may be limited by bankruptcy, insolvency (including, without limitation,
all laws relating to fraudulent transfers), reorganization, moratorium or
similar laws affecting enforcement of creditors' rights generally and
except as enforcement thereof is subject to general
5
<PAGE> 10
principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law), and will be in the form contemplated
by, and entitled to the benefits of, the Indenture.
(xi) Description of the Securities and the Indenture. The
Securities and the Indenture will conform in all material respects to the
respective statements relating thereto contained in the Prospectus and
will be in substantially the respective forms filed as exhibits to the
Registration Statement.
(xii) Absence of Defaults and Conflicts. Neither the Company nor
any of its subsidiaries is in violation of its charter or by-laws or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, lease or other agreement
or instrument to which the Company or any of its subsidiaries is a party
or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any subsidiary is subject
(collectively, "Agreements and Instruments") except for such defaults
that would not result in a Material Adverse Effect; and the execution,
delivery and performance of this Agreement, the Indenture and the
Securities and the consummation of the transactions contemplated herein
and in the Registration Statement (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities as
described in the Prospectus under the caption "Use of Proceeds") and
compliance by the Company with its obligations hereunder and under the
Indenture and the Securities have been duly authorized by all necessary
corporate action and do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with or constitute
a breach of, or default or Repayment Event (as defined below) under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any subsidiary pursuant to,
the Agreements and Instruments, nor will such action result in any
violation of the provisions of the charter or by-laws of the Company or
any subsidiary or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over
the Company or any subsidiary or any of their assets, properties or
operations. As used herein, a "Repayment Event" means any event or
condition which gives the holder of any note, debenture or other evidence
of indebtedness (or any person acting on such holder's behalf) the right
to require the repurchase, redemption or repayment of all or a portion of
such indebtedness by the Company or any subsidiary.
(xiii) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any subsidiary exists or, to the knowledge of
the Company, is imminent, and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its or any
subsidiary's principal suppliers, manufacturers, customers or
contractors, which, in either case, may reasonably be expected to result
in a Material Adverse Effect.
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<PAGE> 11
(xiv) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation, in each case before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to the
knowledge of the Company, threatened, against or affecting the Company or
any subsidiary, which is required to be disclosed in the Registration
Statement (other than as disclosed therein), or which, singly or in the
aggregate, might reasonably be expected to result in a Material Adverse
Effect, or which, singly or in the aggregate, might reasonably be
expected to materially and adversely affect the properties or assets
thereof or the consummation of the transactions contemplated in this
Agreement or the performance by the Company of its obligations hereunder
or under the Indenture or the Securities; the aggregate of all pending
legal or governmental proceedings to which the Company or any subsidiary
is a party or of which any of their respective property or assets is the
subject which are not described in the Registration Statement, including
ordinary routine litigation incidental to the business, could not
reasonably be expected to result in a Material Adverse Effect.
(xv) Accuracy of Exhibits. There are no contracts or documents
which are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits thereto which have not been so
described and filed as required.
(xvi) Possession of Intellectual Property. The Company and its
subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the
business now operated by them, and neither the Company nor any of its
subsidiaries has received any notice or is otherwise aware of any
infringement of or conflict with asserted rights of others with respect
to any Intellectual Property or of any facts or circumstances which would
render any Intellectual Property invalid or inadequate to protect the
interest of the Company or any of its subsidiaries therein, and which
infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, singly or in the
aggregate, would result in a Material Adverse Effect.
(xvii) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale
of the Securities hereunder or the consummation of the transactions
contemplated by this Agreement or for the due execution, delivery or
performance of the Indenture by the Company, except such as have been
already obtained or as may be required under the 1933 Act or the 1933 Act
Regulations or state securities laws and except for the qualification of
the Indenture under the 1939 Act.
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(xviii) Possession of Licenses and Permits. The Company and its
subsidiaries possess such permits, licenses, approvals, consents,
certificates and other authorizations (collectively, "Governmental
Licenses") issued by the appropriate federal, state, local or foreign
regulatory agencies or bodies necessary to conduct the business now
operated by them; the Company and its subsidiaries are in compliance with
the terms and conditions of all such Governmental Licenses, except where
the failure so to comply would not, singly or in the aggregate, have a
Material Adverse Effect; all of the Governmental Licenses are valid and
in full force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full force
and effect would not have a Material Adverse Effect; and neither the
Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would result in a Material
Adverse Effect.
(xix) Title to Property. The Company and its subsidiaries have good
and marketable title to all real property owned by the Company and its
subsidiaries and good title to all other properties owned by them, in
each case, free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind except such
as (a) are described in the Prospectus or (b) do not, singly or in the
aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by
the Company or any of its subsidiaries; and all of the leases and
subleases material to the business of the Company and its subsidiaries,
considered as one enterprise, and under which the Company or any of its
subsidiaries holds properties described in the Prospectus, are in full
force and effect, and neither the Company nor any subsidiary has any
notice of any material claim of any sort that has been asserted by anyone
adverse to the rights of the Company or any subsidiary under any of the
leases or subleases mentioned above, or affecting or questioning the
rights of the Company or such subsidiary to the continued possession of
the leased or subleased premises under any such lease or sublease.
(xx) Compliance with Cuba Act. The Company has complied with, and
is and will be in compliance with, the provisions of that certain Florida
act relating to disclosure of doing business with Cuba, codified as
Section 517.075 of the Florida statutes, and the rules and regulations
thereunder (collectively, the "Cuba Act") or is exempt therefrom.
(xxi) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus
will not be, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act").
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(xxii) Defaults on Senior Indebtedness. No event of default exists
under any contract, indenture, mortgage, loan agreement, note, lease or
other agreement or instrument constituting Senior Indebtedness (as
defined in the Indenture).
(xxiii) Stabilization or Manipulation. Neither the Company nor any
of its officers, directors or controlling persons has taken, directly or
indirectly, any action designed to cause or to result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company
to facilitate the sale of the Securities.
(xxiv) Related Party Transactions. No relationship, direct or
indirect, exists between or among any of the Company or any affiliate of
the Company, on the one hand, and any director, officer, stockholder,
customer or supplier of any of them, on the other hand, which is required
by the 1933 Act or by the rules and regulations enacted thereunder to be
described in the Registration Statement or the Prospectus which is not so
described or is not described as required.
(xxv) Environmental Laws. Except as described in the Registration
Statement and except as would not, singly or in the aggregate, result in
a Material Adverse Effect, (A) neither the Company nor any of its
subsidiaries is in violation of any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of common
law or any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree or judgment,
relating to pollution or protection of human health, the environment
(including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata) or wildlife, including, without
limitation, laws and regulations relating to the release or threatened
release of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum or petroleum products (collectively,
"Hazardous Materials") or to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Materials (collectively, "Environmental Laws"), (B) the Company and its
subsidiaries have all permits, licenses, authorizations and approvals
currently required for their respective businesses and for the businesses
contemplated to be conducted upon consummation of the offering of the
Securities under any applicable Environmental Laws and are each in
compliance with their requirements, (C) there are no pending or
threatened administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental Law
against the Company or any of its subsidiaries and (D) there are no
events, facts or circumstances that might reasonably be expected to form
the basis of any liability or obligation of the Company or any of its
subsidiaries, including, without limitation, any order, decree, plan or
agreement requiring clean-up or remediation, or any action, suit or
proceeding by any private party or governmental body or agency, against
or affecting the Company or any of its subsidiaries relating to any
Hazardous Materials or any Environmental Laws.
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(xxvi) Registration Rights. There are no holders of securities
(debt or equity) of the Company, or holders of rights (including, without
limitation, preemptive rights), warrants or options to obtain securities
of the Company, who in connection with the issuance, sale and delivery of
the Securities and the execution, delivery and performance of this
Agreement have the right to request the Company to register securities
held by them under the 1933 Act.
(xxvii) Accounting Controls. The Company and its subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that (A) transactions are executed in accordance
with management's general or specific authorization; (B) transactions
are recorded as necessary to permit preparation of financial statements
in conformity with generally accepted accounting principles and to
maintain accountability for assets; (C) access to assets is permitted
only in accordance with management's general or specific authorization;
and (D) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(b) Officer's Certificates. Any certificate signed by any officer of the
Company or any of its subsidiaries delivered to the Underwriters or to counsel
for the Underwriters shall be deemed a representation and warranty by the
Company to each Underwriter as to the matters covered thereby.
SECTION 2. SALE AND DELIVERY TO UNDERWRITERS; CLOSING.
(a) Securities. On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Company, at
the price set forth in Schedule B, the aggregate principal amount of Securities
set forth in Schedule A opposite the name of such Underwriter, plus any
additional principal amount of Securities which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 10 hereof.
(b) Payment. Payment of the purchase price for, and delivery of
certificates for, the Securities shall be made at the offices of Fried, Frank,
Harris, Shriver & Jacobson, One New York Plaza, New York, New York, or at such
other place as shall be agreed upon by the Representative and the Company, at
9:00 A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30
P.M. (Eastern time) on any given day) business day after the date hereof
(unless postponed in accordance with the provisions of Section 10), or such
other time not later than ten business days after such date as shall be agreed
upon by the Representative and the Company (such time and date of payment and
delivery being herein called the "Closing Time").
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery
to the respective accounts of the Underwriters of certificates for the
Securities to be purchased by them. It is understood that each
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<PAGE> 15
Underwriter has authorized the Representative, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Securities which it has agreed to purchase. Merrill Lynch, individually and
not as representative of the Underwriters, may (but shall not be obligated to)
make payment of the purchase price for the Securities to be purchased by any
Underwriter whose funds have not been received by the Closing Time, but such
payment shall not relieve such Underwriter from its obligations hereunder.
(c) Denominations; Registration. Certificates for the Securities shall be
in such denominations ($1,000 or integral multiples thereof) and registered in
such names as the Representative may request in writing at least one full
business day before the Closing Time. The Securities will be made available
for examination and packaging by the Representative in The City of New York not
later than 10:00 A.M. (Eastern time) on the business day prior to the Closing
Time.
SECTION 3. COVENANTS OF THE COMPANY. The Company covenants with each
Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b), will comply with the requirements of Rule
430A or Rule 434, as applicable, and will notify the Representative
immediately, and confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement shall become effective, or any
supplement to the Prospectus or any amended Prospectus shall have been filed,
(ii) of the receipt of any comments from the Commission, (iii) of any request
by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information, and
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, or of
the initiation or threatening of any proceedings for any of such purposes. The
Company will promptly effect the filings necessary pursuant to Rule 424(b) and
will take such steps as it deems necessary to ascertain promptly whether the
form of prospectus transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will promptly
file such prospectus. The Company will make every reasonable effort to prevent
the issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Representative notice
of its intention to file or prepare any amendment to the Registration Statement
(including any filing under Rule 462(b)), any Term Sheet or any amendment,
supplement or revision to either the prospectus included in the Registration
Statement at the time it became effective or to the Prospectus, will furnish
the Representative with copies of any such documents a reasonable amount of
time prior to such proposed filing or use, as the case may be, and will not
file or use any such document to which the Representative or counsel for the
Underwriters shall object.
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(c) Delivery of Registration Statements. The Company has furnished or
will deliver to the Representative and counsel for the Underwriters, without
charge, signed copies of the Registration Statement as originally filed and of
each amendment thereto (including exhibits filed therewith or incorporated by
reference therein) and signed copies of all consents and certificates of
experts, and will also deliver to the Representative, without charge, a
conformed copy of the Registration Statement as originally filed and of each
amendment thereto (without exhibits) for each of the Underwriters. The copies
of the Registration Statement and each amendment thereto furnished to the
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter reasonably requested, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each Underwriter, without charge, during the period when the
Prospectus is required to be delivered under the 1933 Act or the Securities
Exchange Act of 1934 ("the "1934 Act"), such number of copies of the Prospectus
(as amended or supplemented) as such Underwriter may reasonably request. The
Prospectus and any amendments or supplements thereto furnished to the
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations and the 1939 Act and the 1939
Act Regulations so as to permit the completion of the distribution of the
Securities as contemplated in this Agreement and in the Prospectus. If at any
time when a prospectus is required by the 1933 Act to be delivered in
connection with sales of the Securities, any event shall occur or condition
shall exist as a result of which it is necessary, in the opinion of counsel for
the Underwriters or for the Company, to amend the Registration Statement or
amend or supplement the Prospectus in order that the Prospectus will not
include any untrue statements of a material fact or omit to state a material
fact necessary in order to make the statements therein not misleading in the
light of the circumstances existing at the time it is delivered to a purchaser,
or if it shall be necessary, in the opinion of such counsel, at any such time
to amend the Registration Statement or amend or supplement the Prospectus in
order to comply with the requirements of the 1933 Act or the 1933 Act
Regulations, the Company will promptly prepare and file with the Commission,
subject to Section 3(b), such amendment or supplement as may be necessary to
correct such statement or omission or to make the Registration Statement or the
Prospectus comply with such requirements, and the Company will furnish to the
Underwriters such number of copies of such amendment or supplement as the
Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the Underwriters, to qualify the Securities for offering and
sale under the applicable securities laws of such states and other
jurisdictions as the Representative may designate and to maintain
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<PAGE> 17
such qualifications in effect for a period of not less than one year from the
later of the effective date of the Registration Statement and any Rule 462(b)
Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which
it is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not less
than one year from the effective date of the Registration Statement and any
Rule 462(b) Registration Statement. The Company will also supply the
Underwriters with such information as is necessary for the determination of the
legality of the Securities for investment under the laws of such jurisdictions
as the Underwriters may request.
(g) Rule 158. The Company will timely file such reports pursuant to the
1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received by it
from the sale of the Securities in the manner specified in the Prospectus under
"Use of Proceeds."
(i) Restriction on Sale of Securities. During a period of 90 days from
the date of the Prospectus, the Company will not, without the prior written
consent of Merrill Lynch, directly or indirectly, issue, sell, offer or
contract to sell, grant any option for the sale of, or otherwise transfer or
dispose of, any debt securities of the Company.
(j) Reporting Requirements. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will
file all documents required to be filed with the Commission pursuant to the
1934 Act within the time periods required by the 1934 Act and the rules and
regulations of the Commission thereunder.
(k) Interim Financial Statements. Prior to the Closing Time, the Company
shall furnish to the Underwriters copies of any unaudited interim financial
statements of the Company, promptly after they have been completed, for any
periods subsequent to the periods covered by the financial statements appearing
in the Registration Statement.
(l) Periodic Reports. For a period of five years after the Closing Time,
the Company will furnish to the Underwriters copies of all annual reports,
quarterly reports and current reports filed with the Commission on Forms 10-K,
10-Q and 8-K, or such other similar forms as may be designated by the
Commission, and such other documents, reports and information as shall be
furnished by the Company generally to the holders of the Securities or to
security holders of its publicly issued securities generally.
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SECTION 4. PAYMENT OF EXPENSES. (a) Expenses. The Company will pay all
expenses incident to the performance of its obligations under this Agreement,
including (i) the preparation, printing and filing of the Registration
Statement (including financial statements and exhibits) as originally filed and
of each amendment thereto, (ii) the preparation, printing and delivery to the
Underwriters of this Agreement, any Agreement among Underwriters, the Indenture
and such other documents as may be required in connection with the offering,
purchase, sale, issuance or delivery of the Securities, (iii) the preparation,
issuance and delivery of the certificates for the Securities to the
Underwriters, (iv) the fees and disbursements of the Company's counsel,
accountants and other advisors, (v) the qualification of the Securities under
securities laws in accordance with the provisions of Section 3(f) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the preparation
of the Blue Sky Survey and any supplement thereto, (vi) the printing and
delivery to the Underwriters of copies of each preliminary prospectus, any Term
Sheets and of the Prospectus and any amendments or supplements thereto, (vii)
the preparation, printing and delivery to the Underwriters of copies of the
Blue Sky Survey and any supplement thereto, (viii) the fees and expenses of the
Trustee, including the fees and disbursements of counsel for the Trustee in
connection with the Indenture and the Securities, (ix) any fees payable in
connection with the rating of the Securities, and (x) the filing fees incident
to, and the reasonable fees and disbursements of counsel to the Underwriters in
connection with, the review by the National Association of Securities Dealers,
Inc. (the "NASD") of the terms of the sale of the Securities.
(b) Termination of Agreement. If this Agreement is terminated by the
Representative in accordance with the provisions of Section 5 or Sections
9(a)(i) or (ii) hereof, the Company shall reimburse the Underwriters for all of
their out-of-pocket expenses, including the reasonable fees and disbursements
of counsel for the Underwriters.
SECTION 5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof or
in certificates of any officer of the Company or any subsidiary of the Company
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
(a) Effectiveness of Registration Statement. The Registration Statement,
including any Rule 462(b) Registration Statement, has become effective and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel to the Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A) or, if the Company has elected to
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<PAGE> 19
rely upon Rule 434, a Term Sheet shall have been filed with the Commission in
accordance with Rule 424(b).
(b) Opinion of Counsel for the Company. At Closing Time, the Underwriters
shall have received the favorable opinion, dated as of Closing Time, of
Armstrong, Teasdale, Schlafly & Davis, counsel for the Company, in form and
substance satisfactory to counsel for the Underwriters, together with signed or
reproduced copies of such letter for each of the other Underwriters to the
effect set forth in Exhibit A hereto and to such further effect as counsel to
the Underwriters may reasonably request.
(c) Opinion of Counsel for the Underwriters. At Closing Time, the
Underwriters shall have received the favorable opinion, dated as of Closing
Time, of Fried, Frank, Harris, Shriver & Jacobson, counsel for the
Underwriters, together with signed or reproduced copies of such letter for each
of the other Underwriters with respect to certain matters set forth in clauses
(i), (ii), (vi) through (xii), inclusive, and the penultimate paragraph of
Exhibit A hereto. In giving such opinion such counsel may rely, as to all
matters governed by the laws of jurisdictions other than the law of the State
of New York and the federal law of the United States and the General
Corporation Law of the State of Delaware, upon the opinions of counsel
satisfactory to the Representative. Such counsel may also state that, insofar
as such opinion involves factual matters, they have relied, to the extent they
deem proper, upon certificates of officers of the Company and its subsidiaries
and certificates of public officials.
(d) Officers' Certificate. At Closing Time, (i) there shall not have
been, since the respective dates as of which information is given in the
Prospectus, any material adverse change in the condition (financial or
otherwise), earnings, business affairs or business prospects of the Company and
its subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business; (ii) no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or are contemplated by the
Commission; (iii) the Company shall have complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or prior
to the Closing Time; and (iv) the representations and warranties of the
Company in Section 1 shall be accurate and true and correct as though expressly
made at and as of the Closing Time. At the Closing Time the Representative
shall have received a certificate of the Chief Executive Officer of the Company
and the chief financial or accounting officer of the Company, dated as of the
Closing Time, to such effect.
(e) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Underwriters shall have received from Price Waterhouse LLP a
letter dated such date, in form and substance satisfactory to the
Representative or to the counsel for the Representative, together with signed
or reproduced copies of such letter for each of the other Underwriters, in the
form of Exhibit B hereto, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus.
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<PAGE> 20
(f) Bring-down Comfort Letter. At Closing Time, the Underwriters shall
have received from Price Waterhouse LLP a letter, dated as of Closing Time, to
the effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (e) of this Section, except that the specified date
referred to shall be a date not more than three business days prior to Closing
Time.
(g) Maintenance of Rating. At Closing Time, the Securities shall be rated
at least by Moody's Investor's Service Inc. and by Standard & Poor's Ratings
Group, and the Company shall have delivered to the Representative a letter
dated the Closing Time, from each such rating agency, or other evidence
satisfactory to the Representative, confirming that the Securities have such
ratings; and since the date of this Agreement, there shall not have occurred a
downgrading in the rating assigned to the Securities or any of the Company's
other debt securities by any "nationally recognized statistical rating agency",
as that term is defined by the Commission for purposes of Rule 436(g)(2) under
the 1933 Act, and no such organization shall have publicly announced that it
has under surveillance or review its rating of the Securities or any of the
Company's other debt securities.
(h) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(i) Indenture. The Indenture shall have been duly executed and delivered
by the Company and the Trustee, the Securities shall have duly executed and
delivered by the Company and the Securities shall have been duly authenticated
by the Trustee.
(j) Chief Financial Officer's Certificate. At the Closing Time, the
Underwriters shall have received a certificate of the principal financial
officer of the Company as to certain agreed upon accounting matters.
(k) Additional Documents. At Closing Time, counsel for the Underwriters
shall have been furnished with such documents and opinions as they may require
for the purpose of enabling them to pass upon the issuance and sale of the
Securities as herein contemplated, or in order to evidence the accuracy of any
of the representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company in
connection with the issuance and sale of the Securities as herein contemplated
shall be satisfactory in form and substance to the Underwriters and counsel for
the Underwriters.
(l) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Representative by notice to the Company at
any time at or prior to Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section 4 and
except that Sections 1, 6, 7 and 8 shall survive any such termination and
remain in full force and effect.
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SECTION 6. INDEMNIFICATION.
(a) Indemnification of Underwriters. The Company agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), including the Rule 430A Information
and the Rule 434 Information, if applicable, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
any untrue statement or alleged untrue statement of a material fact
included in any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
6(d) below) any such settlement is effected with the written consent of
the Company; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement
or omission, to the extent that any such expense is not paid under (i) or
(ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).
(b) Indemnification of Company, Directors and Officers. Each Underwriter
severally agrees to indemnify and hold harmless the Company, its directors,
each of its officers who signed the Registration Statement, and each person, if
any, who controls the Company within the
17
<PAGE> 22
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any
and all loss, liability, claim, damage and expense described in the indemnity
contained in subsection (a) of this Section, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions,
made in the Registration Statement (or any amendment thereto), including the
Rule 430A Information and the Rule 434 Information, if applicable, or any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Company by such Underwriter through Merrill Lynch expressly for use in
the Registration Statement (or any amendment thereto) or such preliminary
prospectus or the Prospectus (or any amendment or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve
such indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section
6(a) above, counsel to the indemnified parties shall be selected by Merrill
Lynch, and, in the case of parties indemnified pursuant to Section 6(b) above,
counsel to the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of any
such action; provided, however, that counsel to the indemnifying party shall
not (except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
in respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are
actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from
all liability arising out of such litigation, investigation, proceeding or
claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such
18
<PAGE> 23
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement.
SECTION 7. CONTRIBUTION. If the indemnification provided for in Section 6
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other hand from the offering of the Securities
pursuant to this Agreement or (ii) if the allocation provided by clause (i) is
not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company on the one hand and of the Underwriters on
the other hand in connection with the statements or omissions which resulted in
such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Underwriters on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the Underwriters,
in each case as set forth on the cover of the Prospectus, or, if Rule 434 is
used, the corresponding location on the Term Sheet, bear to the aggregate
initial public offering price of the Securities as set forth on such cover.
The relative fault of the Company on the one hand and the Underwriters on
the other hand shall be determined by reference to, among other things, whether
any such untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
the Company or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 7. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 7 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged
untrue statement or omission or alleged omission.
19
<PAGE> 24
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter,
and each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
shall have the same rights to contribution as the Company. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the principal amount of Securities set forth opposite their
respective names in Schedule A hereto and not joint.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
All representations, warranties and agreements contained in this Agreement or
in certificates of officers of the Company or any of its subsidiaries submitted
pursuant hereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any Underwriter or
controlling person, or by or on behalf of the Company, and shall survive
delivery of the Securities to the Underwriters.
SECTION 9. TERMINATION OF AGREEMENT.
(a) Termination; General. The Representative may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time
(i) if there has been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the Prospectus, any
material adverse change in the condition (financial or otherwise), earnings,
business affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary course of
business, or (ii) if there shall have occurred a downgrading in the rating
assigned to the Securities or any of the Company's other debt securities by any
nationally recognized securities rating agency, or if such securities rating
agency shall have publicly announced that it has under surveillance or review,
with possible negative implications, its rating of the Securities or any of the
Company's other debt securities, or (iii) if there has occurred any material
adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or
economic conditions, in each case the effect of which is such as to make it, in
the judgment of the Representative, impracticable to market the Securities or
to enforce contracts for the sale of the Securities, or (iv) if trading in any
securities
20
<PAGE> 25
of the Company has been suspended or materially limited by the Commission or
the New York Stock Exchange, or if trading generally on the American Stock
Exchange or the New York Stock Exchange or in the NASDAQ National Market has
been suspended or materially limited, or minimum or maximum prices for trading
have been fixed, or maximum ranges for prices have been required, by any of
said exchanges or by such system or by order of the Commission, the National
Association of Securities Dealers, Inc. or any other governmental authority, or
(v) if a banking moratorium has been declared by either Federal or New York
authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that
Sections 1, 6, 7 and 8 shall survive such termination and remain in full force
and effect.
SECTION 10. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS. If one or more of
the Underwriters shall fail at Closing Time to purchase the Securities which it
or they are obligated to purchase under this Agreement (the "Defaulted
Securities"), the Representative shall have the right, but not the obligation,
within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all, but
not less than all, of the Defaulted Securities in such amounts as may be agreed
upon and upon the terms herein set forth; if, however, the Representative shall
not have completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
aggregate principal amount of the Securities to be purchased hereunder, each of
the non-defaulting Underwriters shall be obligated, severally and not jointly,
to purchase the full amount thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the aggregate
principal amount of the Securities to be purchased hereunder, this Agreement
shall terminate without liability on the part of any non-defaulting
Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement, either the Representative or the Company shall have the right
to postpone Closing Time for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements. As used herein, the term "Underwriter"
includes any person substituted for an Underwriter under this Section 10.
SECTION 11. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representative
21
<PAGE> 26
at North Tower, World Financial Center, New York, New York 10281-1201,
attention of Michael Senft, with a copy to Fried, Frank, Harris, Shriver &
Jacobson, One New York Plaza, New York, New York 10004, attention of Valerie
Ford Jacob, Esq.; and notices to the Company shall be directed to it at 2701
Spruce Street, Quincy, Illinois 62301, attention of Kent Hackamack, with a
copy to Armstrong, Teasdale, Schlafly & Davis, One Metropolitan Square, Suite
2600, St. Louis, Missouri 63102, attention of John L. Gillis, Jr., Esq.
SECTION 12. PARTIES. This Agreement shall each inure to the benefit of
and be binding upon the Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and 7
and their heirs and legal representative, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are
intended to be for the sole and exclusive benefit of the Underwriters and the
Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representative, and for the
benefit of no other person, firm or corporation. No purchaser of Securities
from any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. EFFECT OF HEADINGS. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
22
<PAGE> 27
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Underwriters and the Company in accordance with its
terms.
Very truly yours,
TITAN WHEEL INTERNATIONAL, INC.
By
-------------------------------
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
SMITH BARNEY INC.
SCHRODER WERTHEIM & CO.
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
-------------------------------------
Authorized Signatory
23
<PAGE> 28
SCHEDULE A
<TABLE>
<CAPTION>
Principal
Amount of
Name of Underwriter Securities
- -------------------- ------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................... $
Smith Barney Inc.....................
Schroder Wertheim & Co...............
Dean Witter Reynolds Inc.............
A.G. Edwards & Sons, Inc.............
------------
Total................................ $150,000,000
</TABLE>
<PAGE> 29
SCHEDULE B
TITAN WHEEL INTERNATIONAL, INC.
$150,000,000 Senior Subordinated Notes due 2007
1. The initial public offering price of the Securities shall be __% of the
principal amount thereof, plus accrued interest, if any, from the date of
issuance.
2. The purchase price to be paid by the Underwriters for the Securities
shall be __% of the principal amount thereof.
3. The interest rate on the Securities shall be __% per annum.
4. The interest payment dates of the Securities shall be __________ and
__________ of each year, commencing __________, 1997.
5. The Securities will be subject to redemption at any time on or after
__________, 2002, at the option of the Company, in whole or in part, at the
following redemption prices (expressed as percentages of the principal amount),
if redeemed during the 12-month period beginning __________ of the years
indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2002 %
2003 %
2004 %
</TABLE>
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the redemption date (subject to the
rights of holders of record on relevant record dates to receive interest due on
an interest payment date).
<PAGE> 30
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Illinois.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Purchase
Agreement, the Indenture and the Securities.
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each domestic jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectus in the column entitled "As Adjusted" under
the caption "Capitalization" (except for subsequent issuances, if any, pursuant
to reservations, agreements or employee benefit plans referred to in the
Prospectus or pursuant to the exercise of convertible securities or options
referred to in the Prospectus); the shares of issued and outstanding capital
stock of the Company have been duly authorized and validly issued and are fully
paid and non-assessable; and none of the outstanding shares of capital stock
of the Company was issued in violation of the preemptive or other similar
rights of any securityholder of the Company.
(v) Each Subsidiary has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus and is
duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital stock of each
Subsidiary has been duly authorized and validly issued, is fully paid and
non-assessable and, to the best of our knowledge, is owned by the Company,
directly or through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; none of the outstanding
shares of capital stock of any Subsidiary was issued in violation of the
preemptive or similar rights of any securityholder of such Subsidiary.
<PAGE> 31
(vi) The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
(vii) The Indenture has been duly authorized, executed and delivered by
the Company and (assuming the due authorization, execution and delivery thereof
by the Trustee) constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting enforcement of creditors' rights generally
and except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or
at law).
(viii) The Securities are in the form contemplated by the Indenture, have
been duly authorized by the Company and, assuming that the Securities have been
duly authenticated by the Trustee in the manner described in its certificate
delivered to you today (which fact such counsel need not determine by an
inspection of the Securities), the Securities have been duly executed, issued
and delivered by the Company and constitute valid and binding obligations of
the Company, enforceable against the Company in accordance with their terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting enforcement of creditors'
rights generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law), and will be entitled to the benefits of the
Indenture.
(ix) The Indenture has been duly qualified under the 1939 Act.
(x) The Securities and the Indenture conform as to legal matters in all
material respects to the descriptions thereof contained in the Prospectus.
(xi) The Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; any required filing
of the Prospectus pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); and, to the best of our
knowledge, no stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement has been issued under the
1933 Act and no proceedings for that purpose have been instituted or are
pending or threatened by the Commission.
(xii) The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information and the Rule 434 Information, as
applicable, the Prospectus and each amendment or supplement to the Registration
Statement and Prospectus as of their respective effective or issue dates (other
than the financial statements and supporting schedules included therein or
omitted therefrom, and the Trustee's Statement of Eligibility on Form T-1 (the
"Form T-1"), as to which we need express no opinion) complied as to form in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations.
A-2
<PAGE> 32
(xiii) If Rule 434 has been relied upon, the Prospectus was not
"materially different," as such term is used in Rule 434, from the prospectus
included in the Registration Statement at the time it became effective.
(xiv) To the best of our knowledge, there is not pending or threatened any
action, suit, proceeding, inquiry or investigation, to which the Company or any
subsidiary is a party, or to which the property of the Company or any
subsidiary is subject, before or brought by any court or governmental agency or
body, domestic or foreign, which might reasonably be expected to result in a
Material Adverse Effect, or which might reasonably be expected to materially
and adversely affect the properties or assets thereof or the consummation of
the transactions contemplated in the Purchase Agreement or the performance by
the Company of its obligations thereunder or under the Indenture or the
Securities.
(xv) The information in the Prospectus under "Business--Litigation" and
"Description of the Notes", and in the Registration Statement under Item 14, to
the extent that it constitutes matters of law, summaries of legal matters, the
Company's charter and bylaws or legal proceedings, or legal conclusions, has
been reviewed by us and is correct in all material respects.
(xvi) To the best of our knowledge, there are no statutes or regulations
that are required to be described in the Prospectus that are not described as
required.
(xvii) All descriptions in the Registration Statement of contracts and
other documents to which the Company or its subsidiaries are a party are
accurate in all material respects; to the best of our knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed as exhibits thereto, and the descriptions thereof
or references thereto are correct in all material respects.
(xviii) To the best of our knowledge, neither the Company nor any
subsidiary is in violation of its charter or by-laws and no default by the
Company or any subsidiary exists in the due performance or observance of any
material obligation, agreement, covenant or condition contained in any material
contract, indenture, mortgage, loan agreement, note, lease or other agreement
or instrument.
(xix) No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority
or agency, domestic or foreign (other than under the 1933 Act and the 1933 Act
Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states and except for the
qualification of the Indenture under the 1939 Act, as to which we need express
no opinion) is necessary or required in connection with the due authorization,
execution and delivery of the Purchase Agreement or the due execution, delivery
or performance of the Indenture or for the offering, issuances, sale or
delivery of the Securities and the consummation of the transactions
contemplated in the Purchase Agreement and in the Registration Statement
(including the
A-3
<PAGE> 33
issuance and sale of the Securities and the use of the proceeds from the
sale of the Securities as described in the Prospectus under the caption "Use Of
Proceeds").
(xx) The execution, delivery and performance of the Purchase Agreement,
the Indenture and the Securities and the consummation of the transactions
contemplated in the Purchase Agreement and in the Registration Statement
(including the issuance and sale of the Securities and the use of the proceeds
from the sale of the Securities as described in the Prospectus under the
caption "Use Of Proceeds") and compliance by the Company with its obligations
under the Purchase Agreement, the Indenture and the Securities have been duly
authorized by all necessary corporate actions and do not and will not, whether
with or without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or default or a Repayment Event (as defined below)
under or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any subsidiary
pursuant to any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or any other agreement or instrument, known to us, to
which the Company or any subsidiary is a party or by which it or any of them
may be bound, or to which any of the property or assets of the Company or any
subsidiary is subject (except for such conflicts, breaches or defaults or
liens, charges or encumbrances that would not have a Material Adverse Effect)
nor will such action result in any violation of the provisions of the charter
or by-laws of the Company or any subsidiary, or any applicable law, statute,
rule, regulation, judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any subsidiary or any of their assets or properties. As used
herein, a "Repayment Event" means any event or condition which gives the holder
of any note, debenture or other evidence of indebtedness (or any person acting
on such holder's behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Company or any of its
subsidiaries.
(xxi) To the best of our knowledge, there are no persons with registration
rights or other similar rights to have any securities registered pursuant to
the Registration Statement or otherwise registered by the Company under the
1933 Act.
(xxii) The Company is not an "investment company" as such term is defined
in the 1940 Act.
Nothing has come to our attention that would lead us to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable), (except for financial
statements and schedules and other financial data included therein or omitted
therefrom and the Form T-1, as to which we need make no statement), at the time
such Registration Statement or any such amendment became effective, contained
an untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or that the Prospectus or any amendment or supplement thereto
(except for financial statements and schedules and other financial data and
statistical data derived from financial data and schedules included therein or
omitted therefrom and the Form T-1, as to which we need make no statement), at
the time the Prospectus was issued, at the time any such amended or
supplemented prospectus was issued or
A-4
<PAGE> 34
at the Closing Time, included or includes an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
In rendering such opinion, such counsel may rely, as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials. Such
opinion shall not state that it is to be governed or qualified by, or that it
is otherwise subject to, any treatise, written policy or other document
relating to legal opinions, including, without limitation, the Legal Opinion
Accord of the ABA Section of Business Law (1991).
A-5
<PAGE> 35
Exhibit B
FORM OF ACCOUNTANTS' COMFORT LETTER PURSUANT TO SECTION 5(e)
1. We are independent public accountants with respect to the Company
within the meaning of the Securities Act of 1933, as amended (the "1933
Act") and the applicable published rules and regulations thereunder (the
"1933 Act Regulations").
2. In our opinion, the audited financial statements and the related
financial statement schedules included in the Registration Statement and
the Prospectus comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the 1933 Act
Regulations.
3. On the basis of procedures (but not an examination in accordance
with generally accepted auditing standards) consisting of a reading of
the unaudited interim consolidated financial statements of the Company
for the nine month periods ended September 30, 1996 and September 30,
1995 included in the Registration Statement and the Prospectus
(collectively, the "nine-month financials"), a reading of the latest
available interim consolidated financial statements of the Company, a
reading of the minutes of all meetings of the stockholders and board of
directors and committees of the board of directors of the Company and its
subsidiaries since Janury 1, 1996, inquiries of certain officials of the
Company and its subsidiaries responsible for financial and accounting
matters, a review of the nine-month financials in accordance with
standards established by the American Institute of Certified Public
Accountants in Statement on Auditing Standards No. 71, Interim Financial
Information ("SAS 71"), and such other inquiries and procedures as may be
specified in such letter, nothing came to our attention that caused us to
believe that:
(A) the nine-month financials included in the Registration
Statement and the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of
the 1933 Act and the 1933 Act Regulations applicable to unaudited
interim financial statements included in registration statements or
any material modifications should be made to the nine-month
financials included in the Registration Statement and the
Prospectus for them to be in conformity with generally accepted
accounting principles;
(B) At February 28, 1997 and at a specified date not more
than five days prior to the date of this Agreement, there was any
change in the capital stock of the Company and its subsidiaries or
any decrease in the total assets, total current assets or
stockholders' equity of the Company and its subsidiaries on a
consolidated basis or any increase in the long term debt of the
Company and its subsidiaries on a consolidated basis, in each case
as compared with amounts shown in the latest balance sheet included
in the Registration Statement, except in
<PAGE> 36
each case for changes, decreases or increases that the Registration
Statement discloses have occurred or may occur; or
(C) For the period from October 1, 1996 February 28, 1997 and
for the period from October 1, 1996 to a specified date not more
than five days prior to the date of this Agreement, there was any
decrease in net sales, income from operations, income before income
taxes or net income, in each case as compared with the comparable
period in the preceding year, except in each case for any decreases
that the Registration Statement discloses have occurred or may
occur.
4. Based upon the procedures set forth in clause 3 above and a
reading of the Selected Financial Data included in the Registration
Statement and a reading of the financial statements from which such data
were derived, nothing came to our attention that caused us to believe
that the Selected Financial Data included in the Registration Statement
do not comply as to form in all material respects with the disclosure
requirements of Item 301 of Regulation S-K of the 1933 Act, that the
amounts included in the Selected Financial Data are not in agreement with
the corresponding amounts in the audited consolidated financial
statements for the respective periods or that the financial statements
not included in the Registration Statement from which certain of such
data were derived are not in conformity with generally accepted
accounting principles;
5. We have compared the information in the Registration Statement
under selected captions with the disclosure requirements of Regulation
S-K of the 1933 Act and on the basis of limited procedures specified
herein, nothing came to our attention that caused us to believe that this
information does not comply as to form in all material respects with the
disclosure requirements of Items 302 and 503(d), respectively, of
Regulation S-K;
6. In addition to the procedures referred to in clause 3 above, we
have performed other procedures, not constituting an audit, with respect
to certain amounts, percentages, numerical data and financial information
appearing in the Registration Statement, which are specified herein, and
have compared certain of such items with, and have found such items to be
in agreement with, the accounting and financial records of the Company.
B-2
<PAGE> 1
Draft 3/4/97
TITAN WHEEL INTERNATIONAL, INC., AS ISSUER,
AND
THE FIRST NATIONAL BANK OF CHICAGO, AS TRUSTEE
_________
INDENTURE
DATED AS OF _____________, 1997
_________
$150,000,000
___% SENIOR SUBORDINATED NOTES DUE 2007
<PAGE> 2
Reconciliation and tie between Trust Indenture Act of 1939,
as amended, and Indenture, dated as of _____________, 1997
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- ---------------- -----------
<S> <C>
Section 310 (a)(1) .............................. 609
(a)(2) .............................. 609
(b) ................................. 607, 610
Section 311 (a) ................................. 613
Section 312 (a) ................................. 701
(c) ................................. 702
Section 313 (a) ................................. 703
(c) ................................. 703, 704
Section 314 (a) ................................. 704
(a)(4) .............................. 1018
(c)(1) .............................. 103
(c)(2) .............................. 103
(e) ................................. 103
Section 315 (a) ................................. 601(b)
(b) ................................. 602
(c) ................................. 601(a)
(d) ................................. 601(c), 603
(e) ................................. 514
Section 316 (a)(last sentence) .................. 101 ("Outstanding")
(a)(1)(A) ........................... 502, 512
(a)(1)(B) ........................... 513
(b) ................................. 508
(c) ................................. 105
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 this Indenture.
<PAGE> 3
TABLE OF CONTENTS
PAGE
PARTIES................................................... 1
RECITALS.................................................. 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions................................. 1
"Acquired Indebtedness"..................... 2
"Affiliate"................................. 2
"Asset Sale"................................ 2
"Average Life to Stated Maturity"........... 3
"Bank Credit Facility"...................... 3
"Bankruptcy Law"............................ 3
"Banks"..................................... 3
"Board of Directors"........................ 3
"Board Resolution".......................... 3
"Book-Entry Security"....................... 3
"Business Day".............................. 4
"Capital Lease Obligation".................. 4
"Capital Stock"............................. 4
"Change of Control"......................... 4
"Code"...................................... 5
"Commission"................................ 5
"Commodity Price Protection Agreement"...... 5
"Common Stock".............................. 5
"Company"................................... 5
"Company Request" or "Company Order"........ 5
"Consolidated Fixed Charge Coverage Ratio".. 5
"Consolidated Income Tax Expense"........... 6
"Consolidated Interest Expense"............. 6
"Consolidated Net Income (Loss)"............ 7
"Consolidated Net Tangible Assets".......... 7
:Consolidated Net Worth".................... 7
"Consolidated Non-cash Charges"............. 7
"Consolidation"............................. 8
"Corporate Trust Office".................... 8
"Currency Hedging Arrangements"............. 8
(i)
<PAGE> 4
PAGE
"Default"................................... 8
"Depositary"................................ 8
"Designated Senior Indebtedness"............ 8
"Disinterested Director".................... 8
"Equity Dutch Auction"...................... 8
"Event of Default".......................... 9
"Exchange Act".............................. 9
"Fair Market Value"......................... 9
"Generally Accepted Accounting Principles"
or "GAAP"................................ 9
"Global Securities"......................... 9
"Guarantee"................................. 9
"Guaranteed Debt"........................... 9
"Guarantor"................................. 9
"Holder".................................... 10
"Indebtedness".............................. 10
"Indenture"................................. 10
"Indenture Obligations"..................... 11
"Interest Payment Date"..................... 11
"Interest Rate Agreements".................. 11
"Investment"................................ 11
"Issue Date"................................ 12
"Lien"...................................... 12
"Maturity".................................. 12
"Moody's"................................... 12
"Net Cash Proceeds"......................... 12
"Officers' Certificate"..................... 13
"Opinion of Counsel"........................ 13
"Opinion of Independent Counsel"............ 13
"Outstanding"............................... 13
"Pari Passu Indebtedness"................... 14
"Paying Agent".............................. 14
"Permitted Agreement"....................... 14
"Permitted Holders"......................... 14
"Permitted Indebtedness".................... 15
"Permitted Investment"...................... 17
"Permitted Venture"......................... 18
"Person".................................... 18
"Predecessor Security"...................... 18
"Preferred Stock"........................... 18
"Purchase Money Obligation"................. 18
"Qualified Capital Stock"................... 19
(ii)
<PAGE> 5
PAGE
"Redeemable Capital Stock"................. 19
"Redemption Date".......................... 19
"Redemption Price"......................... 19
"Regular Record Date"...................... 19
"Responsible Officer"...................... 19
"Restricted Subsidiary".................... 19
"Sale and Leaseback Transaction"........... 19
"S&P"...................................... 20
"Securities Act"........................... 20
"Senior Guarantor Indebtedness"............ 20
"Senior Indebtedness"...................... 20
"Senior Representative".................... 20
"Special Record Date"...................... 21
"Stated Maturity".......................... 21
"Subordinated Indebtedness"................ 21
"Subsidiary"............................... 21
"Temporary Cash Investments"............... 21
"Trustee".................................. 22
"Trust Indenture Act"...................... 22
"Unrestricted Subsidiary".................. 22
"Unrestricted Subsidiary Indebtedness"..... 23
"Voting Stock"............................. 23
"Wholly Owned Subsidiary".................. 23
Section 102. Other Definitions.......................... 23
Section 103. Compliance Certificates and Opinions....... 24
Section 104. Form of Documents Delivered to Trustee..... 25
Section 105. Acts of Holders. 26
Section 106. Notices, etc., to the Trustee, the Company
and any Guarantor....................... 28
Section 107. Notice to Holders; Waiver.................. 28
Section 108. Conflict with Trust Indenture Act.......... 29
Section 109. Effect of Headings and Table of Contents... 29
Section 110. Successors and Assigns..................... 29
Section 111. Separability Clause........................ 29
Section 112. Benefits of Indenture...................... 29
Section 113. GOVERNING LAW.............................. 29
Section 114. Legal Holidays............................. 30
Section 115. Independence of Covenants.................. 30
Section 116. Schedules and Exhibits..................... 30
Section 117. Counterparts............................... 30
(iii)
<PAGE> 6
PAGE
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally....................................... 30
Section 202. Form of Face of Security.............................. 31
Section 203. Form of Reverse of Securities......................... 34
Section 204. Form of Trustee's Certificate of Authentication....... 38
Section 205. Form of Option of Holder to Elect Purchase............ 38
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms....................................... 40
Section 302. Denominations......................................... 41
Section 303. Execution, Authentication, Delivery and Dating........ 41
Section 304. Temporary Securities.................................. 42
Section 305. Registration, Registration of Transfer and Exchange... 43
Section 306. Book-Entry Provisions for U.S. Global Security........ 44
Section 307. Mutilated, Destroyed, Lost and Stolen Securities...... 45
Section 308. Payment of Interest; Interest Rights Preserved........ 46
Section 309. CUSIP Numbers......................................... 48
Section 310. Persons Deemed Owners................................. 48
Section 311. Cancellation.......................................... 48
Section 312. Computation of Interest............................... 49
ARTICLE FOUR
DEFEASANCE AND COVENANT DEFEASANCE
Section 401. Company's Option to Effect Defeasance or Covenant
Defeasance......................................... 49
Section 402. Defeasance and Discharge.............................. 49
Section 403. Covenant Defeasance................................... 50
Section 404. Conditions to Defeasance or Covenant Defeasance....... 50
Section 405. Deposited Money and U.S. Government
Obligations to Be Held in Trust;
Other Miscellaneous Provisions..................... 53
Section 406. Reinstatement......................................... 53
(iv)
<PAGE> 7
PAGE
ARTICLE FIVE
REMEDIES
Section 501. Events of Default.................................... 54
Section 502. Acceleration of Maturity; Rescission and
Annulment.......................................... 56
Section 503. Collection of Indebtedness and Suits for
Enforcement by Trustee............................. 57
Section 504. Trustee May File Proofs of Claim..................... 58
Section 505. Trustee May Enforce Claims without
Possession of Securities........................... 59
Section 506. Application of Money Collected....................... 59
Section 507. Limitation on Suits.................................. 60
Section 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest.................... 61
Section 509. Restoration of Rights and Remedies................... 61
Section 510. Rights and Remedies Cumulative....................... 61
Section 511. Delay or Omission Not Waiver......................... 61
Section 512. Control by Holders................................... 62
Section 513. Waiver of Past Defaults.............................. 62
Section 514. Undertaking for Costs................................ 62
Section 515. Waiver of Stay, Extension or Usury Laws.............. 63
Section 516. Remedies Subject to Applicable Law................... 63
ARTICLE SIX
THE TRUSTEE
Section 601. Duties of Trustee.................................... 63
Section 602. Notice of Defaults................................... 65
Section 603. Certain Rights of Trustee............................ 65
Section 604. Trustee Not Responsible for Recitals, Dispositions
of Securities or Application of Proceeds Thereof... 67
Section 605. Trustee and Agents May Hold Securities;
Collections; etc................................... 67
Section 606. Money Held in Trust.................................. 67
Section 607. Compensation and Indemnification of Trustee and
Its Prior Claim.................................... 68
Section 608. Conflicting Interests................................ 68
Section 609. Trustee Eligibility.................................. 68
Section 610. Resignation and Removal; Appointment of
Successor Trustee.................................. 69
Section 611. Acceptance of Appointment by Successor............... 71
(v)
<PAGE> 8
PAGE
Section 612. Merger, Conversion, Consolidation or Succession
to Business................................................. 71
Section 613. Preferential Collection of Claims Against
Company..................................................... 72
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses of
Holders..................................................... 72
Section 702. Disclosure of Names and Addresses of Holders.................. 73
Section 703. Reports by Trustee............................................ 73
Section 704. Reports by Company............................................ 73
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 801. Company and Guarantors May Consolidate, etc.,
Only on Certain Terms....................................... 74
Section 802. Successor Substituted......................................... 77
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Agreements without Consent
of Holders................................................. 78
Section 902. Supplemental Indentures and Agreements with Consent of
Holders.................................................... 79
Section 903. Execution of Supplemental Indentures and Agreements........... 80
Section 904. Effect of Supplemental Indentures............................. 81
Section 905. Conformity with Trust Indenture Act........................... 81
Section 906. Reference in Securities to Supplemental Indentures............ 81
Section 907. Notice of Supplemental Indentures............................. 81
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium and Interest................... 82
Section 1002. Maintenance of Office or Agency.............................. 82
Section 1003. Money for Security Payments to Be Held in Trust.............. 82
(vi)
<PAGE> 9
PAGE
Section 1004. Corporate Existence.................................... 84
Section 1005. Payment of Taxes and Other Claims...................... 84
Section 1006. Maintenance of Properties.............................. 85
Section 1007. Insurance.............................................. 85
Section 1008. Limitation on Indebtedness............................. 85
Section 1009. Limitation on Restricted Payments...................... 86
Section 1010. Limitation on Transactions with Affiliates............. 91
Section 1011. Limitation on Liens.................................... 91
Section 1012. Limitation on Sale of Assets........................... 92
Section 1013. Limitation on Issuances of Guarantees of Indebtedness.. 97
Section 1014. Limitation on Senior Subordinated Indebtedness......... 97
Section 1015. Purchase of Securities upon a Change of Control........ 98
Section 1016. Limitation on Restricted Subsidiary Capital Stock...... 101
Section 1017. Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries.............................. 102
Section 1018. Limitations on Unrestricted Subsidiaries............... 102
Section 1019. Provision of Financial Statements...................... 103
Section 1020. Statement by Officers as to Default.................... 103
Section 1021. Waiver of Certain Covenants............................ 104
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Rights of Redemption................................... 104
Section 1102. Applicability of Article............................... 105
Section 1103. Election to Redeem; Notice to Trustee.................. 105
Section 1104. Selection by Trustee of Securities to Be Redeemed...... 105
Section 1105. Notice of Redemption................................... 105
Section 1106. Deposit of Redemption Price............................ 106
Section 1107. Securities Payable on Redemption Date.................. 107
Section 1108. Securities Redeemed or Purchased in Part............... 107
ARTICLE TWELVE
SATISFACTION AND DISCHARGE
Section 1201. Satisfaction and Discharge of Indenture................ 108
Section 1202. Application of Trust Money............................. 109
(vii)
<PAGE> 10
PAGE
ARTICLE THIRTEEN
SUBORDINATION OF SECURITIES
Section 1301. Securities Subordinate to Senior Indebtedness.............. 109
Section 1302. Payment Over of Proceeds Upon Dissolution, etc............. 110
Section 1303. Suspension of Payment When Designated Senior
Indebtedness in Default................................. 111
Section 1304. Payment Permitted if No Default............................ 113
Section 1305. Subrogation to Rights of Holders of Senior Indebtedness.... 113
Section 1306. Provisions Solely to Define Relative Rights................ 113
Section 1307. Trustee to Effectuate Subordination........................ 114
Section 1308. No Waiver of Subordination Provisions...................... 114
Section 1309. Notice to Trustee.......................................... 115
Section 1310. Reliance on Judicial Orders or Certificates................ 116
Section 1311. Rights of Trustee as a Holder of Senior I
Indebtedness; Preservation of Trustee's Rights........... 116
Section 1312. Article Applicable to Paying Agents........................ 116
Section 1313. No Suspension of Remedies.................................. 117
Section 1314. Trustee's Relation to Senior Indebtedness.................. 117
TESTIMONIUM
SIGNATURES AND SEALS...................................................... 118
ACKNOWLEDGMENTS
SCHEDULE I Existing Indebtedness
SCHEDULE II Existing Dividend Restrictions
EXHIBIT A Form of Intercompany Note
(viii)
<PAGE> 11
INDENTURE, dated as of_____________, 1997, between Titan Wheel
International, Inc., an Illinois corporation (the "Company"), and The First
National Bank of Chicago, as trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of ___% Senior
Subordinated Notes due 2007 (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 and the Securities;
This Indenture is subject to, and shall be governed by, the provisions of
the Trust Indenture Act that are required to be part of and to govern
indentures qualified under the Trust Indenture Act;
All acts and things necessary have been done to make the Securities, when
duly issued and executed by the Company and authenticated and delivered
hereunder, the valid obligations of the Company and this Indenture a valid
agreement of the Company and each of the Guarantors in accordance with the
terms of this Indenture;
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:
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;
<PAGE> 12
(c) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP;
(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;
(e) all references to $, US$, dollars or United States dollars shall refer
to the lawful currency of the United States of America; and
(f) all references herein to particular Sections or Articles refer to this
Indenture unless otherwise so indicated.
Certain terms used principally in Article Four are defined in Article
Four.
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Restricted Subsidiary or (ii) assumed in connection
with the acquisition of assets from such Person, in each case, 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.
Acquired Indebtedness shall be deemed to be incurred on the date of the related
acquisition of assets from any Person or the date the acquired Person becomes a
Restricted Subsidiary, as the case may be.
"Affiliate" means, with respect to any specified Person: (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person; (ii) any other Person that
owns, directly or indirectly, 5% or more of such specified Person's Capital
Stock or any officer or director of any such specified Person or other Person
or, with respect to any natural Person, any person having a relationship with
such Person by blood, marriage or adoption not more remote than first cousin;
or (iii) any other Person 5% or more of the Voting Stock of which is
beneficially owned or held directly or indirectly by such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
other disposition (including, without limitation, by way of merger,
consolidation or sale and leaseback transaction) (collectively, a "transfer"),
directly or indirectly, in one or a series of related transactions, of: (i)
any Capital Stock of any Restricted Subsidiary; (ii) all or substantially all
of the properties and assets of any division or line of business of the Company
or its Restricted Subsidiaries; or (iii) any other properties or assets of the
2
<PAGE> 13
Company or any Restricted Subsidiary other than in the ordinary course of
business. For the purposes of this definition, the term "Asset Sale" shall not
include any transfer of properties and assets (A) that is governed by the
provisions described in Article Eight hereof, (B) that is by the Company to any
Guarantor, or by any Restricted Subsidiary to the Company or any Wholly Owned
Restricted Subsidiary in accordance with the terms of this Indenture, (C) that
is of obsolete equipment in the ordinary course of business or (D) the Fair
Market Value of which in the aggregate does not exceed $1,000,000 in any
transaction or series of related transactions.
"Average Life to Stated Maturity" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years from the date of determination to
the date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal payment by
(ii) the sum of all such principal payments.
"Bank Credit Facility" means the Multicurrency Credit Agreement, dated as
of September 19, 1996, among the Company, the Banks Party Thereto, and Harris
Trust and Savings Bank, as Agent, as such agreement, in whole or in part, may
be amended, renewed, extended, substituted, refinanced, restructured, replaced,
supplemented or otherwise modified from time to time (including, without
limitation, any successive renewals, extensions, substitutions, refinancings,
restructurings, replacements, supplementations or other modifications of the
foregoing.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as
amended, or any similar United States federal or state law relating to
bankruptcy, insolvency, receivership, winding up, liquidation, reorganization
or relief of debtors or any amendment to, succession to or change in any such
law.
"Banks" means the lenders under the Bank Credit Facility.
"Board of Directors" means the board of directors of the Company or any
Guarantor, as the case may be, or any duly authorized committee of such board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company or any Guarantor, as the case may be,
to have been duly adopted by the Board of Directors and to be in full force and
effect on the date of such certification, and delivered to the Trustee.
"Book-Entry Security" means any Securities bearing the legend specified in
Section 202 evidencing all or part of a series of Securities, authenticated and
delivered to the Depositary for such series or its nominee, and registered in
the name of such Depositary or nominee.
3
<PAGE> 14
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions or trust companies in The City
of New York or the city in which the Corporate Trust Office of the Trustee is
located are authorized or obligated by law, regulation or executive order to
close.
"Capital Lease Obligation" of any Person means any obligation of such
Person and its Subsidiaries on a Consolidated basis under any capital lease of
real or personal property which, in accordance with GAAP, has been recorded as
a capitalized lease obligation.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock or other equity interests whether now outstanding or issued after
the date of this Indenture.
"Change of Control" means the occurrence of any of the following events:
(i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have beneficial ownership of all shares
that such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 35% 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 election to such board or whose nomination for election by the
stockholders 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 in Section 1009 hereof (and
such amount shall be treated as a Restricted Payment subject to the provisions
in the Indenture described in Section 1009 hereof and (B) no "person" or
"group," other than
4
<PAGE> 15
Permitted Holders, owns immediately after such transaction, directly or
indirectly, more than 35% 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 in Article Eight hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"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.
"Commodity Price Protection Agreement" means any forward contract,
commodity swap, commodity option or other similar financial agreement or
arrangement relating to, or the value which is dependent upon, fluctuations in
commodity prices.
"Common Stock" means the common stock, no par value per share, of the
Company.
"Company" means Titan Wheel International, Inc., a corporation
incorporated under the laws of Illinois, 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 by any one of its Chairman of the Board, its
President, its Chief Executive Officer, its Chief Financial Officer or a Vice
President (regardless of Vice Presidential designation), and by any one of its
Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and
delivered to the Trustee.
"Consolidated Fixed Charge Coverage Ratio" of any Person means, for any
period, the ratio of (a) the sum of Consolidated Net Income (Loss),
Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated
Non-cash Charges deducted in computing Consolidated Net Income (Loss) in each
case, for such period, of such Person and its Restricted Subsidiaries on a
Consolidated basis, all determined in accordance with GAAP to (b) the sum of
Consolidated Interest Expense for such period and cash and non-cash dividends
paid on any Preferred Stock and Redeemable Capital Stock of such Person during
such period in each case after giving pro forma effect to (i) the incurrence of
the Indebtedness giving rise to the need to make such calculation and (if
applicable) the application of the net proceeds therefrom, including to
refinance other
5
<PAGE> 16
Indebtedness, as if such Indebtedness was incurred, and the application of such
proceeds occurred, on the first day of such period; (ii) the incurrence,
repayment or retirement of any other Indebtedness by the Company and its
Restricted Subsidiaries since the first day of such period as if such
Indebtedness was incurred, repaid or retired at the beginning of such period
(except that, in making such computation, the amount of Indebtedness under any
revolving credit facility shall be computed based upon the average daily
balance of such Indebtedness during such period); (iii) in the case of Acquired
Indebtedness or any acquisition occurring at the time of the incurrence of such
Indebtedness, the related acquisition, assuming such acquisition had been
consummated on the first day of such period; and (iv) any acquisition or
disposition by the Company and its Restricted Subsidiaries of any company or
any business or any assets out of the ordinary course of business, whether by
merger, stock purchase or sale or asset purchase or sale, or any related
repayment of Indebtedness, in each case since the first day of such applicable
period, assuming such acquisition or disposition had been consummated on the
first day of such period; provided that (i) in making such computation, the
Consolidated Interest Expense attributable to interest on any Indebtedness
computed on a pro forma basis and (A) bearing a floating interest rate shall be
computed as if the rate in effect on the date of computation had been the
applicable rate for the entire period and (B) which was not outstanding during
the period for which the computation is being made but which bears, at the
option of such Person, a fixed or floating rate of interest, shall be computed
by applying at the option of such Person either the fixed or floating rate and
(ii) in making such computation, the Consolidated Interest Expense of such
Person attributable to interest on any Indebtedness under a revolving credit
facility computed on a pro forma basis shall be computed based upon the average
daily balance of such Indebtedness during the applicable period.
"Consolidated Income Tax Expense" of any Person means, for any period, the
provision for federal, state, local and foreign income taxes of such Person and
its Consolidated Restricted Subsidiaries for such period as determined in
accordance with GAAP.
"Consolidated Interest Expense" of any Person means, without duplication,
for any period, the sum of (a) the interest expense of such Person and its
Restricted Subsidiaries for such period, on a Consolidated basis, including,
without limitation, (i) amortization of debt discount, (ii) the net costs
associated with Interest Rate Agreements, Currency Hedging Arrangements and
Commodity Price Protection Agreements (including amortization of discounts),
(iii) the interest portion of any deferred payment obligation and (iv) accrued
interest, plus (b) (i) the interest component of the Capital Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by such Person and its
Restricted Subsidiaries during such period and (ii) all capitalized interest of
such Person and its Restricted Subsidiaries plus (c) the interest expense under
any
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<PAGE> 17
Guaranteed Debt of such Person and any Restricted Subsidiary to the extent not
included under clause (a)(iv) above, in each case as determined on a
Consolidated basis in accordance with GAAP.
"Consolidated Net Income (Loss)" of any Person means, for any period, the
Consolidated net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a Consolidated basis as determined in
accordance with GAAP, adjusted, to the extent included in calculating such net
income (or loss), by excluding, without duplication, (i) all extraordinary
gains or losses (less all fees and expenses relating thereto), (ii) the portion
of net income (or loss) of such Person and its Restricted Subsidiaries on a
Consolidated basis 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 Consolidated Restricted Subsidiaries, (iii) net
income (or loss) of any Person combined with such Person or any of its
Restricted Subsidiaries on a "pooling of interests" basis attributable to any
period prior to the date of combination, (iv) any gain or loss, net of taxes,
realized upon the termination of any employee pension benefit plan, (v) net
gains (or losses) (less all fees and expenses relating thereto) in respect of
dispositions of assets other than in the ordinary course of business, (vi) the
net income of any Restricted Subsidiary to the extent that the declaration 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 regulation applicable to that Subsidiary or its
stockholders, (vii) any restoration to income of any contingency reserve,
except to the extent provision for such reserve was made out of income accrued
at any time following the date of this Indenture, or (viii) any gain arising
from the acquisition of any securities, or the extinguishment, under GAAP, of
any Indebtedness of such Person.
"Consolidated Net Tangible Assets" of any Person means, as of any date,
(a) all amounts that would be shown as assets on a Consolidated balance sheet
of such Person and its Subsidiaries prepared in accordance with GAAP, less (b)
the amount thereof constituting goodwill and other intangible assets as
calculated in accordance with GAAP.
"Consolidated Net Worth" of any Person, as of a date, means the
Consolidated stockholders' equity (excluding Redeemable Capital Stock) of such
Person and its Restricted Subsidiaries, as of such date, as determined in
accordance with GAAP.
"Consolidated Non-cash Charges" of any Person means, for any period, the
aggregate depreciation, amortization and other non-cash charges of such Person
and its subsidiaries on a Consolidated basis for such period, as determined in
accordance with
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<PAGE> 18
GAAP (excluding any non-cash charge which requires an accrual or reserve for
cash charges for any future period).
"Consolidation" means, with respect to any Person, the consolidation of
the accounts of such Person and each of its subsidiaries if and to the extent
the accounts of such Person and each of its subsidiaries would normally be
consolidated with those of such Person, all in accordance with GAAP. The term
"Consolidated" shall have a similar meaning.
"Corporate Trust Office" means the office of the Trustee or an affiliate
or agent thereof at which at any particular time the corporate trust business
for the purposes of this Indenture shall be principally administered, which
office at the date of execution of this Indenture is located at The First
National Bank of Chicago, c/o First Chicago Trust Company of New York, 14 Wall
Street, 8th Floor, Window 2, New York, New York 10019.
"Currency Hedging Arrangements" means one or more of the following
agreements which shall be entered into by one or more financial institutions:
foreign exchange contracts, currency swap agreements or other similar
agreements or arrangements designed to protect against the fluctuations in
currency values.
"Default" means any event which is, or after notice or passage of any time
or both would be, an Event of Default.
"Depositary" means, with respect to the Securities issued in the form of
one or more Book-Entry Securities, The Depository Trust Company ("DTC"), its
nominees and successors, or another Person designated as Depositary by the
Company, which must be a clearing agency registered under the Exchange Act.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness under,
or in respect of, the Bank Credit Facility, and (ii) any other Senior
Indebtedness which at the time of determination, has an aggregate principal
amount outstanding of at least $25 million and is specifically designated in
the instrument evidencing such Senior Indebtedness or the agreement under which
such Senior Indebtedness arises as "Designated Senior Indebtedness" by the
Company.
"Disinterested Director" means, with respect to any transaction or series
of related transactions, a member of the Board of Directors of the Company who
does not have any material direct or indirect financial interest in or with
respect to such transaction or series of related transactions.
"Equity Dutch Auction" shall mean the tender offer of the Company, dated
February 25, 1997, to purchase up to 5 million shares of Common Stock on the
terms described therein, as such tender offer may be supplemented or amended.
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<PAGE> 19
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing
buyer under no compulsion to buy. Fair Market Value shall be determined by the
Board of Directors of the Company acting in good faith and shall be evidenced
by a resolution of the Board of Directors of the Company.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied,
which are in effect on the date of this Indenture.
"Global Securities" means a security evidencing all or a part of the
Securities to be issued as Book-Entry Securities issued to the Depositary in
accordance with Section 306.
"Guarantee" means the guarantee by any Guarantor of the Company's
Indenture Obligations.
"Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person referred to in the definition of Indebtedness
below guaranteed directly or indirectly in any manner by such Person, or in
effect guaranteed directly or indirectly by such Person through an agreement
(i) to pay or purchase such Indebtedness or to advance or supply funds for the
payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as
lessee or lessor) property, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such Indebtedness or to
assure the holder of such Indebtedness against loss, (iii) to supply funds to,
or in any other manner invest in, the debtor (including any agreement to pay
for property or services without requiring that such property be received or
such services be rendered), (iv) to maintain working capital or equity capital
of the debtor, or otherwise to maintain the net worth, solvency or other
financial condition of the debtor or (v) otherwise to assure a creditor against
loss; provided that the term "guarantee" shall not include endorsements for
collection or deposit, in either case in the ordinary course of business.
"Guarantor" means any Restricted Subsidiary which is a guarantor of the
Securities, including any Person that is required after the date of the
Indenture to execute a guarantee of the Securities pursuant to Section 1011 or
Section 1013 hereof until a
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<PAGE> 20
successor replaces such party pursuant to the applicable provisions of this
Indenture and, thereafter, shall mean such successor.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness 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 arising 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 issued under letter of credit facilities,
acceptance facilities or other similar facilities, (ii) all obligations of such
Person evidenced by bonds, notes, debentures or other similar instruments,
(iii) 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 payables arising in the ordinary course of business, (iv)
all obligations under Interest Rate Agreements, Currency Hedging Arrangements
or Commodity Price Protection Agreements of such Person, (v) all Capital Lease
Obligations of such Person, (vi) all Indebtedness referred to in clauses (i)
through (v) above 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 or with respect to 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, (vii) all Guaranteed
Debt of such Person, (viii) all Redeemable Capital Stock issued by such Person
valued at the greater of its voluntary or involuntary maximum fixed repurchase
price plus accrued and unpaid dividends, and (ix) any amendment, supplement,
modification, deferral, renewal, extension, refunding or refinancing of any
liability of the types referred to in clauses (i) through (viii) above. For
purposes hereof, 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 this Indenture, and if such price is
based upon, or measured by, the Fair Market Value of such Redeemable Capital
Stock, such Fair Market Value to be determined in good faith by the Board of
Directors of the issuer of such Redeemable Capital Stock.
"Indenture" means this instrument as originally executed (including all
exhibits and schedules thereto) and as it may from time to time be supplemented
or
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<PAGE> 21
amended by one or more indentures supplemental hereto entered into pursuant to
the applicable provisions hereof.
"Indenture Obligations" means the obligations of the Company and any other
obligor under this Indenture or under the Securities including any Guarantor,
to pay principal of, premium, if any, and interest when due and payable, and
all other amounts due or to become due under or in connection with this
Indenture, the Securities and the performance of all other obligations to the
Trustee and the holders under this Indenture and the Securities, according to
the respective terms thereof.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Rate Agreements" means one or more of the following agreements
which shall be entered into by one or more financial institutions: interest
rate protection agreements (including, without limitation, interest rate swaps,
caps, floors, collars and similar agreements) and/or other types of interest
rate hedging agreements from time to time.
"Investment" means, with respect to any Person, directly or indirectly,
any advance, loan (including guarantees), or other extension of credit 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, acquisition or ownership by such Person of any
Capital Stock, bonds, notes, debentures or other securities issued or owned by
any other Person and all other items that would be classified as investments on
a balance sheet prepared in accordance with GAAP, and shall include (i) the
designation of a Restricted Subsidiary as an Unrestricted Subsidiary and (ii)
the Fair Market Value of the Capital Stock (or any other Investment), held by
the Company or any of its Restricted Subsidiaries, of (or in) any Person that
has ceased to be a Restricted Subsidiary. For purposes of the definition of
"Unrestricted Subsidiary" and the "Limitation on Restricted Payments" covenant,
(i) "Investment" shall include the Fair Market Value of the assets (net of
liabilities (other than the liabilities to the Company or any of its
Restricted Subsidiaries)) of any Restricted Subsidiary at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary, (ii) the Fair
Market Value of the assets (net of liabilities (other than liabilities to the
Company or any of its Restricted Subsidiaries)) of any Unrestricted Subsidiary
at the time that such Unrestricted Subsidiary is designated a Restricted
Subsidiary shall be considered a reduction in outstanding Investments and (iii)
any property transferred to or from an Unrestricted Subsidiary shall be valued
at its Fair Market Value at the time of such transfer.
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<PAGE> 22
"Issue Date" means the date on which the Securities are originally issued
under this Indenture.
"Lien" means any mortgage or deed of trust, charge, pledge, lien
(statutory or otherwise), privilege, security interest, assignment, deposit,
arrangement, easement, hypothecation, claim, preference, priority or other
encumbrance upon or with respect to any property of any kind (including any
conditional sale, capital lease or other title retention agreement, any leases
in the nature thereof, and any agreement to give any security interest), real
or personal, movable or immovable, now owned or hereafter acquired.
"Maturity" means, when used with respect to the Securities, the date on
which the principal of the Securities becomes due and payable as therein
provided or as provided in this Indenture, whether at Stated Maturity, the
Offer Date or the Redemption Date and whether by declaration of acceleration,
Offer in respect of Excess Proceeds, Change of Control Offer in respect of a
Change of Control, call for redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc. or any successor rating
agency.
"Net Cash Proceeds" means (a) with respect to any Asset Sale by any
Person, the proceeds thereof (without duplication in respect of all Asset
Sales) in the form of cash or Temporary Cash Investments including payments in
respect of deferred payment obligations when received in the form of, or stock
or other assets when disposed of for, cash or Temporary Cash Investments
(except to the extent that such obligations are financed or sold with recourse
to the Company or any Restricted Subsidiary) net of (i) brokerage commissions
and other reasonable fees and expenses (including fees and expenses of counsel
and investment bankers) related to such Asset Sale, (ii) provisions for all
taxes payable as a result of such Asset Sale, (iii) payments made to retire
Indebtedness where payment of such Indebtedness is secured by the assets or
properties the subject of such Asset Sale, (iv) amounts required to be paid to
any Person (other than the Company or any Restricted Subsidiary) owning a
beneficial interest in the assets subject to the Asset Sale and (v) appropriate
amounts to be provided by the Company or any Restricted Subsidiary, as the case
may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any Restricted
Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as reflected in an officers'
certificate delivered to the Trustee and (b) with respect to any issuance or
sale of Capital Stock or options, warrants or rights to purchase Capital
12
<PAGE> 23
Stock, or debt securities or Capital Stock that have been converted into or
exchanged for Capital Stock as referred to in Section 1009 hereof, the proceeds
of such issuance or sale in the form of cash or Temporary Cash Investments
including payments in respect of deferred payment obligations when received in
the form of, or stock or other assets when disposed of for, cash or Temporary
Cash Investments (except to the extent that such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary), net of
attorney's fees, accountant's fees and brokerage, consultation, underwriting
and other fees and expenses actually incurred in connection with such issuance
or sale and net of taxes paid or payable as a result thereof.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, the President, the Chief Executive Officer, or a Vice President
(regardless of Vice Presidential designation), and by the Chief Financial
Officer, Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company or any Guarantor, as the case may be, and delivered
to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, any Guarantor or the Trustee, unless an Opinion of
Independent Counsel is required pursuant to the terms of this Indenture, and
who shall be acceptable to the Trustee.
"Opinion of Independent Counsel" means a written opinion of counsel, who
may be regular outside counsel for the Company, but which is issued by a Person
who is not an employee or consultant (other than non-employee legal counsel) of
the Company, or any Guarantor and who shall be reasonably acceptable to the
Trustee.
"Outstanding" when used with respect to Securities means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(a) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Securities, or portions thereof, for whose payment or redemption 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; provided that if such Securities are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor reasonably satisfactory to the Trustee has been
made;
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<PAGE> 24
(c) Securities, except to the extent provided in Sections 402 and 403,
with respect to which the Company has effected defeasance or covenant
defeasance as provided in Article Four; and
(d) 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 and the Company proof reasonably satisfactory to each of them 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,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company, any Guarantor, or any other obligor upon the Securities or any
Affiliate of the Company, any Guarantor 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, authorization, direction, notice, consent 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 reasonable satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company, any Guarantor or any other obligor upon the Securities or
any Affiliate of the Company, any Guarantor or such other obligor.
"Pari Passu Indebtedness" means (a) any Indebtedness of the Company that
is pari passu in right of payment to the Securities and (b) with respect to any
Guarantee, Indebtedness which ranks pari passu in right of payment to such
Guarantee.
"Paying Agent" means any Person (including the Company) authorized by the
Company to pay the principal of, premium, if any, or interest on, any
Securities on behalf of the Company.
"Permitted Agreement" means any written agreement between a Permitted
Venture, on the one hand, and the Company or any Restricted Subsidiary, on the
other hand, pursuant to which the Company sells products produced by the
Company in the ordinary course of its business at a purchase price not less
than the Company's cost.
"Permitted Holders" means (a) Maurice M. Taylor, Jr., (b) trusts for the
benefit of Mr. Taylor or for the benefit of Mr. Taylor's spouse and children or
trusts for the benefit of any such trust, (c) entities controlled by Mr.
Taylor, (d) in the event of the death or incapacity of Taylor, his estate (and
executors, administrators, committees or
14
<PAGE> 25
other personal representatives), heirs or testamentary legatees and (e)
MascoTech, Inc. and any of its subsidiaries and any successors of MascoTech,
Inc. and such subsidiaries.
"Permitted Indebtedness" means:
(i) Indebtedness outstanding at any time incurred pursuant to the Bank
Credit Facility in an aggregate principal amount not to exceed an amount equal
to the greater of (A) $250 million, less any amount of Indebtedness permanently
repaid and (B) the sum of (x) 90% of the consolidated book value of the
accounts receivable of the Company and its Restricted Subsidiaries plus (y) 60%
of the consolidated book value of the inventory of the Company and its
Restricted Subsidiaries, in each case determined in accordance with GAAP;
(ii) Indebtedness of the Company pursuant to the Securities and
Indebtedness of any Guarantor pursuant to a Guarantee of the Securities;
(iii) Indebtedness of the Company or any Restricted Subsidiary outstanding
on the date of this Indenture and listed on Schedule I hereto;
(iv) Indebtedness of the Company owing to a Restricted Subsidiary;
provided that any Indebtedness of the Company owing to a Restricted Subsidiary
is made pursuant to an intercompany note in the form attached to this Indenture
and is subordinated in right of payment from and after such time as the
Securities shall become due and payable (whether at Stated Maturity,
acceleration or otherwise) to the payment and performance of the Company's
obligations under the Securities; provided, further, that any disposition,
pledge or transfer of any such Indebtedness to a Person (other than a
disposition, pledge or transfer to a Restricted Subsidiary) shall be deemed to
be an incurrence of such Indebtedness by the Company not permitted by this
clause (iv);
(v) Indebtedness of a Wholly Owned Restricted Subsidiary owing to the
Company or another Wholly Owned Restricted Subsidiary; provided that any such
Indebtedness is made pursuant to an intercompany note in the form attached to
this Indenture; provided, further, that (a) any disposition, pledge or transfer
of any such Indebtedness to a Person shall be deemed to be an incurrence of
such Indebtedness by the obligor not permitted by this clause (v), (other than
the Company or any wholly-owned subsidiary) and (b) any transaction pursuant to
which any Wholly Owned Restricted Subsidiary, which has Indebtedness owing to
the Company or any other Wholly Owned Restricted Subsidiary, ceases to be a
Wholly Owned Restricted Subsidiary shall be deemed to be the incurrence of
Indebtedness by such Wholly Owned Restricted Subsidiary that is not permitted
by this clause (v);
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<PAGE> 26
(vi) guarantees of any Restricted Subsidiary made in accordance with the
provisions of Section 1013 hereof;
(vii) obligations of the Company entered into in the ordinary course of
business (a) pursuant to Interest Rate Agreements designed to protect the
Company or any Restricted Subsidiary against fluctuations in interest rates in
respect of Indebtedness of the Company or any Restricted Subsidiary as long as
such obligations do not exceed the aggregate principal amount of such
Indebtedness then outstanding, (b) under any Currency Hedging Arrangements,
which if related to Indebtedness do not increase the amount of such
Indebtedness other than as a result of foreign exchange fluctuations, or (c)
under any Commodity Price Protection Agreements, which if related to
Indebtedness do not increase the amount of such Indebtedness other than as a
result of foreign exchange fluctuations;
(viii) Indebtedness of the Company and its Restricted Subsidiaries
represented by Capital Lease Obligations or Purchase Money Obligations or other
Indebtedness incurred or assumed in connection with the acquisition or
development of real or personal, movable or immovable, property in each case
incurred for the purpose of financing or refinancing all or any part of the
purchase price or cost of construction or improvement of property used in the
business of the Company, in an aggregate principal amount pursuant to this
clause (viii) not to exceed $20 million outstanding at any time; provided that
the principal amount of any Indebtedness permitted under this clause (viii) did
not in each case at the time of incurrence exceed the Fair Market Value, as
determined by the Company in good faith, of the acquired or constructed asset
or improvement so financed;
(ix) Indebtedness arising from agreements providing for indemnification,
adjustment of purchase price or similar obligations, or from guarantees or
letters of credit, surety bonds or performance bonds securing any obligation of
the Company or any of its Restricted Subsidiaries pursuant to such agreements,
in any case incurred in connection with the disposition of any business, assets
or Restricted Subsidiary of the Company (other than guarantees of Indebtedness
incurred by any Person acquiring all or any portion of such business, assets or
Restricted Subsidiary of the Company for the purpose of financing such
acquisition), in a principal amount not to exceed the actual proceeds actually
received by the Company or any Restricted Subsidiary in connection with such
disposition;
(x) any renewals, extensions, substitutions, refundings, refinancings or
replacements (collectively, a "refinancing") of any Indebtedness described in
clauses (ii) and (iii) of this definition of "Permitted Indebtedness,"
including any successive refinancings so long as the borrower under such
refinancing is the Company or, if not the
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<PAGE> 27
Company, the same as the borrower of the Indebtedness being refinanced and the
aggregate principal amount of Indebtedness represented thereby is not increased
by such refinancing plus the lesser of (I) the stated amount of any premium or
other payment required to be paid in connection with such a refinancing
pursuant to the terms of the Indebtedness being refinanced or (II) the amount
of premium or other payment actually paid at such time to refinance the
Indebtedness, plus, in either case, the amount of expenses of the Company
incurred in connection with such refinancing and (A) in the case of any
refinancing of Indebtedness that is Subordinated Indebtedness, such new
Indebtedness is made subordinated to the Securities at least to the same extent
as the Indebtedness being refinanced and (B) in the case of Pari Passu
Indebtedness or Subordinated Indebtedness, as the case may be, such refinancing
does not reduce the Average Life to Stated Maturity or the Stated Maturity of
such Indebtedness; and
(xi) Indebtedness of the Company and its Subsidiaries in addition to that
described in clauses (i) through (x) above, and any renewals, extensions,
substitutions, refinancings or replacements of such Indebtedness, so long as
the aggregate principal amount of all such Indebtedness shall not exceed $20
million outstanding at any one time in the aggregate.
"Permitted Investment" means (i) Investments in any Restricted Subsidiary
or any Person which, as a result of such Investment, (a) becomes a Restricted
Subsidiary or (b) is merged or consolidated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, the Company
or any Restricted Subsidiary, provided, in the case of both (a) and (b), that
such Person's primary business is related, ancillary or complementary to the
businesses of the Company and its Restricted Subsidiaries on the date of such
Investment; (ii) Indebtedness of the Company or a Restricted Subsidiary
described under clauses (iv), (v) and (vi) of the definition of "Permitted
Indebtedness;" (iii) Investments in any of the Securities; (iv) Temporary Cash
Investments; (v) Investments acquired by the Company or any Restricted
Subsidiary in connection with an Asset Sale permitted under Section 1012 to the
extent such Investments are non-cash proceeds as permitted by such Section; (vi)
Investments in existence on the date of this Indenture; (vii) guarantees of
Indebtedness of a Wholly Owned Restricted Subsidiary given by the Company or
another Wholly Owned Restricted Subsidiary and guarantees of Indebtedness of
the Company given by any Restricted Subsidiary, in each case, in accordance
with the terms of this Indenture; (viii) Investments in a Permitted Venture in
an aggregate amount measured at the time of Investment not to exceed at any one
time outstanding 20% of Consolidated Net Tangible Assets of the Company at or
prior to June 30, 1999 and 15% of Consolidated Net Tangible Assets of the
Company on July 1, 1999 and thereafter, in each case as of the end of the last
fiscal quarter; and (ix) Investments in an aggregate amount not to exceed
$20 million at any one time outstanding, of which up to $10 million may consist
of Capital Stock of the Company. In connection with any
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assets or property contributed or transferred to any Person as an Investment,
such property and assets shall be equal to the Fair Market Value (as determined
by the Company's Board of Directors) at the time of Investment.
"Permitted Venture" means any entity (i) in which the Company or any
Restricted Subsidiary owns Capital Stock, (ii) which is not a Restricted
Subsidiary and in which no other Affiliate of the Company (other than a
Restricted Subsidiary) has an Investment and (iii) which operates in the
business of the Company or its Restricted Subsidiaries existing on the date of
this Indenture or in businesses reasonably related thereto.
"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.
"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 mutiliated
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 Capital Stock of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over the
Capital Stock of any other class in such Person.
"Purchase Money Obligation" means any Indebtedness secured by a Lien on
assets related to the business of the Company and any additions and accessions
thereto, which are purchased by at any time after the Securities are issued;
provided that (i) the security agreement or condition sales or other title
retention contract pursuant to which the Lien on such assets is created
(collectively a "Purchase Money Security Agreement") shall be entered into
within 90 days after the purchase or substantial completion of the construction
of such assets and shall at all times be confined solely to the assets so
purchased or acquired, any additions and accessions thereto and any proceeds
therefrom, (ii) at no time shall the aggregate principal amount of the
outstanding Indebtedness secured thereby be increased, except in connection
with the purchase of additions and accession thereto and except in respect of
fees and other obligations in respect of such Indebtedness and (iii) (A) the
aggregate outstanding principal amount of Indebtedness secured thereby
(determined on a per asset basis is the case of any additions
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<PAGE> 29
and accessions) shall not at the time such Purchase Money Security Agreement in
entered into exceed 100% of the purchase price to the Company of the assets
subject thereto or (B) the Indebtedness secured thereby shall be with recourse
solely to the assets so purchased or acquired, any additions and accessions
thereto and any proceeds therefrom.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any Capital Stock that, either by its
terms or by the terms of any security into which it is convertible or
exchangeable 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
principal of the Securities or is redeemable at the option of the holder
thereof at any time prior to any such Stated Maturity, or is convertible into
or exchangeable for debt securities at any time prior to any such Stated
Maturity at the option of the holder thereof.
"Redemption Date" when used with respect to any Security to be redeemed
pursuant to any provision in this Indenture means the date fixed for such
redemption by or pursuant to this Indenture.
"Redemption Price" when used with respect to any Security to be redeemed
pursuant to any provision in this Indenture means the price at which it is to
be redeemed pursuant to this Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the _______ 15 or _______ 15 (whether or not a Business Day) next
preceding such Interest Payment Date.
"Responsible Officer" when used with respect to the Trustee means any
officer assigned to the Corporate Trust Office or any agent of the Trustee
appointed hereunder, including any vice president, assistant vice president,
assistant secretary, or any other officer or assistant officer of the Trustee
or any agent of the Trustee appointed hereunder to whom any corporate trust
matter is referred because of his or her knowledge of and familiarity with the
particular subject.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any transaction or series of
related transactions pursuant to which the Company or a Subsidiary sells or
transfers any property or asset in connection with the leasing, or the resale
against installment payments, of such property or asset to the seller or
transferor.
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"S&P" means Standard & Poor's Rating Group, a division of McGraw Hill,
Inc. or any successor rating agency.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute.
"Senior Guarantor Indebtedness" means Indebtedness of a Guarantor which
secures or guarantees any Senior Indebtedness.
"Senior Indebtedness" means the principal of, premium, if any, and
interest (including interest accruing after the filing of a petition initiating
any proceeding under any state, federal or foreign bankruptcy law whether or
not allowable as a claim in such proceeding) and all other monetary obligations
on, any Indebtedness of the Company (other than as otherwise provided in this
definition), whether outstanding on the date of this Indenture or thereafter
created, incurred or assumed, and whether at any time owing, actually or
contingently, 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 include the principal of, and premium,
if any, and interest (including interest accruing after the filing of a
petition initiating any proceedings under any state, federal or foreign
bankruptcy laws whether or not allowable as a claim in such proceeding), and
all other monetary obligations of every kind and nature of the Company from
time to time owed to the lenders under the Bank Credit Facility; provided,
however, that any Indebtedness under any refinancing, refunding or replacement
of the Bank Credit Facility shall not constitute Senior Indebtedness to the
extent the Indebtedness thereunder is by its express terms subordinate to any
other Indebtedness of the Company. Notwithstanding the foregoing, "Senior
Indebtedness" shall not include (i) Indebtedness evidenced by the Securities,
(ii) Indebtedness that is by its terms subordinate or junior in right of
payment to any Indebtedness of the Company, (iii) Indebtedness which, when
incurred and without respect to any election under Section 1111(b) of Title 11
United States Code, is without recourse to the Company, (iv) Indebtedness which
is represented by Redeemable Capital Stock, (v) any liability for foreign,
federal, state, local or other tax owed or owing by the Company to the extent
such liability constitutes Indebtedness, (vi) Indebtedness of the Company to a
Subsidiary or any other Affiliate of the Company or any of such Affiliate's
subsidiaries and (vii) that portion of any Indebtedness which at the time of
issuance is issued in violation of the Indenture.
"Senior Representative" means the agent, indenture trustee or other
trustee or representative for any Senior Indebtedness.
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"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 308.
"Stated Maturity" means, when used with respect to any Indebtedness or any
installment of interest thereon, the dates specified in such Indebtedness as
the fixed date on which the principal of such Indebtedness or such installment
of interest, as the case may be, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Guarantor subordinated in right of payment to the Securities or the Guarantee
of such Guarantor, as the case may be.
"Subsidiary" means any Person, a majority of the equity ownership or the
Voting Stock of which is at the time owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries; provided that any Unrestricted Subsidiary shall not be
deemed a Subsidiary under the Securities.
"Temporary Cash Investments" means (i) any evidence of Indebtedness,
maturing not more than one year after the date of acquisition, issued by the
United States of America, or an instrumentality or agency thereof, and
guaranteed fully as to principal, premium, if any, and interest by the United
States of America, (ii) any certificate of deposit (or, with respect to
non-U.S. banking institutions, similar instruments) maturing not more than one
year after the date of acquisition, issued by, or time deposit of, a commercial
banking institution that is a member of the Federal Reserve System or a
commercial banking institution organized and located in a country recognized by
the United States of America, in each case, that has combined capital and
surplus and undivided profits of not less than $500 million (or the foreign
currency equivalent thereof), whose debt has a rating, at the time as of which
any investment therein is made, of "P-1" (or higher) according to Moody's
Investors Service, Inc. ("Moody's") or any successor rating agency or "A-1" (or
higher) according to Standard & Poor's Rating Group, a division of McGraw Hill,
Inc. ("S&P"), or any successor rating agency, (iii) commercial paper, maturing
not more than one year after the date of acquisition, issued by a corporation
(other than an Affiliate or Subsidiary of the Company) organized and existing
under the laws of the United States of America with a rating, at the time as of
which any investment therein is made, of "P-1" (or higher) according to Moody's
or "A-1" (or higher) according to S&P and (iv) any money market deposit
accounts issued or offered by a domestic commercial bank or a commercial
banking institution organized and located in a country recognized by the United
States of America, in each case having capital and surplus in excess of $500
million (or the foreign currency equivalent thereof); provided that the short
term debt of such commercial bank has a rating, at the time of
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<PAGE> 32
Investment, of "P-1" (or higher) according to Moody's or "A-1" (or higher)
according to S&P.
"Trustee" means, except as set forth in Section 405, 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.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended,
or any successor statute.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be an Unrestricted Subsidiary (as designated by
the Board of Directors of the Company, as provided below) and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the
Company may designate any Subsidiary of the Company (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary if all of
the following conditions apply: (a) neither the Company nor any of its
Subsidiaries provides credit support for Indebtedness of such Subsidiary
(including any undertaking, agreement or instrument evidencing such
Indebtedness), (b) such Subsidiary is not liable, directly or indirectly, with
respect to any Indebtedness other than Unrestricted Subsidiary Indebtedness,
(c) any Investment in such Subsidiary made as a result of designating such
Subsidiary an Unrestricted Subsidiary shall not violate the provisions of
Section 1018 and such Unrestricted Subsidiary is not party to any agreement,
contract, arrangement or understanding at such time with the Company or any
Subsidiary of the Company other than a Permitted Agreement unless the terms of
any such agreement, contract, arrangement or understanding are no less
favorable to the Company or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of the Company or, in
the event such condition is not satisfied, the value of such agreement,
contract, arrangement or understanding to such Subsidiary shall be deemed a
Restricted Investment; and (d) such Unrestricted Subsidiary does not own any
Capital Stock in any Subsidiary of the Company which is not simultaneously
being designated an Unrestricted Subsidiary. Any such designation by the Board
of Directors of the Company shall be evidenced to the Trustee by filing with
the Trustee a Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complies with the
foregoing conditions and shall be deemed a Restricted Payment on the date of
designation in an amount equal to the greater of (1) the net book value of such
Investment or (2) the Fair Market Value of such Investment as determined in
good faith by the Company's Board of Directors. The Board of Directors of the
Company may designate any Unrestricted Subsidiary as a Restricted Subsidiary;
provided that (i) immediately after giving effect to such designation, the
Company could incur $1.00 of additional Indebtedness (other than
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Permitted Indebtedness) pursuant to the restrictions in Section 1008 and (ii)
all Indebtedness of such Subsidiary shall be deemed to be incurred on the date
such Subsidiary becomes a Subsidiary.
"Unrestricted Subsidiary Indebtedness" of any Unrestricted Subsidiary
means Indebtedness of such Unrestricted Subsidiary (i) as to which neither the
Company nor any Subsidiary is directly or indirectly liable (by virtue of the
Company or any such Subsidiary being the primary obligor on, guarantor of, or
otherwise liable in any respect to, such Indebtedness), except Guaranteed Debt
of the Company or any Subsidiary to any Affiliate, in which case (unless the
incurrence of such Guaranteed Debt resulted in a Restricted Payment at the time
of incurrence) the Company shall be deemed to have made a Restricted Payment
equal to the principal amount of any such Indebtedness to the extent guaranteed
at the time such Affiliate is designated an Unrestricted Subsidiary and (ii)
which, upon the occurrence of a default with respect thereto, does not result
in, or permit any holder of any Indebtedness of the Company or any Restricted
Subsidiary to declare, a default on such Indebtedness of the Company or any
Restricted Subsidiary or cause the payment thereof to be accelerated or payable
prior to its Stated Maturity.
"Voting Stock" means Capital Stock of the class or classes 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 a corporation (irrespective of whether or not at the time
Capital Stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of
which is owned by the Company or another Wholly Owned Subsidiary.
Section 102. Other Definitions.
Term Defined in Section
---- -------------------
"Act" 105
"Agent Members" 306
"Change of Control Offer" 1015
"Change of Control Purchase Date" 1015
"Change of Control Purchase Notice" 1015
"Change of Control Purchase Price" 1015
"covenant defeasance" 403
"Defaulted Interest" 308
"defeasance" 402
"Defeasance Redemption Date" 404
"Defeased Securities" 401
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"Excess Proceeds" 1012
"incur" 1008
"Initial Period" 1303
"Non-payment Default" 1303
"Offer" 1012
"Offer Date" 1012
"Offered Price" 1012
"Pari Passu Debt Amount" 1012
"Pari Passu Offer" 1012
"Payment Blockage Period" 1303
"Payment Default" 1303
"Permitted Junior Securities" 1302
"Permitted Payment" 1009
"Purchase Money Security Agreement" 101
"refinancing" 1009
"Required Filing Date" 1019
"Restricted Payments" 1009
"Securities" Recitals
"Security Amount" 1012
"Security Register" 305
"Security Registrar" 305
"Special Payment Date" 308
"Surviving Entity" 801
"Surviving Guarantor Entity" 801
"Global Security" 201
"U.S. Government Obligations" 404
Section 103. 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 and any Guarantor (if
applicable) and any other obligor on the Securities (if applicable) shall
furnish to the Trustee an Officers' Certificate in a form and substance
reasonably acceptable to the Trustee stating that all conditions precedent, if
any, provided for in this Indenture (including any covenant compliance with
which constitutes a condition precedent) relating to the proposed action have
been complied with, and an Opinion of Counsel in a form and substance
reasonably acceptable to the Trustee 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 certificates or opinions is specifically required by any provision of
this Indenture relating
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to such particular application or request, no additional certificate or opinion
need be furnished.
Every certificate or Opinion of Counsel with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such certificate or
individual or firm signing such opinion has read such covenant or condition and
the definitions herein relating thereto;
(b) 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;
(c) a statement that, in the opinion of each such individual or such firm,
he or it has made such examination or investigation as is necessary to enable
him or it to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether, in the opinion of each such individual or
such firm, such condition or covenant has been complied with.
Section 104. 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, 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, any Guarantor or
other obligor on the Securities 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 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, any Guarantor or other obligor on the Securities stating that
the information with respect to such factual matters is in the possession of
the Company, any Guarantor or other obligor on the Securities, unless such
officer or counsel knows, or in
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<PAGE> 36
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous. Opinions of
Counsel required to be delivered to the Trustee may have qualifications
customary for opinions of the type required and counsel delivering such
Opinions of Counsel may rely on certificates of the Company or government or
other officials customary for opinions of the type required, including
certificates certifying as to matters of fact, including that various financial
covenants have been complied with.
Any certificate or opinion of an officer of the Company, any Guarantor or
other obligor on the Securities may be based, insofar as it relates to
accounting matters, upon a certificate or opinion of, or representations by, an
accountant or firm of accountants in the employ of the Company, unless such
officer knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to the accounting
matters upon which his certificate or opinion may be based are erroneous. Any
certificate or opinion of any independent firm of public accountants filed with
the Trustee shall contain a statement that such firm is independent with
respect to the Company.
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 105. 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 conclusive in favor of the Trustee and the Company, if made
in the manner provided in this Section 105.
(b) The ownership of Securities shall be proved by the Security Register.
(c) 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 or the Holder of every Security issued upon the transfer
thereof or in
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exchange therefor or in lieu thereof, in respect of anything done, suffered or
omitted to be done by the Trustee, any Paying Agent or the Company, any
Guarantor or any other obligor of the Securities in reliance thereon, whether
or not notation of such action is made upon such Security.
(d) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(e) 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 a Board Resolution, fix in advance a
record date for the determination of such 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 Trust
Indenture Act 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 first 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 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 request, demand, authorization, direction, notice, consent, waiver
or other Act 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 such record date.
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Section 106. Notices, etc., to the Trustee, the Company and any Guarantor.
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:
(a) the Trustee by any Holder or by the Company or any Guarantor or any
other obligor on the Securities shall be sufficient for every purpose (except
as provided in Section 501(c)) hereunder if in writing and mailed, first-class
postage prepaid, or delivered by recognized overnight courier, to or with the
Trustee at its Corporate Trust Office, Attention: Corporate Trust Department,
or at any other address previously furnished in writing to the Holders or the
Company, any Guarantor or any other obligor on the Securities by the Trustee;
or
(b) the Company or any Guarantor by the Trustee or any Holder shall be
sufficient for every purpose (except as provided in Section 501(c)) hereunder
if in writing and mailed, first-class postage prepaid, or delivered by
recognized overnight courier, to the Company or such Guarantor addressed to it
c/o Titan Wheel International, Inc., 2701 Spruce Street, Quincy, Illinois,
Attention: Chief Financial Officer, or at any other address previously
furnished in writing to the Trustee by the Company or such Guarantor.
Section 107. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, or delivered by
recognized overnight courier, to each Holder affected by such event, at its
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 mailed 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 Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. 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 regular mail service or by reason
of any other cause, it shall be impracticable to mail notice of any event as
required by any
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provision of this Indenture, then any method of giving such notice as shall be
reasonably satisfactory to the Trustee shall be deemed to be a sufficient
giving of such notice.
Section 108. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with any provision
of the Trust Indenture Act or another provision which is required or deemed to
be included in this Indenture by any of the provisions of the Trust Indenture
Act, the provision or requirement of the Trust Indenture Act 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 to be excluded, as the
case may be.
Section 109. 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 110. Successors and Assigns.
All covenants and agreements in this Indenture by the Company and the
Guarantors shall bind their respective successors and assigns, whether so
expressed or not.
Section 111. 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 112. 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, the holders of Senior Indebtedness
and the holders of Senior Guarantor Indebtedness) any benefit or any legal or
equitable right, remedy or claim under this Indenture.
SECTION 113. GOVERNING LAW.
THIS INDENTURE, THE SECURITIES AND ANY GUARANTEES SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH,
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THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF
LAWS PRINCIPLES THEREOF.
Section 114. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, Maturity or
Stated 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 or 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 such Interest Payment Date or Redemption Date, or at
the Maturity or Stated Maturity and no interest shall accrue with respect to
such payment for the period from and after such Interest Payment Date,
Redemption Date, Maturity or Stated Maturity, as the case may be, to the next
succeeding Business Day.
Section 115. Independence of Covenants.
All covenants and agreements in this Indenture shall be given independent
effect so that if a particular action or condition is not permitted by any such
covenants, the fact that it would be permitted by an exception to, or be
otherwise within the limitations of, another covenant shall not avoid the
occurrence of a Default or an Event of Default if such action is taken or
condition exists.
Section 116. Schedules and Exhibits.
All schedules and exhibits attached hereto are by this reference made a
part hereof with the same effect as if herein set forth in full.
Section 117. Counterparts.
This Indenture may be executed in any number of counterparts, each of
which shall be deemed an original; but all such counterparts shall together
constitute but one and the same instrument.
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally.
The Securities and the Trustee's certificate of authentication thereon
shall be in substantially the forms set forth in this Article Two, with such
appropriate
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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, any
organizational document or governing instrument or applicable law 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 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 executing such
Securities, as evidenced by their execution of such Securities.
The Securities shall be issued initially in the form of one or more
permanent global Securities substantially in the form set forth in Section 202
(the "Global Security") deposited with the Trustee, as custodian for the
Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Global Security
may from time to time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided.
Section 202. Form of Face of Security.
The form of the face of any Securities authenticated and delivered
hereunder shall be substantially as follows:
[Legend if Security is a Global Security]
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE
NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A
SUCCESSOR DEPOSITARY. TRANSFERS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO
NOMINEES OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC") OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE
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<PAGE> 42
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC, TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY SUCH
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
TITAN WHEEL INTERNATIONAL, INC.
__________________
___% SENIOR SUBORDINATED NOTE DUE 2007
CUSIP NO. ______________
No. __________ $_______________________
Titan Wheel International, Inc., an Illinois 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 _______________ United States
dollars on _______ 1, 2007, at the office or agency of the Company referred to
below, and to pay interest thereon from __________, 1997, or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, semiannually on _______ 1 and _______ 1 in each year, commencing ________
1, 1997 at the rate of ___% per annum, in United States dollars, until the
principal hereof is paid or duly provided for. Interest shall be computed on
the basis of a 360-day year comprised of twelve 30-day months.
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
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<PAGE> 43
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 ______ 15 or ______ 15 (whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date. Any such interest not so punctually
paid, or duly provided for, and interest on such defaulted interest at the
interest rate borne by the Securities, to the extent lawful, shall forthwith
cease to be payable to the Holder on such Regular Record Date, and may either
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 10 days prior to
such Special Record Date, or 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, premium, if any, and interest on, this
Security will be made at the office or agency of the Company in The City of New
York maintained for that purpose, or at such other office or agency 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 reverse hereof or by the authenticating agent
appointed as provided in the Indenture by manual signature of an authorized
signer, this Security shall not be entitled to any benefit under the Indenture,
or be valid or obligatory for any purpose.
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<PAGE> 44
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the manual or facsimile signature of its authorized officers and
its corporate seal to be affixed or reproduced hereon.
Dated: TITAN WHEEL INTERNATIONAL, INC.
By:___________________________
Title:________________________
Attest:
____________________________
Authorized Officer
Section 203. Form of Reverse of Securities.
The form of the reverse of any Securities authenticated and delivered
hereunder shall be substantially as follows:
TITAN WHEEL INTERNATIONAL, INC.
___% Senior Subordinated Note due 2007
This Security is one of a duly authorized issue of Securities of the
Company designated as its ___% Senior Subordinated Notes due 2007 (herein
called the "Securities"), limited (except as otherwise provided in the
Indenture referred to below) in aggregate principal amount to $150,000,000,
issued under and subject to the terms of an indenture (herein called the
"Indenture") dated as of _________, 1997, between the Company and The First
National Bank of Chicago, as 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 Guarantors, the Trustee and the Holders of the
Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered.
The Indenture contains provisions for defeasance at any time of (a) the
entire Indebtedness on the Securities and (b) certain restrictive covenants and
related Defaults and Events of Default, in each case upon compliance with
certain conditions set forth therein.
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<PAGE> 45
The Securities are subject to redemption at any time on or after
__________, 2002, at the option of the Company, in whole or in part, on not
less than 30 nor more than 60 days' prior notice to the Holders by first-class
mail, in amounts of $1,000 or an integral multiple thereof, at the following
redemption prices (expressed as percentages of the principal amount), if
redeemed during the 12-month period beginning __________ the years indicated
below:
Redemption
Year Price
---- ----------
2002 %
2003 %
2004 %
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the Redemption Date (subject to the
rights of Holders of record on relevant Regular Record Dates or Special Record
Dates to receive interest due on an Interest Payment Date). If less than all
of the Securities are to be redeemed, the Trustee shall select the Securities
or portions thereof to be redeemed pro rata, by lot or by any other method the
Trustee shall deem fair and reasonable.
Upon the occurrence of a Change of Control, each Holder may require the
Company to purchase such Holder's Securities in whole or in part in integral
multiples of $1,000, at a purchase price in cash in an amount equal to 101% of
the principal amount thereof, plus accrued and unpaid interest, if any, to the
date of purchase, pursuant to Change of Control Offer and in accordance with
the procedures set forth in the Indenture.
Under certain circumstances, in the event the Net Cash Proceeds received
by the Company from any Asset Sale, which proceeds are not used to repay Senior
Indebtedness or invested in properties or other assets that replace the
properties and assets that were the subject of the Asset Sale or which will be
used in the business of the Company or its Subsidiaries existing on the date
of the Indenture or in businesses reasonably related thereto, exceeds a
specified amount the Company will be required to apply such proceeds to the
repayment of the Securities and certain Indebtedness ranking pari passu in
right of payment to the Securities.
In the case of any redemption or repurchase of Securities in accordance
with the Indenture, interest installments whose Stated Maturity is on or prior
to the Redemption Date will be payable to the Holders of such Securities of
record as of the close of business on the relevant Regular Record Date or
Special Record Date referred to on the face hereof. Securities (or portions
thereof) for whose redemption and payment
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<PAGE> 46
provision is made in accordance with the Indenture shall cease to bear interest
from and after the Redemption Date.
In the event of redemption or repurchase of this Security in accordance
with the Indenture in part only, a new Security or Securities for the
unredeemed portion hereof shall be issued in the name of the Holder hereof upon
the cancellation hereof.
If an Event of Default shall occur and be continuing, the principal amount
of all the Securities may be declared due and payable in the manner and with
the effect provided in the Indenture.
The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders) as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the Guarantors and the rights of the Holders under the Indenture
and the Securities and the Guarantees at any time by the Company and the
Trustee with the consent of the Holders of a specified percentage 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 and
the Guarantors with certain provisions of the Indenture and the Securities and
the Guarantees and certain past Defaults under the Indenture and the Securities
and the Guarantees and their 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.
The Securities are, to the extent and manner provided in Article Thirteen
of the Indenture, subordinated and subject in right of payment to the prior
payment in full of all Senior Indebtedness.
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, any
Guarantor or any other obligor on the Securities (in the event such Guarantor
or such other obligor is obligated to make payments in respect of the
Securities), 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, subject to the subordination
provisions of the Indenture.
If this Security is in certificated form, then as provided in the
Indenture and subject to certain limitations therein set forth, the transfer of
this Security is registrable on
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<PAGE> 47
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 or at such other office or agency of the
Company as may be maintained for such purpose, 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 its 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.
If this Security is a Global Security, it is exchangeable for a Security
in certificated form as provided in the Indenture and in accordance with the
rules and procedures of the Trustee and the Depositary. In addition,
certificated securities shall be transferred to all beneficial holders in
exchange for their beneficial interests in the Global Security if (x) the
Depositary notifies the Company that it is unwilling or unable to continue as
depository for the Global Security and a successor depositary is not appointed
by the Company within 90 days or (y) there shall have occurred and be
continuing an Event of Default and the Security Registrar has received a
request from the Depositary. Upon any such issuance, the Trustee is required
to register such certificated Securities in the name of, and cause the same to
be delivered to, such Person or Persons (or the nominee of any thereof).
Securities in certificated form 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 cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, any Guarantor, the Trustee and any agent of the Company, any
Guarantor 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
is overdue, and neither the Company, any Guarantor, the Trustee nor any such
agent shall be affected by notice to the contrary.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES
THEREOF.
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<PAGE> 48
All terms used in this Security which are defined in the Indenture and not
otherwise defined herein shall have the meanings assigned to them in the
Indenture.
Section 204. Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be included on the form
of the face of the Securities substantially in the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
[Series A Securities]
This is one of the ___% Senior Subordinated Notes due 2007 referred to in
the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By:_________________________________
Authorized Signer
Section 205. Form of Option of Holder to Elect Purchase.
(a) The form of Option of Holder to Elect Purchase Form shall be set forth
on the Securities substantially as follows:
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant to
Section 1012 or Section 1015, as applicable, of the Indenture, check the Box:
[ ].
If you wish to have a portion of this Security purchased by the Company
pursuant to Section 1012 or Section 1015 as applicable, of the Indenture, state
the amount (in original principal amount):
$ _______________.
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<PAGE> 49
Date: ___________________ Your Signature: _____________________
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee: __________________________________
[Signature must be guaranteed by an eligible Guarantor Institution (banks,
stock brokers, savings and loan associations and credit unions) with membership
in an approved guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17Ad-15]
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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 $150,000,000 in principal
amount of Securities, 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, 307, 906, 1012, 1015 or
1108.
The Securities shall be known and designated as the "___% Senior
Subordinated Notes due 2007" of the Company. The Stated Maturity of the
Securities shall be ______ 1, 2007, and the Securities shall each bear interest
at the rate of ___% per annum, from ___________, 1997, or from the most recent
Interest Payment Date to which interest has been paid, payable semiannually on
______ 1 and ______ 1 in each year, commencing _______ 1, 1997, until the
principal thereof is paid or duly provided for. Interest on any overdue
principal, interest (to the extent lawful) or premium, if any, shall be payable
on demand.
The principal of, premium, if any, and interest on, the Securities shall
be payable and the Securities will be exchangeable and transferable at an
office or agency of the Company in The City of New York maintained for such
purposes; provided, however, that payment of interest may be made at the option
of the Company by check mailed to addresses of the Persons entitled thereto as
such addresses shall appear on the Security Register.
The Securities shall be subject to repurchase by the Company pursuant to
an Offer as provided in Section 1012.
Holders shall have the right to require the Company to purchase their
Securities, in whole or in part, in the event of a Change of Control pursuant
to Section 1015.
The Securities shall be redeemable as provided in Article Eleven and in
the Securities.
The Indebtedness evidenced by the Securities shall be subordinated in
right of payment to Senior Indebtedness as provided in Article Thirteen.
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<PAGE> 51
At the election of the Company, the entire Indebtedness on the Securities
or certain of the Company's obligations and covenants and certain Events of
Default thereunder may be defeased as provided in Article Four.
Section 302. Denominations.
The Securities shall be issuable only in fully 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 one of its
Chairman of the Board, its President, its Chief Executive Officer, its Chief
Financial Officer or one of its Vice Presidents under its corporate seal
reproduced thereon attested by its Secretary or one of its Assistant
Secretaries. The signatures of any of these officers on the Securities may be
manual or facsimile.
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 (with or without Guarantees endorsed thereon) 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 as provided in this Indenture and not
otherwise.
Each Security shall be dated the date of its authentication.
No Security or Guarantee endorsed thereon 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 an
authorized officer, 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.
In case the Company or any Guarantor, pursuant to Article Eight, shall, in
a single transaction or through a series of related transactions, be
consolidated or merged
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<PAGE> 52
with or into any other Person or shall sell, assign, convey, transfer, lease or
otherwise dispose of all or 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 or such Guarantor shall have
been merged, or the successor Person which shall have participated in the sale,
assignment, 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, sale, assignment, 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 Request 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 303 in exchange or substitution for or upon registration of
transfer of any Securities, such successor Person, at the option of the Holders
but without expense to them, shall provide for the exchange of all Securities
at the time Outstanding for Securities authenticated and delivered in such new
name.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Securities on behalf of the Trustee. Unless limited by the
terms of such appointment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Security Registrar or Paying
Agent to deal with the Company and its Affiliates.
If an officer whose signature is on a Security no longer holds that office
at the time the Trustee authenticates such Security such Security shall be
valid nevertheless.
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 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.
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<PAGE> 53
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without 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 the Trustee to keep, so long as it is the Security
Registrar, at the Corporate Trust Office of the Trustee, or such other office
as the Trustee may designate, a register (the register maintained in such
office or 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 the Security Registrar may prescribe,
the Company shall provide for the registration of Securities and of transfers
of Securities. The Trustee shall initially be the "Security Registrar" for the
purpose of registering Securities and transfers of Securities as herein
provided. The Company may appoint one or more co-Security Registrars.
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 the same
series of any authorized denomination or denominations, of a like aggregate
principal amount.
Furthermore, any Holder of the Global Security shall, by acceptance of
such Global Security, agree that transfers of beneficial interests in such
Global Security may be effected only through a book-entry system maintained by
the Holder of such Global Security (or its agent), and that ownership of a
beneficial interest in a Security shall be required to be reflected in a book
entry.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination or denominations, of a like aggregate
principal amount, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver,
Securities of the same series which the Holder making the exchange is entitled
to receive.
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<PAGE> 54
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
Indebtedness, 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, repurchase or redemption, shall (if so required by the Company or
the Trustee) 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 to a Holder for any registration of
transfer, exchange or redemption of Securities, except for any tax or other
governmental charge that may be imposed in connection therewith, other than
exchanges pursuant to Sections 303, 304, 305, 906, 1012, 1015 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
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 (b) to register the transfer of or exchange any Security
so selected for redemption in whole or in part, except the unredeemed portion
of Securities being redeemed in part.
Section 306. Book-Entry Provisions for Global Security.
(a) The Global Security initially shall be registered in the name of the
Depositary for such Global Security or the nominee of such Depositary and be
deposited with, or on behalf of, the Depositary or with the Trustee as
custodian for such Depositary.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary, or the Trustee as its custodian, or under the
Global Security, and the Depositary may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of such
Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy
or other authorization furnished by the Depositary or shall impair, as between
the Depositary and its Agent Members, the operation of customary practices
governing the exercise of the rights of a holder of any Security.
(b) Transfers of the Global Security shall be limited to transfers of
such Global Security in whole, but not in part, to the Depositary, its
successors or their
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<PAGE> 55
respective nominees. Interests of beneficial owners in the Global Security may
be transferred in accordance with the rules and procedures of the Depositary.
Physical Securities shall be issued to all beneficial owners in exchange for
their beneficial interests in the Global Security if, and only if, (i) the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary for the Global Security and a successor Depositary is not appointed
by the Company within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Security Registrar has received a request
from the Depositary to issue Physical Securities in lieu of all or a portion of
the Global Securities (in which case the Company shall deliver Physical
Securities within 30 days of such request).
(c) In connection with any transfer of a portion of the beneficial
interest in the Global Security pursuant to subsection (b) of this Section, the
Security Registrar shall reflect on its books and records the date and a
decrease in the principal amount of the Global Security in an amount equal to
the principal amount of the beneficial interest in the Global Security to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Physical Securities of like tenor and amount.
(d) In connection with the transfer of the entire Global Security to
beneficial owners pursuant to subsection (b) of this Section, the Global
Security shall be deemed to be surrendered to the Trustee for cancellation, and
the Company shall execute, and the Trustee shall authenticate and deliver, to
each beneficial owner identified by the Depositary in exchange for its
beneficial interest in the Global Security, an equal aggregate principal amount
of Physical Securities of authorized denominations.
(e) The registered holder of the Global Security may grant proxies and
otherwise authorize any person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
Section 307. Mutilated, Destroyed, Lost and Stolen Securities.
If (a) any mutilated Security is surrendered to the Trustee, or (b) 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, any Guarantor and the Trustee, such security or indemnity, in each
case, as may be required by them to save each of them harmless, then, in the
absence of notice to the Company, any Guarantor or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company shall execute
and upon a Company Request the Trustee shall authenticate and deliver, in
exchange for any such mutilated Security or in lieu of any such destroyed, lost
or stolen
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<PAGE> 56
Security, a replacement 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 replacement Security, pay such Security.
Upon the issuance of any replacement Securities under this Section, the
Company may require the payment of a sum sufficient to pay all documentary,
stamp or similar issue or transfer taxes or other governmental charges 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 an original additional
contractual obligation of the Company and any Guarantor, 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.
Section 308. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or duly
provided for, on the Stated Maturity of such interest shall be paid to the
Person in whose name the Security (or any Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest payment.
Any interest on any Security which is payable, but is not punctually paid
or duly provided for, on the Stated Maturity of such interest, and interest on
such defaulted interest at the then applicable interest rate borne by the
Securities, to the extent lawful (such defaulted interest and interest thereon
herein collectively called "Defaulted Interest"), shall forthwith cease to be
payable to the Holder on the Regular Record Date; and such Defaulted Interest
may be paid by the Company, at its election in each case, as provided in
Subsection (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or any relevant
Predecessor Securities) are registered at the close of business on
a Special Record Date
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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 (not less than 30 days after such
notice) of the proposed payment (the "Special Payment Date"), 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 Special
Payment Date, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in
this Subsection provided. 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 Special Payment Date 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 in writing
of such Special Record Date. In the name and at the expense of the
Company, the Trustee 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 its address
as it appears in 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 and Special
Payment Date therefor having been so mailed, such Defaulted
Interest shall be paid to the Persons in whose names the Securities
are registered on such Special Record Date and shall no longer be
payable pursuant to the following Subsection (b).
(b) 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 written
notice given by the Company to the Trustee of the proposed payment
pursuant to this Subsection, such payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section 308, 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.
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Section 309. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and the Company, or the Trustee on behalf of the Company,
shall use CUSIP numbers in notices of redemption or exchange as a convenience
to Holders; provided, however, that any such notice shall state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of redemption or exchange and
that reliance may be placed only on the other identification numbers printed on
the Securities; and provided further, however, that failure to use CUSIP
numbers in any notice of redemption or exchange shall not affect the validity
or sufficiency of such notice.
Section 310. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer, the
Company, any Guarantor, the Trustee and any agent of the Company, any Guarantor
or the Trustee may treat the Person in whose name any Security is registered as
the owner of such Security for the purpose of receiving payment of principal
of, premium, if any, and (subject to Section 308) interest on, such Security
and for all other purposes whatsoever, whether or not such Security is overdue,
and neither the Company, any Guarantor, the Trustee nor any agent of the
Company, any Guarantor or the Trustee shall be affected by notice to the
contrary.
Section 311. Cancellation.
All Securities surrendered for payment, purchase, redemption, registration
of transfer or exchange shall be delivered to the Trustee and, if not already
canceled, shall be promptly canceled by it. The Company and any Guarantor may
at any time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company or such Guarantor may
have acquired in any manner whatsoever, and all Securities so delivered shall
be promptly canceled by the Trustee. No Securities shall be authenticated in
lieu of or in exchange for any Securities canceled as provided in this Section
311, except as expressly permitted by this Indenture. All canceled Securities
held by the Trustee shall be destroyed and certification of their destruction
delivered to the Company, unless by a Company Order received by the Trustee
prior to such destruction, the Company shall direct that the canceled
Securities be returned to it. The Trustee shall provide the Company a list of
all Securities that have been canceled from time to time as requested by the
Company.
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Section 312. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
ARTICLE FOUR
DEFEASANCE AND COVENANT DEFEASANCE
Section 401. 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 402 or Section 403 be
applied to all of the Outstanding Securities (the "Defeased Securities"), upon
compliance with the conditions set forth below in this Article Four.
Section 402. Defeasance and Discharge.
Upon the Company's exercise under Section 401 of the option applicable to
this Section 402, the Company, each Guarantor and any other obligor upon the
Securities, if any, shall be deemed to have been discharged from its
obligations with respect to the Defeased Securities on the date the conditions
set forth in Section 404 below are satisfied (hereinafter, "defeasance"). For
this purpose, such defeasance means that the Company, each Guarantor and any
other obligor under this Indenture shall be deemed to have paid and discharged
the entire Indebtedness represented by the Defeased Securities, which shall
thereafter be deemed to be "Outstanding" only for the purposes of Section 405
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 and upon Company Request, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of Defeased Securities to receive, solely from the trust fund described
in Section 404 and as more fully set forth in such Section, payments in respect
of the principal of, premium, if any, and interest on, such Securities, when
such payments are due, (b) the Company's obligations with respect to such
Defeased Securities under Sections 304, 305, 307, 1002 and 1003, (c) the
rights, powers, trusts, duties and immunities of the Trustee hereunder,
including, without limitation, the Trustee's rights under Section 607, and (d)
this Article Four. Subject to compliance with this Article Four, the Company
may exercise its option under this Section 402 notwithstanding the prior
exercise of its option under Section 403 with respect to the Securities.
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Section 403. Covenant Defeasance.
Upon the Company's exercise under Section 401 of the option applicable to
this Section 403, the Company and each Guarantor shall be released from its
obligations under any covenant or provision contained or referred to in
Sections 1005 through 1020, inclusive, and the provisions of clause (iii) of
Section 801(a), with respect to the Defeased Securities on and after the date
the conditions set forth in Section 404 below are satisfied (hereinafter,
"covenant defeasance"), and the Defeased Securities shall thereafter be deemed
to be not "Outstanding" for the purposes of any direction, waiver, consent or
declaration or Act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "Outstanding"
for all other purposes hereunder. For this purpose, such covenant defeasance
means that, with respect to the Defeased Securities, the Company and each
Guarantor may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such Section or Article, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
Section or Article or by reason of any reference in any such Section or Article
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 Sections
501(c), (d) or (e), but, except as specified above, the remainder of this
Indenture and such Defeased Securities shall be unaffected thereby.
Section 404. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either Section 402
or Section 403 to the Defeased Securities:
(1) The Company shall irrevocably have deposited or caused to be deposited
with the Trustee 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) United States dollars in
an amount, (b) U.S. Government Obligations which through the scheduled payment
of principal and interest in respect thereof in accordance with their terms and
with no further reinvestment will provide, not later than one day before the
due date of any payment, money in an amount, or (c) a combination thereof, in
such amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants or a nationally recognized investment
banking firm expressed in a written certification thereof delivered to the
Trustee, to pay and discharge, and which shall be applied by the Trustee to pay
and discharge, the principal of, premium, if any, and interest on, the Defeased
Securities, on the Stated Maturity of such principal or interest (or on any
date after , 2002 (such date being referred to as the "Defeasance
Redemption Date") if at or prior to electing to exercise either its option
applicable to Section 402 or its option applicable to Section 403,
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the Company has delivered to the Trustee an irrevocable notice to redeem all of
the Outstanding Securities on the Defeasance Redemption Date). For this
purpose, "U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in 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 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) In the case of an election under Section 402, the Company shall have
delivered to the Trustee an Opinion of Independent Counsel in the United States
stating that (A) the Company has received from, or there has been published by,
the Internal Revenue Service a ruling or (B) since the date hereof, there has
been a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such Opinion of Independent Counsel in the
United States 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;
(3) In the case of an election under Section 403, the Company shall have
delivered to the Trustee an Opinion of Independent Counsel in the United States
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;
(4) No Default or Event of Default shall have occurred and be continuing
on the date of such deposit or insofar as Section 501(i) or (j) is concerned,
at any time during the period ending on the 91st day after the date of deposit
(it being understood that this condition shall not be satisfied until the
expiration of such period);
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(5) Such defeasance or covenant defeasance shall not cause the Trustee for
the Securities to have a conflicting interest for purposes of the Trust
Indenture Act with respect to any other securities of the Company or any
Guarantor;
(6) 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, any Guarantor or any
Subsidiary is a party or by which it is bound;
(7) Such defeasance or covenant defeasance shall not result in the trust
arising from such deposit constituting an investment company within the meaning
of the Investment Company Act of 1940, as amended, unless such trust shall be
registered under such Act or exempt from registration thereunder;
(8) The Company shall have delivered to the Trustee an Opinion of
Independent Counsel to the effect that 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;
(9) The Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the holders of the Securities or any Guarantee over the
other creditors of the Company or any Guarantor with the intent of defeating,
hindering, delaying or defrauding creditors of the Company, any Guarantor or
others;
(10) No event or condition shall exist that would prevent the Company from
making payments of the principal of, premium, if any, and interest on the
Securities on the date of such deposit or at any time ending on the 91st day
after the date of such deposit; and
(11) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Independent Counsel, each stating that all
conditions precedent provided for relating to either the defeasance under
Section 402 or the covenant defeasance under Section 403 (as the case may be)
have been complied with.
Opinions of Counsel or Opinions of Independent Counsel required to be
delivered under this Section shall be in form and substance reasonably
satisfactory to the Trustee may have qualifications customary for opinions of
the type required and counsel delivering such opinions may rely on certificates
of the Company or government or other officials customary for opinions of the
type required, which certificates shall be limited as to matters of fact,
including that various financial covenants have been complied with.
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Section 405. 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
United States dollars and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee pursuant to Section 404 in respect of the
Defeased 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 (excluding the Company or
any of its Affiliates acting as 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, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law. Money so
held in trust shall not be subject to the provisions of 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 404 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is
imposed, assessed or for the account of the Holders of the Defeased Securities.
Anything in this Article Four to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
United States dollars or U.S. Government Obligations held by it as provided in
Section 404 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 defeasance or covenant defeasance.
Section 406. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or U.S. Government Obligations in accordance with Section 402 or 403,
as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the
Securities and any Guarantor's obligations under any Guarantee shall be revived
and reinstated, with present and prospective effect, as though no deposit had
occurred pursuant to Section 402 or 403, as the case may be, until such time as
the Trustee or Paying Agent is permitted to apply all such United States
dollars or U.S. Government Obligations in accordance with Section 402 or 403,
as the case may be; provided, however, that if the Company makes any payment to
the Trustee or Paying Agent of principal of, premium, if any, or interest on
any Security following the
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reinstatement of its obligations, the Trustee or Paying Agent shall promptly
pay any such amount to the Holders of the Securities and the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the United States dollars and U.S. Government Obligations held by
the Trustee or Paying Agent.
ARTICLE FIVE
REMEDIES
Section 501. Events of Default.
"Event of Default," wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) there shall be a default in the payment of any interest on any
Security when it becomes due and payable, and such default shall continue for a
period of 30 days;
(b) there shall be a default in the payment of the principal of (or
premium, if any, on) any Security at its Maturity (upon acceleration, optional
or mandatory redemption, required repurchase or otherwise);
(c) there shall be a default in the performance, or breach, of any
covenant or agreement of the Company or any Guarantor under this Indenture or
any Guarantee (other than a default in the performance, or breach, of a
covenant or agreement which is specifically dealt with in clauses (a), (b) or
(d) of this Section 501) and such default or breach shall continue for a period
of 30 days after written notice has been given, by certified mail, (x) to the
Company by the Trustee or (y) to the Company and the Trustee by the Holders of
at least 25% in aggregate principal amount of the Outstanding Securities, which
notice shall specify that it is a "notice of default" and shall demand that
such a default be remedied;
(d) (i) there shall be a default in the performance or breach of the
provisions of Article Eight; (ii) the Company shall have failed to make or
consummate an Offer in accordance with the provisions of Section 1012; or (iii)
the Company shall have failed to make or consummate a Change of Control Offer
required in accordance with the provisions of Section 1015;
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(e) one or more defaults shall have occurred under any of the agreements,
indentures or instruments under which the Company, any Guarantor or any
Subsidiary then has outstanding Indebtedness in excess of $10,000,000,
individually or in the aggregate, and either (a) such default results from the
failure to pay such Indebtedness at its stated final maturity or (b) such
default or defaults have resulted in the acceleration of the maturity of such
Indebtedness;
(f) either (i) the collateral agent under the Bank Credit Facility or (ii)
if the Bank Credit Facility shall no longer be in force and effect, any holder
of at least $10,000,000 in aggregate principal amount of Indebtedness of the
Company or any Restricted Subsidiary shall commence judicial proceedings to
foreclose upon assets of the Company or any of its Restricted Subsidiaries
having an aggregate Fair Market Value, individually or in the aggregate, in
excess of $10,000,000 or shall have exercised any right under applicable law or
applicable security documents to take ownership of any such assets in lieu of
foreclosure;
(g) any Guarantee shall for any reason cease to be, or shall for any
reason be asserted in writing by any Guarantor or the Company not to be, in
full force and effect and enforceable in accordance with its terms except to
the extent contemplated by this Indenture and any such Guarantee;
(h) one or more judgments, orders or decrees for the payment of money in
excess of $10,000,000, either individually or in the aggregate, shall be
rendered against the Company, any Guarantor or any Subsidiary or any of their
respective properties and shall not be discharged and either (a) any creditor
shall have commenced an enforcement proceeding upon such judgment, order or
decree or (b) there shall have been a period of 60 consecutive days during
which a stay of enforcement of such judgment or order, by reason of an appeal
or otherwise, shall not be in effect;
(i) there shall have been the entry by a court of competent jurisdiction
of (i) a decree or order for relief in respect of the Company, any Guarantor or
any Subsidiary in an involuntary case or proceeding under any applicable
Bankruptcy Law or (ii) a decree or order adjudging the Company, any Guarantor
or any Subsidiary bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company, any
Guarantor or any Subsidiary under any applicable federal or state law, or
appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Company, any Guarantor or any Subsidiary or
of any substantial part of their respective properties, or ordering the winding
up or liquidation of their respective affairs, and any such decree or order for
relief shall continue to be in effect, or any such other decree or order shall
be unstayed and in effect, for a period of 60 consecutive days; or
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(j) (i) the Company, any Guarantor or any Subsidiary commences a voluntary
case or proceeding under any applicable Bankruptcy Law or any other case or
proceeding to be adjudicated bankrupt or insolvent, (ii) the Company, any
Guarantor or any Subsidiary consents to the entry of a decree or order for
relief in respect of the Company, such Guarantor or such Subsidiary in an
involuntary case or proceeding under any applicable Bankruptcy Law or to the
commencement of any bankruptcy or insolvency case or proceeding against it,
(iii) the Company, any Guarantor or any Subsidiary files a petition or answer
or consent seeking reorganization or relief under any applicable federal or
state law, (iv) the Company, any Guarantor or any Subsidiary (1) consents to
the filing of such petition or the appointment of, or taking possession by, a
custodian, receiver, liquidator, assignee, trustee, sequestrator or similar
official of the Company, any Guarantor or such Subsidiary or of any substantial
part of their respective properties, (2) makes an assignment for the benefit of
creditors or (3) admits in writing its inability to pay its debts generally as
they become due, or (v) the Company, any Guarantor or any Subsidiary takes any
corporate action in furtherance of any such actions in this paragraph (j).
Section 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Sections 501(i) and (j)) shall occur and be continuing with respect to this
Indenture, the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Securities then Outstanding may, and the Trustee at the
request of such Holders shall, declare all unpaid principal of, premium, if
any, and accrued interest on all Securities to be due and payable, by a notice
in writing to the Company (and to the Trustee if given by the Holders of the
Securities) and upon any such declaration, such principal, premium, if any, and
interest shall become due and payable immediately. If an Event of Default
specified in clause (i) or (j) of Section 501 occurs with respect to the
Company and is continuing, then all the Securities shall ipso facto become and
be due and payable immediately in an amount equal to the principal amount of
the Securities, together with accrued and unpaid interest, if any, to the date
the Securities become due and payable, without any declaration or other act on
the part of the Trustee or any Holder. Thereupon, the Trustee may, at its
discretion, proceed to protect and enforce the rights of the Holders of the
Securities by appropriate judicial proceedings.
After such declaration of acceleration with respect to the Securities, but
before a judgment or decree for payment of the 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:
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(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 this
Indenture and the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel,
(ii) all overdue interest on all Outstanding Securities,
(iii) the principal of and premium, if any, on any Outstanding
Securities which have become due otherwise than by such declaration
of acceleration and interest thereon at a rate borne by the
Securities, and
(iv) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities;
and
(b) all Events of Default, other than the non-payment of principal
of the Securities which 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.
If payment of the Notes is accelerated because of an Event of Default,
the Trustee shall promptly notify the agent under the Bank Credit Facility.
Section 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company and each Guarantor covenant that if
(a) default is made in the payment of any interest on any Security when
such interest becomes due and payable and such default continues for a period
of 30 days, or
(b) default is made in the payment of the principal of, premium, if
any, on any Security at the Stated Maturity thereof,
the Company and such Guarantor will, upon demand of the Trustee, pay to it, 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,
with interest upon the overdue principal and premium, if any, and, to the
extent that payment of such interest shall be legally enforceable, upon overdue
installments 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.
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If the Company or any Guarantor, as the case may be, fails to pay such
amounts forthwith upon such demand, the Trustee, in its own name and as trustee
of an express trust, may institute a judicial proceeding for the collection of
the sums so due and unpaid and may prosecute such proceeding to judgment or
final decree, and may enforce the same against the Company or any Guarantor 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, any Guarantor 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 under this Indenture or any Guarantee by such appropriate private or
judicial proceedings as the Trustee shall deem most effectual to protect and
enforce such rights, including seeking recourse against any Guarantor pursuant
to the terms of any Guarantee, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein or therein, or to enforce any other proper remedy, including,
without limitation, seeking recourse against any Guarantor pursuant to the
terms of a Guarantee, or to enforce any other proper remedy, subject however to
Section 512. No recovery of any such judgment upon any property of the Company
or any Guarantor shall affect or impair any rights, powers or remedies of the
Trustee or the Holders.
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, including any
Guarantor, 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 Trustee shall have
made any demand on the Company for the payment of overdue principal or
interest) shall be entitled and empowered, by intervention in such proceeding
or otherwise,
(a) 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, disbursements and advances of the Trustee, its agents
and counsel) and of the Holders allowed in such judicial proceeding, and
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(b) 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 607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the 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, the Securities or
the Guarantees may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any proceeding
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.
Any money collected by the Trustee pursuant to this Article or otherwise
on behalf of the Holders or the Trustee pursuant to this Article or through any
proceeding or any arrangement or restructuring in anticipation or in lieu of
any proceeding contemplated by this Article shall be applied, subject to
applicable law, 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,
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 607;
SECOND: To the payment of the amounts then due and unpaid upon the
Securities for principal, premium, if any, and interest, in respect of which or
for the
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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, premium, if any, and interest; and
THIRD: The balance, if any, to the Person or Persons entitled thereto,
including the Company, provided that all sums due and owing to the Holders and
the Trustee have been paid in full as required by this Indenture.
Section 507. Limitation on Suits.
No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture or the
Securities, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee of a
continuing Event of Default;
(b) 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;
(c) such Holder or Holders have offered to the Trustee an indemnity
satisfactory to the Trustee against the costs, expenses and liabilities to be
incurred in compliance with such request;
(d) the Trustee for 15 days after its receipt of such notice, request and
offer (and if requested, provision) of indemnity has failed to institute any
such proceeding; and
(e) no direction inconsistent with such written request has been given to
the Trustee during such 15-day period by the Holders of a majority 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, any Security or any Guarantee 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,
any Security or any Guarantee, except in the manner provided in this Indenture
and for the equal and ratable benefit of all the Holders.
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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 based on the terms stated herein, which is
absolute and unconditional, to receive payment of the principal of, premium, if
any, and (subject to Section 309) interest on such Security on the respective
Stated Maturities expressed in such Security (or, in the case of redemption or
repurchase, on the Redemption Date or the repurchase 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; provided that the rights of the
Holders to receive payments on their securities are subject to the provisions
of Article Thirteen of this Indenture.
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 or any Guarantee 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 the Company, any
Guarantor, any other obligor on the Securities, the Trustee and the Holders
shall, subject to any determination in such proceeding, 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.
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 aggregate principal amount of
the Outstanding Securities shall have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee, provided
that
(a) such direction shall not be in conflict with any rule of law or with
this Indenture (including, without limitation, Section 507) or any Guarantee,
expose the Trustee to personal liability, or be unduly prejudicial to Holders
not joining therein; and
(b) subject to the provisions of Section 315 of the Trust Indenture Act,
the Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
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 Outstanding
Securities waive any past Default hereunder and its consequences, except a
Default
(a) in the payment of the principal of, premium, if any, or interest on
any Security; or
(b) in respect of a covenant or a provision hereof which under this
Indenture cannot be modified or amended without the consent of the Holder of
each Security Outstanding affected by such modification or amendment.
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
Section 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
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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, premium, if any, or interest on, any Security on or after the respective
Stated Maturities expressed in such Security (or, in the case of redemption, on
or after the Redemption Date).
Section 515. Waiver of Stay, Extension or Usury Laws.
Each of the Company and the Guarantors 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 or any usury or other law wherever enacted, now or at any time
hereafter in force, which would prohibit or forgive the Company or any
Guarantor from paying all or any portion of the principal of, premium, if any,
or interest on the Securities contemplated herein or in the Securities or which
may affect the covenants or the performance of this Indenture; and each of the
Company and the Guarantors (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.
Section 516. Remedies Subject to Applicable Law.
All rights, remedies and powers provided by this Article Five may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law in the premises, and all the provisions of this
Indenture are intended to be subject to all applicable mandatory provisions of
law which may be controlling in the premises and to be limited to the extent
necessary so that they will not render this Indenture invalid, unenforceable or
not entitled to be recorded, registered or filed under the provisions of any
applicable law.
ARTICLE SIX
THE TRUSTEE
Section 601. Duties of Trustee.
Subject to the provisions of Trust Indenture Act Sections 315(a) through
315(d):
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(a) if a Default or an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise thereof as
a prudent person would exercise or use under the circumstances in the conduct
of his own affairs;
(b) except during the continuance of a Default or an Event of Default:
(1) the Trustee need perform only those duties as are
specifically set forth in this Indenture and no covenants or
obligations shall be implied in this Indenture that are adverse to
the Trustee; and
(2) in the absence of bad faith or willful misconduct on its
part, the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture;
(c) the Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(1) this Subsection (c) does not limit the effect of
Subsection (b) of this Section 601;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts;
and
(3) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith, in accordance with a
direction of the Holders of a majority in principal amount of
Outstanding Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power confirmed upon the Trustee under
this Indenture;
(d) no provision of this Indenture shall require the Trustee 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;
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(e) whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to Subsections (a),
(b), (c) and (d) of this Section 601; and
(f) the Trustee shall not be liable for interest on any money or assets
received by it except as the Trustee may agree with the Company. Assets held
in trust by the Trustee need not be segregated from other assets except to the
extent required by law.
Section 602. Notice of Defaults.
Within 30 days after a Responsible Officer of the Trustee receives notice
of the occurrence of any Default, the Trustee shall transmit by mail to all
Holders and any other Persons entitled to receive reports pursuant to Section
313(c) of the Trust Indenture Act, as their names and addresses appear in the
Security Register, notice of such Default hereunder known to the Trustee,
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, premium, if
any, or interest on any Security, the Trustee shall be protected in withholding
such notice if and so long as a trust committee of Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interest of the Holders.
Section 603. Certain Rights of Trustee.
Subject to the provisions of Section 601 hereof and Trust Indenture Act
Sections 315(a) through 315(d):
(a) 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;
(b) 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;
(c) the Trustee may consult with counsel and any 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 in accordance with such advice or Opinion
of Counsel;
(d) 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
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pursuant to this Indenture, unless such Holders shall have offered to the
Trustee security or indemnity satisfactory to the Trustee against the costs,
expenses and liabilities which might be incurred therein or thereby in
compliance with such request or direction;
(e) the Trustee shall not be liable for any action taken or omitted by it
in good faith and believed by it to be authorized or within the discretion,
rights or powers conferred upon it by this Indenture other than any liabilities
arising out of the negligence, bad faith or willful misconduct of the Trustee;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, approval,
appraisal, bond, debenture, note, coupon, security or other paper or document
unless requested in writing to do so by the Holders of not less than a majority
in aggregate principal amount of the Securities then Outstanding; provided
that, if the payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Indenture, the
Trustee may require reasonable indemnity against such expenses or liabilities
as a condition to proceeding; the reasonable expenses of every such
investigation so requested by the Holders of not less than 25% in aggregate
principal amount of the Securities Outstanding shall be paid by the Company or,
if paid by the Trustee or any predecessor Trustee, shall be repaid by the
Company upon demand; provided, further, the Trustee in its discretion may make
such further inquiry or investigation into such facts or matters as it may deem
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;
(g) 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 specifically prescribed) may, in the absence of bad faith on its
part, rely upon an Officers' Certificate; and
(h) the Trustee may execute any of the trusts or powers 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.
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Section 604. Trustee Not Responsible for Recitals, Dispositions of
Securities or Application of Proceeds Thereof.
The recitals contained herein and in the Securities, except 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 any Statement of Eligibility and Qualification on Form T-1 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 nor shall the Trustee be
responsible for any statement in any registration statement for the Securities
under the Securities Act or responsible for the determination as to which
beneficial owners are entitled to receive notices hereunder.
Section 605. Trustee and Agents May Hold Securities; Collections; etc.
The Trustee, any Paying Agent, Security Registrar or any other agent of
the Company, in its individual or any other capacity, may become the owner or
pledgee of Securities, with the same rights it would have if it were not the
Trustee, Paying Agent, Security Registrar or such other agent and, subject to
Sections 608 and 613 hereof and Trust Indenture Act Sections 310 and 311, may
otherwise deal with the Company and receive, collect, hold and retain
collections from the Company with the same rights it would have if it were not
the Trustee, Paying Agent, Security Registrar or such other agent.
Section 606. Money Held in Trust.
All moneys received by the Trustee shall, until used or applied as herein
provided, be held in trust for the purposes for which they were received, but
need not be segregated from other funds except to the extent required by
mandatory provisions of law. Except for funds or securities deposited with the
Trustee pursuant to Article Four, the Trustee shall be required to invest all
moneys received by the Trustee, until used or applied as herein provided, in
Temporary Cash Investments in accordance with the directions of the Company.
The Trustee shall be under no liability to the Company for interest on any
money received by it hereunder except as otherwise agreed in writing with the
Company.
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Section 607. Compensation and Indemnification of Trustee and Its Prior
Claim.
The Company covenants and agrees to pay to the Trustee from time to time,
and the Trustee shall be entitled to, 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) and the Company covenants and agrees to pay or reimburse the Trustee and
each predecessor Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by or on behalf of the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and
of all agents and other persons not regularly in its employ) except any such
expense, disbursement or advance as may arise from its negligence, bad faith or
willful misconduct. The Company also covenants and agrees to indemnify the
Trustee and each predecessor Trustee for, and to hold it harmless against, any
claim, loss, liability, tax, assessment or other governmental charge (other
than taxes applicable to the Trustee's compensation hereunder) or expense
incurred without negligence, bad faith or willful misconduct on its part,
arising out of or in connection with the acceptance or administration of this
Indenture or the trusts hereunder and its duties hereunder, including
enforcement of this Section 607 and also including any liability which the
Trustee may incur as a result of failure to withhold, pay or report any tax,
assessment or other governmental charge, and the costs and expenses of
defending itself against or investigating 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 607 to compensate and indemnify
the Trustee and each predecessor Trustee and to pay or reimburse the Trustee
and each predecessor Trustee for reasonable expenses, disbursements and
advances shall constitute an additional obligation hereunder and shall survive
the satisfaction and discharge of this Indenture and the resignation or removal
of the Trustee and each predecessor Trustee.
Section 608. Conflicting Interests.
The Trustee shall comply with the provisions of Section 310(b) of the
Trust Indenture Act.
Section 609. Trustee Eligibility.
There shall at all times be a Trustee hereunder which shall be eligible to
act as trustee under Trust Indenture Act Section 310(a)(5) and which shall have
a combined capital and surplus of at least $100,000,000, to the extent there is
an institution eligible and willing to serve. If the Trustee does not have an
office in The City of New York, the Trustee may appoint an agent in The City of
New York reasonably acceptable to the
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Company to conduct any activities which the Trustee may be required under this
Indenture to conduct in The City of New York. If such Trustee 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 609, 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 609, the Trustee shall resign immediately in the
manner and with the effect hereinafter specified in this Article.
Section 610. Resignation and Removal; Appointment of Successor Trustee.
(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 under Section 611.
(b) The Trustee, or any trustee or trustees hereafter appointed, may at
any time resign by giving written notice thereof to the Company. Upon
receiving such notice or resignation, the Company shall promptly appoint a
successor trustee by written instrument executed by authority of the Board of
Directors of the Company, a copy of which shall be delivered to the resigning
Trustee and a copy to the successor trustee. If an instrument of acceptance by
a successor trustee shall not have been delivered to the Trustee within 30 days
after the giving of such notice of resignation, the resigning Trustee may, or
any Holder who has been a bona fide Holder of a Security for at least six
months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor trustee.
Such court may thereupon, after such notice, if any, as it may deem proper,
appoint and prescribe a successor trustee.
(c) The Trustee may be removed at any time for any cause or for no cause
by an Act of the Holders of not less than a majority in aggregate 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
Trust Indenture Act Section 310(b) after written request therefor
by the Company or by any Holder who has been a bona fide Holder of
a Security for at least six months,
(2) the Trustee shall cease to be eligible under Section 609
and shall fail to resign after written request therefor by the
Company or by any
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Holder who has been a bona fide Holder of a Security for at least
six months, 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 case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, the Holder of any Security who has
been a bona fide Holder of a Security for at least six months 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. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, remove the Trustee and appoint 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 and
shall comply with the applicable requirements of Section 611. If, within one
year after such resignation, removal or incapability, or the occurrence of such
vacancy, the Company has not appointed a successor Trustee, a successor trustee
shall be appointed by the Act of the Holders of a majority in principal amount
of the Outstanding Securities delivered to the Company and the retiring
Trustee. Such 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 of the Securities and accepted
appointment in the manner hereinafter provided, the Holder of any Security who
has been a bona fide Holder for at least six months may, subject to Section
514, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the appointment of a successor trustee.
(f) The Company shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor trustee by mailing written
notice of such event by first-class mail, postage prepaid, to the Holders of
Securities as their names and addresses appear in the Security Register. Each
notice shall include the name of the successor trustee and the address of its
Corporate Trust Office or agent hereunder.
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Section 611. 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 as if originally named as Trustee hereunder;
but, nevertheless, on the written request of the Company or the successor
trustee, upon payment of its charges pursuant to Section 607 then unpaid, such
retiring Trustee shall pay over to the successor trustee all moneys at the time
held by it hereunder and shall execute and deliver an instrument transferring
to such successor trustee all such rights, powers, duties and obligations.
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 and powers.
No successor trustee with respect to the Securities shall accept
appointment as provided in this Section 611 unless at the time of such
acceptance such successor trustee shall be eligible to act as trustee under the
provisions of Trust Indenture Act Section 310(a) and this Article Six and shall
have a combined capital and surplus of at least $100,000,000 and have a
Corporate Trust Office or an agent selected in accordance with Section 609.
Upon acceptance of appointment by any successor trustee as provided in
this Section 611, the Company shall give notice thereof to the Holders of the
Securities, by mailing such notice to such Holders at their addresses as they
shall appear on the Security Register. If the acceptance of appointment is
substantially contemporaneous with the appointment, then the notice called for
by the preceding sentence may be combined with the notice called for by Section
610. If the Company fails to give such notice within 10 days after acceptance
of appointment by the successor trustee, the successor trustee shall cause such
notice to be given at the expense of the Company.
Section 612. 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 (including the trust created by this Indenture) shall
be the successor of the Trustee hereunder, provided that such corporation shall
be eligible under Trust Indenture Act Section 310(a) and this Article Six and
shall have a combined capital and surplus of at
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least $100,000,000 and have a Corporate Trust Office or an agent selected in
accordance with Section 609, without the execution or filing of any paper or
any further act on the part of any of the parties hereto.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt
the certificate of authentication of any predecessor Trustee and deliver such
Securities so authenticated; and, in case at that time any of the Securities
shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor hereunder or
in the name of the successor trustee; and in all such cases such certificate
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
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.
Section 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company (or
other obligor under the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor). A Trustee who has resigned or
been removed shall be subject to Trust Indenture Act Section 311(a) to the
extent indicated therein.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semiannually, not more than 10 days after each Regular Record Date, a
list, in such form as the Trustee may reasonably require, of the names and
addresses of the Holders as of such Regular Record Date; and
(b) at such other times as the Trustee may reasonably request in writing,
within 30 days after receipt by the Company of any such request, a list of
similar form and content to that in subsection (a) hereof as of a date not more
than 15 days prior to the time such list is furnished;
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provided, however, that if and so long as the Trustee shall be the Security
Registrar, no such list need be furnished.
Section 702. Disclosure of Names and Addresses of Holders.
Holders may communicate pursuant to Trust Indenture Act Section 312(b)
with other Holders with respect to their rights under this Indenture or the
Securities, and the Trustee shall comply with Trust Indenture Act Section
312(b). The Company, the Trustee, the Security Registrar and any other Person
shall have the protection of Trust Indenture Act Section 312(c). Further,
every Holder of Securities, by receiving and holding the same, agrees with the
Company and the Trustee that neither the Company nor the Trustee or any agent
of either of them shall be held accountable by reason of the disclosure of any
information as to the names and addresses of the Holders in accordance with
Trust Indenture Act 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 Trust Indenture
Act Section 312.
Section 703. Reports by Trustee.
(a) Within 60 days after ___________ of each year commencing with the
first ______________ after the issuance of Securities, the Trustee, if so
required under the Trust Indenture Act, shall transmit by mail to all Holders,
in the manner and to the extent provided in Trust Indenture Act Section 313(c),
a brief report dated as of such ___________ in accordance with and with respect
to the matters required by Trust Indenture Act Section 313(a). The Trustee
shall also transmit by mail to all Holders, in the manner and to the extent
provided in Trust Indenture Act Section 313(c), a brief report in accordance
with and with respect to the matters required by Trust Indenture Act Section
313(b)(2).
(b) A copy of each report transmitted to Holders pursuant to this Section
703 shall, at the time of such transmission, be mailed to the Company and filed
with each stock exchange, if any, upon which the Securities are listed and also
with the Commission. The Company will notify the Trustee promptly if the
Securities are listed on any stock exchange.
Section 704. Reports by Company.
The Company and any Guarantor, as the case may be, shall:
(a) file with the Trustee, within 15 days after the Company or any
Guarantor, as the case may be, is required to file the same with the
Commission, copies of the annual reports and of the information, documents and
other reports (or copies of such
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portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which the Company or any Guarantor may be
required to file with the Commission pursuant to Section 13 or Section 15(d) of
the Exchange Act; or, if the Company or any Guarantor, as the case may be, is
not required to file information, documents or reports pursuant to either of
said Sections, then it shall (i) deliver to the Trustee annual audited
financial statements of the Company and its Subsidiaries, prepared on a
Consolidated basis in conformity with GAAP, within 120 days after the end of
each fiscal year of the Company, and (ii) file with the Trustee and, to the
extent permitted by law, the Commission, in accordance with the rules and
regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Exchange Act in respect of a security
listed and registered on a national securities exchange as may be prescribed
from time to time in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance with the rules
and regulations prescribed from time to time by the Commission, such additional
information, documents and reports with respect to compliance by the Company or
any Guarantor, as the case may be, with the conditions and covenants of this
Indenture as are required from time to time by such rules and regulations
(including such information, documents and reports referred to in Trust
Indenture Act Section 314(a)); and
(c) within 15 days after the filing thereof with the Trustee, transmit by
mail to all Holders in the manner and to the extent provided in Trust Indenture
Act Section 313(c), such summaries of any information, documents and reports
required to be filed by the Company or any Guarantor, as the case may be,
pursuant to Section 1019 hereunder and subsections (a) and (b) of this Section
as are required by rules and regulations prescribed from time to time by the
Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 801. Company and Guarantors May Consolidate, etc., Only on
Certain Terms.
(a) The Company will not, in a single transaction or through a series of
related transactions, consolidate with or merge with or into any other Person
or sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets to any Person or group of
affiliated Persons, or permit any of its Subsidiaries to enter into any such
transaction or series of related transactions if such transaction or series of
related transactions, in the aggregate, would result in a sale,
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assignment, conveyance, transfer, lease or disposition of all or substantially
all of the properties and assets of the Company and its Subsidiaries on a
Consolidated basis to any other Person or group of affiliated Persons, unless
at the time and after giving effect thereto:
(i) either (a) the Company will be the continuing corporation
or (b) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person
which acquires by sale, assignment, conveyance, transfer, lease or
disposition all or substantially all of the properties and assets
of the Company and its Subsidiaries on a Consolidated basis (the
"Surviving Entity") will be a corporation duly organized and
validly existing under the laws of the United States of America,
any state thereof or the District of Columbia and such Person
expressly assumes, by a supplemental indenture, in a form
satisfactory to the Trustee, all the obligations of the Company
under the Securities or hereunder, and the Securities and this
Indenture, as the case may be, will remain in full force and effect
as so supplemented;
(ii) immediately before and immediately after giving effect to
such transaction on a pro forma basis (and treating any
Indebtedness not previously an obligation of the Company or any of
its Subsidiaries which becomes the obligation of the Company or any
of its Subsidiaries as a result of such transaction as having been
incurred at the time of such transaction), no Default or Event of
Default will have occurred and be continuing;
(iii) immediately after giving effect to such transaction on a
pro forma basis (and treating any Indebtedness not previously an
obligation of the Company or any of its Restricted Subsidiaries
which becomes the obligation of the Company or any of its
Restricted Subsidiaries as a result of such transaction as having
been incurred at the time of such transaction), the Consolidated
Net Worth of the Company (or the Surviving Entity if the Company is
not the continuing obligor under this Indenture) is equal to or
greater than the Consolidated Net Worth of the Company immediately
prior to such transaction;
(iv) immediately before and immediately after giving effect to
such transaction on a pro forma basis (on the assumption that the
transaction occurred on the first day of the four-quarter period
for which financial statements are available ending immediately
prior to the consummation of such transaction with the appropriate
adjustments with respect to the transaction being included in such
pro forma calculation), the
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Company (or the Surviving Entity if the Company is not the
continuing obligor hereunder) could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under Section
1008;
(v) at the time of the transaction, each Guarantor, if any,
unless it is the other party to the transactions described above,
will have by supplemental indenture confirmed that its Guarantees
shall apply to such Person's obligations hereunder and under the
Securities;
(vi) at the time of the transaction if any of the property or
assets of the Company or any of its Subsidiaries would thereupon
become subject to any Lien, the provisions of Section 1011 are
complied with; and
(vii) at the time of the transaction the Company or the
Surviving Entity will have delivered, or caused to be delivered, to
the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an Opinion of Counsel, each
to the effect that such consolidation, merger, transfer, sale,
assignment, conveyance, transfer, lease or other transaction and
the supplemental indenture in respect thereof comply with this
Indenture and that all conditions precedent herein provided for
relating to such transaction have been complied with.
(b) Each Guarantor shall not, and the Company will not permit a
Guarantor to, in a single transaction or through a series of related
transactions, consolidate with or merge with or into any other Person (other
than the Company or any Guarantor) or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets on
a Consolidated basis to any Person or group of affiliated Persons (other than
the Company or any Guarantor), or permit any of its Subsidiaries to enter into
any such transaction or series of related transactions if such transaction or
series of related transactions, in the aggregate, would result in a sale,
assignment, conveyance, transfer, lease or disposition of all or substantially
all of the properties and assets of the Guarantor and its Subsidiaries on a
Consolidated basis to any other Person or group of affiliated Persons (other
than the Company or any Guarantor), unless at the time and after giving effect
thereto:
(i) either (1) the Guarantor will be the continuing
corporation or (2) the Person (if other than the Guarantor) formed
by such consolidation or into which such Guarantor is merged or the
Person which acquires by sale, assignment, conveyance, transfer,
lease or disposition all or substantially all of the properties and
assets of the Guarantor and its Subsidiaries on a Consolidated
basis (the "Surviving Guarantor Entity") will be a corporation
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duly organized and validly existing under the laws of the United
States of America, any state thereof or the District of Columbia
and such Person expressly assumes, by a supplemental indenture, in
a form satisfactory to the Trustee, all the obligations of such
Guarantor under its Guarantee of the Securities and this Indenture,
and such Guarantee will remain in full force and effect;
(ii) immediately before and immediately after giving effect to
such transaction on a pro forma basis, no Default or Event of
Default shall have occurred and be continuing;
(iii) if any of the property or assets of such Guarantor or
any of its Subsidiaries would thereupon be subject to any Lien,
the provisions of Section 1011 are complied with; and
(iii) at the time of the transaction such Guarantor or the
Surviving Guarantor Entity will have delivered, or caused to be
delivered, to the Trustee, in form and substance reasonably
satisfactory to the Trustee, an Officers' Certificate and an
Opinion of Counsel, each to the effect that such consolidation,
merger, transfer, sale, assignment, conveyance, lease or other
transaction and the supplemental indenture in respect thereof
comply with this Indenture and that all conditions precedent
therein provided for relating to such transaction have been
complied with.
The provisions of this Section 801(b) shall not apply to any transaction
(including any Asset Sale made in accordance with Section 1012) with respect to
any Guarantor if the Guarantee of such Guarantor is released in connection with
such transaction in accordance with Section 1013(b).
Section 802. Successor Substituted.
Upon any consolidation or merger, or any sale, assignment,
conveyance, transfer, lease or disposition of all or substantially all of the
properties and assets of the Company or any Guarantor, if any, in accordance
with Section 801, the successor Person formed by such consolidation or into
which the Company or such Guarantor, as the case may be, is merged or the
successor Person to which such sale, assignment, conveyance, transfer, lease or
disposition is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company or such Guarantor, as the case may be,
under this Indenture, in the Securities and/or the Guarantee, as the case may
be, with the same effect as if such successor had been named as the Company or
such Guarantor, as the case may be, herein, in the Securities and/or in the
Guarantee, as the case may be. When a successor (other than a successor that
is an Affiliate of the Company) assumes all
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the obligations of its predecessor under this Indenture, the Securities or a
Guarantee, as the case may be, the predecessor shall be released from those
obligations and covenants hereof and the Securities; provided that in the case
of a transfer by lease, the predecessor shall not be released from the payment
of principal and interest on the Securities or a Guarantee, as the case may be.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Agreements without Consent of
Holders.
Without the consent of any Holders, the Company, the Guarantors, if any,
and any other obligor upon the Securities 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 or agreements or other instruments
with respect to any Guarantee, in form and substance satisfactory to the
Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Company, any
Guarantor or any other obligor upon the Securities, and the assumption by any
such successor of the covenants of the Company or such Guarantor or obligor
herein and in the Securities and in any Guarantee in accordance with Article
Eight;
(b) to add to the covenants of the Company, any Guarantor or any other
obligor upon the Securities for the benefit of the Holders, or to surrender any
right or power conferred upon the Company or any Guarantor or any other obligor
upon the Securities, as applicable, herein, in the Securities or in any
Guarantee;
(c) to cure any ambiguity, or to correct or supplement any provision
herein or in any supplemental indenture, the Securities or any Guarantee which
may be defective or inconsistent with any other provision herein or in the
Securities or any Guarantee or to make any other provisions with respect to
matters or questions arising under this Indenture or in the Securities or any
Guarantee; provided that, in each case, such provisions shall not adversely
affect the interest of the Holders;
(d) to comply with the requirements of the Commission in order to effect
or maintain the qualification of this Indenture under the Trust Indenture Act,
as contemplated by Section 905 or otherwise;
(e) to add a Guarantor pursuant to the requirements of Section 1013;
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(f) to evidence and provide the acceptance of the appointment of a
successor trustee hereunder; or
(g) to mortgage, pledge, hypothecate or grant a security interest in favor
of the Trustee for the benefit of the Holders as additional security for the
payment and performance of the Company's or any Guarantor's Indenture
Obligations, in any property, or assets, including any of which are required to
be mortgaged, pledged or hypothecated, or in which a security interest is
required to be granted to the Trustee pursuant to this Indenture or otherwise.
Section 902. Supplemental Indentures and Agreements with Consent of
Holders.
Except as permitted by Section 901, with the consent of the Holders of at
least a majority in aggregate principal amount of the Outstanding Securities,
by Act of said Holders delivered to the Company, each Guarantor, if any, and
the Trustee, the Company and each Guarantor (if a party thereto) when
authorized by Board Resolutions, and the Trustee may (i) enter into an
indenture or indentures supplemental hereto or agreements or other instruments
with respect to any Guarantee in form and substance satisfactory to the
Trustee, for the purpose of adding any provisions to or amending, modifying or
changing in any manner or eliminating any of the provisions of this Indenture,
the Securities or any Guarantee (including but not limited to, for the purpose
of modifying in any manner the rights of the Holders under this Indenture, the
Securities or any Guarantee) or (ii) waive compliance with any provision in
this Indenture, the Securities or any Guarantee (other than waivers of past
Defaults covered by Section 513 and waivers of covenants which are covered by
Section 1021); provided, however, that no such supplemental indenture,
agreement or instrument shall, without the consent of the Holder of each
Outstanding Security affected thereby:
(a) change the Stated Maturity of the principal of, or any installment of
interest on, or change to an earlier date any redemption date of, or waive a
default in the payment of the principal or interest on, any such Security or
reduce the principal amount thereof or the rate of interest thereon or any
premium payable upon the redemption thereof, or change the coin or currency in
which the principal of any Security or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the case of redemption,
on or after the Redemption Date);
(b) amend, change or modify the obligation of the Company to make and
consummate an Offer with respect to any Asset Sale or Asset Sales in accordance
with Section 1012 or the obligation of the Company to make and consummate a
Change
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of Control Offer in the event of a Change of Control in accordance with Section
1015, including, in each case, amending, changing or modifying any definitions
relating thereto;
(c) reduce the percentage in principal amount of such Outstanding
Securities, the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for any waiver or
compliance with certain provisions of this Indenture;
(d) modify any of the provisions of this Section 902 or Section 513 or
1021, except to increase the percentage of such Outstanding Securities required
for any such actions or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the Holder of
each such Security affected thereby;
(e) except as otherwise permitted under Article Eight, consent to the
assignment or transfer by the Company or any Guarantor of any of its rights and
obligations hereunder; or
(f) amend or modify any of the provisions of this Indenture relating to
the subordination of the Securities or any Guarantee in any manner adverse to
the Holders or the holders of any Guarantee.
Upon the written request of the Company and each Guarantor, if any,
accompanied by a copy of Board Resolutions authorizing the execution of any
such supplemental indenture or Guarantee, and upon the filing with the Trustee
of evidence of the consent of Holders as aforesaid, the Trustee shall join with
the Company and each Guarantor in the execution of such supplemental indenture
or Guarantee.
It shall not be necessary for any Act of Holders under this Section 902 to
approve the particular form of any proposed supplemental indenture or Guarantee
or agreement or instrument relating to any Guarantee, but it shall be
sufficient if such Act shall approve the substance thereof.
Section 903. Execution of Supplemental Indentures and Agreements.
In executing, or accepting the additional trusts created by, any
supplemental indenture, agreement, instrument or waiver permitted by this
Article Nine or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Trust
Indenture Act Sections 315(a) through 315(d) and Section 602 hereof) shall be
fully protected in relying upon, an Opinion of Counsel and an Officers'
Certificate stating that the execution of such supplemental indenture,
agreement or instrument is authorized or permitted by this Indenture. The
Trustee may,
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but shall not be obligated to, enter into any such supplemental indenture,
agreement or instrument which affects the Trustee's own rights, duties or
immunities under this Indenture, any Guarantee 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 this Article Nine 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 Nine may, and shall if required
by the Trustee, 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 Board of Directors, to any such supplemental indenture may be
prepared and executed by the Company and each Guarantor 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, any Guarantor 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.
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ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium and Interest.
The Company shall duly and punctually pay the principal of, premium, if
any, and interest on the Securities in accordance with the terms of the
Securities and this Indenture.
Section 1002. Maintenance of Office or Agency.
The Company shall maintain an office or agency where Securities may be
presented or surrendered for payment. The Company also will maintain in The
City of New York an office or agency where Securities may be surrendered for
registration of transfer, redemption or exchange and where notices and demands
to or upon the Company in respect of the Securities and this Indenture may be
served. The Company will give prompt written notice to the Trustee of the
location and any change in the location of any such offices or agencies. If at
any time the Company shall fail to maintain any such required offices or
agencies or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
office of the agent of the Trustee and the Company hereby appoints the Trustee
such agent as its agent to receive all such presentations, surrenders, notices
and demands.
The Company may 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 such designation. 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 office or agency.
The Trustee shall initially act as Paying Agent for the Securities.
Section 1003. Money for Security Payments to Be Held in Trust.
If the Company or any of its Affiliates shall at any time act as Paying
Agent, it will, on or before each due date of the principal of, premium, if
any, or interest on any of the Securities, segregate and hold in trust for the
benefit of the Holders entitled thereto a sum sufficient to pay the principal,
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.
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If the Company or any of its Affiliates is not acting as Paying Agent, the
Company will, on or before each due date of the principal of, premium, if any,
or interest on any of the Securities, deposit with a Paying Agent a sum in same
day funds sufficient to pay the principal, premium, if any, or interest so
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.
If the Company is not acting as Paying Agent, 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:
(a) hold all sums held by it for the payment of the principal of, premium,
if any, or interest on the 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;
(b) give the Trustee notice of any Default by the Company or any Guarantor
(or any other obligor upon the Securities) in the making of any payment of
principal, premium, if any, or interest on the Securities;
(c) 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; and
(d) acknowledge, accept and agree to comply in all aspects with the
provisions of this Indenture relating to the duties, rights and disabilities of
such Paying Agent.
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
money.
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, 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
promptly be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust;
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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 the New York Times and The Wall Street Journal (national edition), and
mail to each such Holder, 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 notification, publication and mailing, any unclaimed balance of
such money then remaining will promptly be repaid to the Company.
Section 1004. Corporate Existence.
Subject to Article Eight, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect the corporate
existence and related rights and franchises (charter and statutory) of the
Company and each Subsidiary; provided, however, that the Company shall not be
required to preserve any such right or franchise or the corporate existence of
any such Subsidiary if the Board of Directors of the Company shall determine
that the preservation thereof is no longer necessary or desirable in the
conduct of the business of the Company and its Subsidiaries as a whole and that
the loss thereof would not reasonably be expected to have a material adverse
effect on the ability of the Company to perform its obligations hereunder; and
provided, further, however, that the foregoing shall not prohibit a sale,
transfer or conveyance of a Subsidiary or any of its assets in compliance with
the terms of this Indenture.
Section 1005. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged, on
or before the date the same shall become due and payable, (a) all taxes,
assessments and governmental charges levied or imposed upon the Company or any
of its Subsidiaries shown to be due on any return of the Company or any of its
Subsidiaries or otherwise assessed or upon the income, profits or property of
the Company or any of its Subsidiaries if failure to pay or discharge the same
could reasonably be expected to have a material adverse effect on the ability
of the Company or any Guarantor to perform its obligations hereunder and (b)
all lawful claims for labor, materials and supplies, which, if unpaid, would by
law become a Lien upon the property of the Company or any of its Subsidiaries,
except for any Lien permitted to be incurred under Section 1011, if failure to
pay or discharge the same could reasonably be expected to have a material
adverse effect on the ability of the Company or any Guarantor to perform its
obligations hereunder; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or
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validity is being contested in good faith by appropriate proceedings properly
instituted and diligently conducted and in respect of which appropriate
reserves (in the good faith judgment of management of the Company) are being
maintained in accordance with GAAP.
Section 1006. Maintenance of Properties.
The Company shall cause all material properties owned by the Company or
any of its Subsidiaries or used or held for use in the conduct of its business
or the business of any of its Subsidiaries to be maintained and kept in good
condition, repair and working order (ordinary wear and tear excepted) 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 reasonable judgment of the Company may be consistent with sound business
practice and necessary so that the business carried on in connection therewith
may be properly 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 reasonable judgment of the
Company, desirable in the conduct of its business or the business of any of its
Subsidiaries and not reasonably expected to have a material adverse effect on
the ability of the Company to perform its obligations hereunder.
Section 1007. Insurance.
The Company shall at all times keep all of its and its Subsidiaries'
properties which are of an insurable nature insured with insurers, believed by
the Company in good faith to be financially sound and 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 in the
same general geographic areas in which the Company and its Subsidiaries
operate, except where the failure to do so could not reasonably be expected to
have a material adverse effect on the condition (financial or otherwise),
earnings, business affairs or prospects of the Company and its Subsidiaries,
taken as a whole.
Section 1008. Limitation on Indebtedness.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, create, issue, incur, assume, guarantee or otherwise in any
manner become directly or indirectly liable for the payment of or otherwise
incur (collectively, "incur"), any Indebtedness (including any Acquired
Indebtedness but excluding Permitted Indebtedness), unless such Indebtedness is
incurred by the Company or constitutes Acquired Indebtedness of a Restricted
Subsidiary and, in each case, the Company's Consolidated Fixed Charge Coverage
Ratio for the four full fiscal quarters for which
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financial statements are available immediately preceding the incurrence of such
Indebtedness taken as one period is at least equal to or greater than 2.25:1.
For purposes of determining the outstanding principal amount of any
particular Indebtedness Incurred pursuant to this Section, (1) Indebtedness
Incurred pursuant to the Bank Credit Facility prior to or on the date of this
Indenture shall be treated as Incurred pursuant to clause (i) under the
definition of "Permitted Indebtedness," (2) Indebtedness permitted by this
Section need not be permitted solely by reference to one provision permitting
such Indebtedness but may be permitted in part by one such provision and in
part by one or more other provisions of this Section permitting such
Indebtedness and (3) in the event that Indebtedness or any portion thereof
meets the criteria of more than one of the types of Indebtedness described in
this covenant, the Company, in its sole discretion, shall classify such
Indebtedness and only be required to include the amount of such Indebtedness in
one of such clauses. Accordingly, Indebtedness Incurred after the date of this
Indenture, whether Incurred as reborrowings under the Bank Credit Facility or
otherwise, can be allocated as set forth in the preceding sentence.
Section 1009. Limitation on Restricted Payments.
(a) The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution
to holders of, any shares of the Company's Capital Stock (other
than dividends or distributions payable solely in shares of its
Qualified Capital Stock or in options, warrants or other rights to
acquire shares of such Qualified Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire for
value, directly or indirectly, the Company's Capital Stock or any
Capital Stock of any Affiliate of the Company or options, warrants
or other rights to acquire such Capital Stock;
(iii) make any principal payment on, or repurchase, redeem,
defease, retire or otherwise acquire for value, prior to any
scheduled principal payment, sinking fund payment or maturity, any
Subordinated Indebtedness;
(iv) declare or pay any dividend or distribution on any
Capital Stock of any Restricted Subsidiary to any Person (other
than (a) to the Company or any of its Wholly Owned Restricted
Subsidiaries or (b) to all
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holders of Capital Stock of such Restricted Subsidiary on a pro
rata basis); or
(v) make or permit the existence of any Investment in any
Person (other than any Permitted Investments)
(any of the foregoing actions described in clauses (i) through (v), other than
any such action that is a Permitted Payment (as defined below), collectively,
"Restricted Payments") (the amount of any such Restricted Payment, if other
than cash, as determined by the Board of Directors of the Company, whose
determination shall be conclusive and evidenced by a Board Resolution), unless
(1) immediately before and immediately after giving effect to such proposed
Restricted Payment on a pro forma basis, no Default or Event of Default shall
have occurred and be continuing and such Restricted Payment shall not be an
event which is, or after notice or lapse of time or both, would be, an "event
of default" under the terms of any Indebtedness of the Company or its
Subsidiaries; (2) immediately before and immediately after giving effect to
such Restricted Payment on a pro forma basis, the Company could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under the
provisions of Section 1008; and (3) after giving effect to the proposed
Restricted Payment, the aggregate amount of all such Restricted Payments
declared or made after the date of this Indenture, does not exceed the sum of:
(A) 50% of the aggregate Consolidated Net Income of
the Company accrued on a cumulative basis during the period
beginning on the first day of the full fiscal quarter
immediately preceding the date of this Indenture and ending on
the last day of the Company's last fiscal quarter ending prior
to the date of the Restricted Payment (or, if such aggregate
cumulative Consolidated Net Income shall be a loss, minus 100%
of such loss);
(B) the aggregate Net Cash Proceeds received after
the date of this Indenture by the Company either (x) as
capital contributions to the Company or (y) from the issuance
or sale (other than to any of its Subsidiaries) of Qualified
Capital Stock of the Company or any options, warrants or
rights to purchase such Qualified Capital Stock 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 in clause (ii) or
(iii) of paragraph (b) below);
(C) the aggregate Net Cash Proceeds received after
the date of this Indenture by the Company (other than from any
of its Subsidiaries)
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upon the exercise of any options, warrants or rights to
purchase Qualified Capital Stock of the Company;
(D) the aggregate Net Cash Proceeds received after
the date of this Indenture by the Company from the conversion
or exchange, if any, of debt securities or Redeemable Capital
Stock of the Company or its Subsidiaries into or for Qualified
Capital Stock of the Company plus, to the extent such debt
securities or Redeemable Capital Stock were issued after the
date of this Indenture, the aggregate of Net Cash Proceeds
from their original issuance;
(E) (x) in the case of the disposition or repayment
of any Investment constituting a Restricted Payment made after
the date of this Indenture, an amount equal to the lesser of
the return of capital with respect to such Investment and the
initial amount of such Investment, in either case, less the
cost of the disposition of such Investment and (y) an amount
equal to the net reduction in Investments resulting from the
redesignation of Unrestricted Subsidiaries as Restricted
Subsidiaries (valued in each case as provided in the
definition of "Investments"), not to exceed in each case the
amount of Investments previously made by the Company or any
Restricted Subsidiary in such Unrestricted Subsidiary; and
(F) $20 million.
(b) Notwithstanding the foregoing, and in the case of clauses (ii)
through (ix) below, so long as there is no Default or Event of Default
continuing, the foregoing provisions shall not prohibit the following actions
(each of clauses (i) through (vi) being referred to as a "Permitted Payment"):
(i) the payment of any dividend within 60 days after the date
of declaration thereof, if at such date of declaration such payment
was permitted by the provisions of paragraph (a) of this Section and
such payment shall have been deemed to have been paid on such date
of declaration and shall not have been deemed a "Permitted Payment"
for purposes of the calculation required by paragraph (a) of this
Section;
(ii) the repurchase, redemption, or other acquisition or
retirement for value of any shares of any class of Capital Stock of
the Company in exchange for (including any such exchange pursuant to
the exercise of a conversion right or privilege in connection with
which cash is paid in lieu of the issuance of fractional shares or
scrip), or out of the Net
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Cash Proceeds of a substantially concurrent issue and sale for cash
(other than to any Subsidiary) of, other shares of Qualified Capital
Stock of the Company; provided that the Net Cash Proceeds from the
issuance of such shares of Qualified Capital Stock are excluded from
clause (3)(B) of paragraph (a) of this Section;
(iii) the repurchase, redemption, defeasance, retirement or
acquisition for value or payment of principal of any Subordinated
Indebtedness or Redeemable Capital Stock in exchange for, or in an
amount not in excess of the Net Cash Proceeds of, a substantially
concurrent issuance and sale for cash (other than to any Subsidiary)
of any Qualified Capital Stock of the Company, provided that the Net
Cash Proceeds from the issuance of such shares of Qualified Capital
Stock are excluded from clause (3)(B) of paragraph (a) of this
Section;
(iv) the repurchase, redemption, defeasance, retirement,
refinancing, acquisition for value or payment of principal of any
Subordinated Indebtedness (other than Redeemable Capital Stock) (a
"refinancing") through the substantially concurrent issuance of new
Subordinated Indebtedness of the Company, provided that any such new
Subordinated Indebtedness (1) shall be in a principal amount that
does not exceed the principal amount so refinanced (or, if such
Subordinated Indebtedness provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, then such lesser amount as of the date of
determination), plus the lesser of (I) the stated amount of any
premium or other payment required to be paid in connection with such
a refinancing pursuant to the terms of the Indebtedness being
refinanced or (II) the amount of premium or other payment actually
paid at such time to refinance the Indebtedness, plus, in either
case, the amount of expenses of the Company incurred in connection
with such refinancing; (2) has an Average Life to Stated Maturity
greater than the remaining Average Life to Stated Maturity of the
Securities; (3) has a Stated Maturity for its final scheduled
principal payment later than the Stated Maturity for the final
scheduled principal payment of the Securities; and (4) is expressly
subordinated in right of payment to the Securities at least to the
same extent as the Subordinated Indebtedness to be refinanced;
(v) the repurchase, redemption, defeasance, retirement,
refinancing, acquisition for value or payment of any Redeemable
Capital Stock through the substantially concurrent issuance of new
Redeemable Capital Stock of the Company, provided that any such new
Redeemable
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Capital Stock (1) shall have an aggregate liquidation preference
that does not exceed the aggregate liquidation preference of the
amount so refinanced; (2) has an Average Life to Stated Maturity
greater than the remaining Average Life to Stated Maturity of the
Securities; and (3) has a Stated Maturity later than the Stated
Maturity for the final scheduled principal payment of the
Securities;
(vi) the repurchase by the Company of up to 5 million shares of
Common Stock pursuant to the Equity Dutch Auction, provided,
however, that in the event all such 5 million shares are not
purchased pursuant to such Equity Dutch Auction, the Company may
repurchase pursuant to tender offers or open market purchases the
difference between 5 million shares of Common Stock and the number
of shares of Common Stock actually purchased in the Equity Dutch
Auction;
(vii) payments or distributions to dissenting stockholders
pursuant to applicable law, pursuant to or in connection with a
consolidation, merger or transfer of assets that complies with the
provisions of the Indenture applicable to mergers, consolidations
and transfers of all or substantially all of the property and assets
of the Company;
(viii) the repurchase of shares, or options to purchase shares,
of Capital Stock of the Company from employees, former employees,
directors or former directors of the Company or any of its
Subsidiaries (or permitted transferees of such employees, former
employees, directors or former directors), pursuant to the terms of
agreements (including employment agreements) or plans (or amendments
thereto) approved by the Board of Directors under which such persons
purchase or sell or are granted the option to purchase or sell,
shares of such stock; provided, however, that the aggregate amount
of such repurchases shall not exceed $1 million in any calendar year
(unless such repurchases are made with the proceeds of insurance
policies and the shares of Capital Stock are repurchased from the
executors, administrators, testamentary trustees, heirs, legatees or
beneficiaries) plus the aggregate Net Cash Proceeds from any
reissuance during such calendar year of Capital Stock to employees
or directors of the Company or its Subsidiaries; or
(ix) any purchase of any fractional share of Common Stock of
the Company resulting from (A) any dividend or other distribution on
outstanding shares of Common Stock of the Company that is payable in
shares of such Common Stock (including any stock split or
subdivision of
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the outstanding Common Stock of the Company), (B) any combination of
all of the outstanding shares of Common Stock of the Company, (C)
any reorganization or consolidation of the Company or any merger of
the Company with or into any other Person or (D) the conversion of
any securities of the Company into shares of Common Stock.
Section 1010. Limitation on Transactions with Affiliates.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into any transaction or series
of related transactions (including, without limitation, the sale, purchase,
exchange or lease of assets, property or services) with or for the benefit of
any Affiliate of the Company (other than the Company or a Wholly Owned
Restricted Subsidiary) unless such transaction or series of related
transactions is entered into in good faith and (a) such transaction or series
of related transactions is on terms that are no less favorable to the Company
or such Subsidiary, as the case may be, than those that would be available in a
comparable transaction in arm's-length dealings with an unrelated third party,
(b) with respect to any transaction or series of related transactions involving
aggregate value in excess of $1 million, the Company delivers an officers'
certificate to the Trustee certifying that such transaction or series of
related transactions complies with clause (a) above, and (c) with respect to
any transaction or series of related transactions involving aggregate value in
excess of $5 million, such transaction or series of related transactions has
been approved by a majority of the Disinterested Directors of the Company, or
in the event there is only one Disinterested Director, by such Disinterested
Director; provided, however, that this provision shall not apply to any
transaction with (i) an officer or director of the Company entered into in the
ordinary course of business (including compensation and employee benefit
arrangements with any officer, director or employee of the Company, including
under any stock option or stock incentive plans); (ii) pursuant to an agreement
or arrangement in existence on the date of this Indenture; or (iii) pursuant
to a Permitted Agreement.
Section 1011. Limitation on Liens.
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, create, incur or affirm any Lien of any kind securing
any Pari Passu Indebtedness or Subordinated Indebtedness (including any
assumption, guarantee or other liability with respect thereto by any Restricted
Subsidiary) upon any property or assets (including any intercompany notes) of
the Company or any Restricted Subsidiary owned on the date of this Indenture or
acquired after the date of this Indenture, or any income or profits therefrom,
unless the Securities are directly secured equally and ratably with (or, in the
case of Subordinated Indebtedness, prior or senior thereto, with the same
relative priority as the Securities shall have with respect to such
Subordinated Indebtedness) the
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obligation or liability secured by such Lien except for Liens (A) securing any
Indebtedness which became Indebtedness pursuant to a transaction permitted
under Article Eight hereof or securing Acquired Indebtedness which, in each
case, were created prior to (and not created in connection with, or in
contemplation of) the incurrence of such Pari Passu Indebtedness or
Subordinated Indebtedness (including any assumption, guarantee or other
liability with respect thereto by any Restricted Subsidiary) and which
Indebtedness is permitted under the provisions of Section 1008 hereof or (B)
securing any Indebtedness incurred in connection with any refinancing, renewal,
substitutions or replacements of any such Indebtedness described in clause (A),
so long as the aggregate principal amount of Indebtedness represented thereby
is not increased by such refinancing plus the lesser of (i) the stated amount
of any premium or other payment required to be paid in connection with such a
refinancing pursuant to the terms of the Indebtedness being refinanced or (ii)
the amount of premium or other payment actually paid at such time to refinance
the Indebtedness, plus, in either case, the amount of expenses of the Company
incurred in connection with such refinancing, provided, however, that in the
case of clauses (A) and (B), any such Lien only extends to the assets that were
subject to such Lien securing such Indebtedness prior to the related
acquisition by the Company or its Restricted Subsidiaries.
Section 1012. Limitation on Sale of Assets.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, consummate an Asset Sale unless (i) at
least 75% of the consideration from such Asset Sale is received in cash and
(ii) the Company or such Subsidiary receives consideration at the time of such
Asset Sale at least equal to the Fair Market Value of the shares or assets
subject to such Asset Sale (as determined by the board of directors of the
Company and evidenced in a board resolution); provided, however, that clause
(i) shall not be applicable to Asset Sales during any 12 month period involving
assets with an aggregate Fair Market Value of less than 10% of the Consolidated
Net Tangible Assets of the Company as of the end of the last fiscal quarter
prior to the execution of the agreement for such Asset Sale.
(b) If all or a portion of the Net Cash Proceeds of any Asset Sale are not
required to be applied to repay permanently any Senior Indebtedness then
outstanding as required by the terms thereof, or the Company determines not to
apply such Net Cash Proceeds to the permanent prepayment of such Senior
Indebtedness, or if no such Senior Indebtedness is then outstanding, then the
Company or a Subsidiary may, within 180 days of the Asset Sale invest the Net
Cash Proceeds in properties and other assets that (as determined by the board
of directors of the Company) replace the properties and assets that were the
subject of the Asset Sale or in properties and assets that will be used in the
businesses of the Company or its Subsidiaries existing on the date of the
Indenture or in
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businesses reasonably related thereto. The amount of such Net Cash Proceeds
not used or invested within 180 days of the Asset Sale as set forth in this
paragraph constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $15 million, the
Company will apply the Excess Proceeds to the repayment of the Securities and
any other Pari Passu Indebtedness outstanding with similar provisions requiring
the Company to make an offer to purchase such Indebtedness with the proceeds
from any Asset Sale as follows: (A) the Company will make an offer to purchase
(an "Offer") from all holders of the Securities in accordance with the
procedures set forth herein in the maximum principal amount (expressed as a
multiple of $1,000) of Securities that may be purchased out of an amount (the
"Security 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 such Pari Passu Indebtedness (subject to
proration in the event such amount is less than the aggregate Offered Price (as
defined herein) of all Securities tendered) and (B) to the extent required by
such Pari Passu Indebtedness to permanently reduce the principal amount of such
Pari Passu Indebtedness, the Company will 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 Security Amount; provided that in no event will 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 for the Securities will be payable in cash in an amount equal to
100% of the principal amount of the Securities plus accrued and unpaid
interest, if any, to the date (the "Offer Date") such Offer is consummated (the
"Offered Price"), in accordance with the procedures set forth herein. To the
extent that the aggregate Offered Price of the Securities tendered pursuant to
the Offer is less than the Security Amount relating thereto or the aggregate
amount of Pari Passu Indebtedness that is purchased in a Pari Passu Offer is
less than the Pari Passu Debt Amount, the Company will use any remaining Excess
Proceeds for general corporate purposes. If the aggregate principal amount of
Securities and Pari Passu Indebtedness surrendered by holders thereof exceeds
the amount of Excess Proceeds, the Trustee shall select the Securities to be
purchased on a pro rata basis. Upon the completion of the purchase of all the
Securities tendered pursuant to an Offer and the completion of a Pari Passu
Offer, the amount of Excess Proceeds, if any, shall be reset at zero.
(d) If the Company becomes obligated to make an Offer pursuant to clause
(c) above, the Securities and the Pari Passu Indebtedness shall be purchased by
the Company, at the option of the holders thereof, in whole or in part in
integral multiples of
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$1,000, on a date that is not earlier than 30 days and not later than 60 days
from the date the notice of the Offer is given to holders, or such later date
as may be necessary for the Company to comply with the requirements under the
Exchange Act.
(e) The Company will comply with the applicable tender offer rules,
including Rule 14e-1 under the Exchange Act, and any other applicable
securities laws or regulations in connection with an Offer.
(f) Subject to paragraph (e) above, within 30 days after the date on which
the amount of Excess Proceeds equals or exceeds $10,000,000, the Company shall
send or cause to be sent by first-class mail, postage prepaid, to the Trustee
and to each Holder, at his address appearing in the Security Register, a notice
stating or including:
(1) that the Holder has the right to require the Company to
repurchase, subject to proration, such Holder's Securities at the
Offered Price;
(2) the Offer Date;
(3) the instructions a Holder must follow in order to have his
Securities purchased in accordance with paragraph (c) of this
Section;
(4) (i) the most recently filed Annual Report on Form 10-K
(including audited consolidated financial statements) of the
Company, the most recent subsequently filed Quarterly Report on
Form 10-Q, as applicable, and any Current Report on Form 8-K of the
Company filed subsequent to such Quarterly Report, other than
Current Reports describing Asset Sales otherwise described in the
offering materials (or corresponding successor reports) (or in the
event the Company is not required to prepare any of the foregoing
Forms, the comparable information required pursuant to Section
1019), (ii) a description of material developments, if any, in the
Company's business subsequent to the date of the latest of such
Reports, (iii) if material, appropriate pro forma financial
information, and (iv) such other information, if any, concerning
the business of the Company which the Company in good faith
believes will enable such Holders to make an informed investment
decision regarding the Offer;
(5) the Offered Price;
(6) the names and addresses of the Paying Agent and the
offices or agencies referred to in Section 1002;
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(7) that Securities must be surrendered prior to the Offer
Date to the Paying Agent at the office of the Paying Agent or to an
office or agency referred to in Section 1002 to collect payment;
(8) that any Securities not tendered will continue to accrue
interest and that unless the Company defaults in the payment of the
Offered Price, any Security accepted for payment pursuant to the
Offer shall cease to accrue interest on and after the Offer Date;
(9) the procedures for withdrawing a tender; and
(10) that the Offered Price for any Security which has been
properly tendered and not withdrawn and which has been accepted for
payment pursuant to the Offer will be paid promptly following the
Offered Date.
(g) Holders electing to have Securities purchased hereunder will be
required to surrender such Securities at the address specified in the notice
prior to the Offer Date. Holders will be entitled to withdraw their election
to have their Securities purchased pursuant to this Section 1012 if the Company
receives, not later than one Business Day prior to the Offer Date, a telegram,
telex, facsimile transmission or letter setting forth (1) the name of the
Holder, (2) the certificate number of the Security in respect of which such
notice of withdrawal is being submitted, (3) the principal amount of the
Security (which shall be $1,000 or an integral multiple thereof) delivered for
purchase by the Holder as to which his election is to be withdrawn, (4) a
statement that such Holder is withdrawing his election to have such principal
amount of such Security purchased, and (5) the principal amount, if any, of
such Security (which shall be $1,000 or an integral multiple thereof) that
remains subject to the original notice of the Offer and that has been or will
be delivered for purchase by the Company.
(h) The Company shall (i) not later than the Offer Date, accept for
payment Securities or portions thereof tendered pursuant to the Offer, (ii) not
later than 10:00 a.m. (New York time) on the Offer Date, deposit with the
Trustee or with a Paying Agent an amount of money in same day funds (or New
York Clearing House funds if such deposit is made prior to the Offer Date)
sufficient to pay the aggregate Offered Price of all the Securities or portions
thereof which are to be purchased on that date and (iii) not later than 10:00
a.m. (New York time) on the Offer Date, deliver to the Paying Agent an
Officers' Certificate stating the Securities or portions thereof 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 Offered
Price of the Securities purchased from each such Holder, and the Company shall
execute and the Trustee shall promptly
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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 Paying
Agent at the Company's expense to the Holder thereof. For purposes of this
Section 1012, the Company shall choose a Paying Agent which shall not be the
Company.
Subject to applicable escheat laws, the Trustee and the Paying Agent shall
return to the Company any cash that remains unclaimed, together with interest,
if any, thereon, held by them for the payment of the Offered Price; provided,
however, that (x) to the extent that the aggregate amount of cash deposited by
the Company with the Trustee in respect of an Offer exceeds the aggregate
Offered Price of the Securities or portions thereof to be purchased, then the
Trustee shall hold such excess for the Company and (y) unless otherwise
directed by the Company in writing, promptly after the Business Day following
the Offer Date the Trustee shall return any such excess to the Company together
with interest or dividends, if any, thereon.
(i) Securities to be purchased shall, on the Offer Date, become due and
payable at the Offered Price and from and after such date (unless the Company
shall default in the payment of the Offered Price) such Securities shall cease
to bear interest. Such Offered Price shall be paid to such Holder promptly
following the later of the Offer Date and the time of delivery of such Security
to the relevant Paying Agent at the office of such Paying Agent by the Holder
thereof in the manner required. Upon surrender of any such Security for
purchase in accordance with the foregoing provisions, such Security shall be
paid by the Company at the Offered Price; provided, however, that installments
of interest whose Stated Maturity is on or prior to the Offer Date shall be
payable to the Person in whose name the Securities (or any Predecessor
Securities) is registered as such on the relevant Regular Record Dates
according to the terms and the provisions of Section 309; provided, further,
that Securities to be purchased are subject to proration in the event the
Excess Proceeds are less than the aggregate Offered Price of all Securities
tendered for purchase, with such adjustments as may be appropriate by the
Trustee so that only Securities in denominations of $1,000 or integral
multiples thereof, shall be purchased. If any Security tendered for purchase
shall not be so paid upon surrender thereof by deposit of funds with the
Trustee or a Paying Agent in accordance with paragraph (h) above, the principal
thereof (and premium, if any, thereon) shall, until paid, bear interest from
the Offer Date at the rate borne by such Security. Any Security that is to be
purchased only in part shall be surrendered to a Paying Agent at the office of
such Paying Agent (with, if the Company, the Security Registrar or the Trustee
so requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Security Registrar or 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, one or
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more new Securities of any authorized denomination as requested by such Holder
in an aggregate principal amount equal to, and in exchange for, the portion of
the principal amount of the Security so surrendered that is not purchased. The
Company shall publicly announce the results of the Offer on or as soon as
practicable after the Offer Date.
Section 1013. Limitation on Issuances of Guarantees of Indebtedness.
(a) The Company will not permit any Restricted Subsidiary other than the
Guarantors, directly or indirectly, to guarantee, assume or in any other manner
become liable with respect to any Pari Passu Indebtedness or Subordinated
Indebtedness of the Company unless such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture to the Indenture providing for a
Guarantee of the Securities on the same terms as the guarantee of such
Indebtedness except that (A) such guarantee need not be secured unless required
pursuant to Section 1011 and (B) if such Indebtedness is by its terms expressly
subordinated to the Securities, any such assumption, guarantee or other
liability of such Restricted Subsidiary with respect to such Indebtedness shall
be subordinated to such Restricted Subsidiary's Guarantee of the Securities at
least to the same extent as such Indebtedness is subordinated to the Securities
pursuant to the terms of this Indenture.
(b) Notwithstanding the foregoing, any Guarantee by a Restricted
Subsidiary of the Securities shall provide by its terms that it (and all Liens
securing the same) shall be automatically and unconditionally released and
discharged upon any sale, exchange or transfer, to any Person not an Affiliate
of the Company, of all of the Company's Capital Stock in, or all or
substantially all the assets of, such Subsidiary, which transaction is in
compliance with the terms of this Indenture and such Restricted Subsidiary is
released from its guarantees of other Indebtedness of the Company or any
Restricted Subsidiaries.
Section 1014. Limitation on Senior Subordinated Indebtedness.
The Company will not, and will not permit any Guarantor to, directly or
indirectly, create, incur, issue, assume, guarantee or otherwise in any manner
become directly or indirectly liable for or with respect to or otherwise permit
to exist any Indebtedness that is subordinate in right of payment to any
Indebtedness of the Company or such Guarantor, as the case may be, unless such
Indebtedness is also pari passu with the Securities or the Guarantee of such
Guarantor or subordinate in right of payment to the Securities or such
Guarantee for at least to the same extent as the Securities or such Guarantee
are subordinate in right of payment to Senior Indebtedness or Senior
Indebtedness of such Guarantor, as the case may be.
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Section 1015. Purchase of Securities upon a Change of Control.
(a) If a Change of Control shall occur at any time, then each Holder shall
have the right to require that the Company purchase such Holder's Securities in
whole or in part in integral multiples of $1,000, at a purchase price (the
"Change of Control Purchase Price") in cash in an amount equal to 101% of the
principal amount of such Securities, plus accrued and unpaid interest, if any,
to the date of purchase (the "Change of Control Purchase Date"), pursuant to
the offer described below in this Section 1015 (the "Change of Control Offer")
and in accordance with the other procedures set forth in subsections (b), (c),
(d) and (e) of this Section 1015.
(b) Within 30 days of any Change of Control, the Company shall notify the
Trustee thereof and give written notice (a "Change of Control Purchase Notice")
of such Change of Control to each Holder by first-class mail, postage prepaid,
at his address appearing in the Security Register, stating among other things:
(1) that a Change of Control has occurred, the date of such
event, and that such Holder has the right to require the Company to
repurchase such Holder's Securities at the Change of Control
Purchase Price;
(2) the circumstances and relevant facts regarding such Change
of Control (including but not limited to information with respect
to pro forma historical income, cash flow and capitalization after
giving effect to such Change of Control);
(3) (i) the most recently filed Annual Report on Form 10-K
(including audited consolidated financial statements) of the
Company, the most recent subsequently filed Quarterly Report on
Form 10-Q, as applicable, and any Current Report on Form 8-K of the
Company filed subsequent to such Quarterly Report (or in the event
the Company is not required to prepare any of the foregoing Forms,
the comparable information required to be prepared by the Company
and any Guarantor pursuant to Section 1019), (ii) a description of
material developments, if any, in the Company's business subsequent
to the date of the latest of such reports and (iii) such other
information, if any, concerning the business of the Company which
the Company in good faith believes will enable such Holders to make
an informed investment decision regarding the Change of Control
Offer;
(4) that the Change of Control Offer is being made pursuant to
this Section 1015 and that all Securities properly tendered
pursuant to the Change of Control Offer will be accepted for
payment at the Change of Control Purchase Price;
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(5) the Change of Control Purchase Date, which shall be a
Business Day no earlier than 30 days nor later than 60 days from
the date such notice is mailed, or such later date as is necessary
to comply with requirements under the Exchange Act;
(6) the Change of Control Purchase Price;
(7) the names and addresses of the Paying Agent and the
offices or agencies referred to in Section 1002;
(8) that Securities must be surrendered on or prior to the
Change of Control Purchase Date to the Paying Agent at the office
of the Paying Agent or to an office or agency referred to in
Section 1002 to collect payment;
(9) that the Change of Control Purchase Price for any Security
which has been properly tendered and not withdrawn will be paid
promptly following the Change of Control Offer Purchase Date;
(10) the procedures that a Holder must follow to accept a
Change of Control Offer or to withdraw such acceptance;
(11) that any Security not tendered will continue to accrue
interest; and
(12) that, unless the Company defaults in the payment of the
Change of Control Purchase Price, any Securities accepted for
payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Purchase Date.
(c) Upon receipt by the Company of the proper tender of Securities,
the Holder of the Security in respect of which such proper tender was made shall
(unless the tender of such Security is properly withdrawn) thereafter be
entitled to receive solely the Change of Control Purchase Price with respect to
such Security. Upon surrender of any such Security for purchase in accordance
with the foregoing provisions, such Security shall be paid by the Company at
the Change of Control Purchase Price; provided, however, that installments of
interest whose Stated Maturity is on or prior to the Change of Control Purchase
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such on the relevant Regular Record Dates
according to the terms and the provisions of Section 308. If any Security
tendered for purchase in accordance with the provisions of this Section 1015
shall not be so paid upon surrender thereof, the principal thereof (and
premium, if any, thereon) shall, until paid,
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bear interest from the Change of Control Purchase Date at the rate borne by
such Security. Holders electing to have Securities purchased will be required
to surrender such Securities to the Paying Agent at the address specified in
the Change of Control Purchase Notice at least one Business Day prior to the
Change of Control Purchase Date. Any Security that is to be purchased only in
part shall be surrendered to a Paying Agent at the office of such Paying Agent
(with, if the Company, the Security Registrar or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Security Registrar or the Trustee, as the case may be, 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, one or more new
Securities of any authorized denomination as requested by such Holder in an
aggregate principal amount equal to, and in exchange for, the portion of the
principal amount of the Security so surrendered that is not purchased.
(d) The Company shall (i) not later than the Change of Control Purchase
Date, accept for payment Securities or portions thereof tendered pursuant to
the Change of Control Offer, (ii) not later than 10:00 a.m. (New York time) on
the Change of Control Purchase Date, deposit with the Trustee or with a Paying
Agent an amount of money in same day funds (or New York Clearing House funds if
such deposit is made prior to the Change of Control Purchase Date) sufficient
to pay the aggregate Change of Control Purchase Price of all the Securities or
portions thereof which are to be purchased as of the Change of Control Purchase
Date and (iii) not later than 10:00 a.m. (New York time) on the Change of
Control Purchase Date, deliver to the Paying Agent an Officers' Certificate
stating the Securities or portions thereof 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 Change of Control Purchase Price of
the Securities purchased from each such Holder, and the Company shall execute
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 Paying Agent at the Company's expense to the Holder
thereof. The Company will publicly announce the results of the Change of
Control Offer on the Change of Control Purchase Date. For purposes of this
Section 1015, the Company shall choose a Paying Agent which shall not be the
Company.
(e) A tender made in response to a Change of Control Purchase Notice may
be withdrawn if the Company receives, not later than one Business Day prior to
the Change of Control Purchase Date, a telegram, telex, facsimile transmission
or letter, specifying, as applicable:
(1) the name of the Holder;
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(2) the certificate number of the Security in respect of which
such notice of withdrawal is being submitted;
(3) the principal amount of the Security (which shall be
$1,000 or an integral multiple thereof) delivered for purchase by
the Holder as to which such notice of withdrawal is being
submitted;
(4) a statement that such Holder is withdrawing his election
to have such principal amount of such Security purchased; and
(5) the principal amount, if any, of such Security (which
shall be $1,000 or an integral multiple thereof) that remains
subject to the original Change of Control Purchase Notice and that
has been or will be delivered for purchase by the Company.
(f) Subject to applicable escheat laws, the Trustee and the Paying
Agent shall return to the Company any cash that remains unclaimed, together with
interest or dividends, if any, thereon, held by them for the payment of the
Change of Control Purchase Price; provided, however, that, (x) to the extent
that the aggregate amount of cash deposited by the Company pursuant to clause
(ii) of paragraph (d) above exceeds the aggregate Change of Control Purchase
Price of the Securities or portions thereof to be purchased, then the Trustee
shall hold such excess for the Company and (y) unless otherwise directed by the
Company in writing, promptly after the Business Day following the Change of
Control Purchase Date the Trustee shall return any such excess to the Company
together with interest, if any, thereon.
(g) The Company shall comply with the applicable tender offer rules,
including Rule 14e-1 under the Exchange Act, and any other applicable
securities laws or regulations in connection with a Change of Control Offer.
Section 1016. Limitation on Restricted Subsidiary Capital Stock.
The Company will not permit (a) any Restricted Subsidiary of the
Company to issue, sell or transfer any Capital Stock, except for (i) Capital
Stock issued or sold to, held by or transferred to the Company or a Wholly Owned
Restricted Subsidiary, and (ii) Capital Stock issued by a Person prior to the
time (A) such Person becomes a Restricted Subsidiary, (B) such Person merges
with or into a Restricted Subsidiary or (C) a Restricted Subsidiary merges with
or into such Person; provided that such Capital Stock was not issued or
incurred by such Person in anticipation of the type of transaction contemplated
by subclause (A), (B) or (C) or (b) any Person (other than the Company or a
Wholly Owned Restricted Subsidiary) to acquire Capital Stock of any Restricted
Subsidiary from the Company or any Restricted Subsidiary, except, in the case
of clause
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(a) or (b), upon the acquisition of all the outstanding Capital Stock of such
Restricted Subsidiary in accordance with the terms of this Indenture.
Section 1017. Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to (i) pay dividends or
make any other distribution on its Capital Stock, (ii) pay any Indebtedness
owed to the Company or any other Restricted Subsidiary, (iii) make any
Investment in the Company or any other Restricted Subsidiary or (iv) transfer
any of its properties or assets to the Company or any other Restricted
Subsidiary, except for: (a) any encumbrance or restriction pursuant to any
agreement in effect on the date of this Indenture and listed on a schedule to
this Indenture; (b) any encumbrance or restriction, with respect to a
Restricted Subsidiary that is not a Restricted Subsidiary of the Company on the
date of this Indenture, in existence at the time such Person becomes a
Restricted Subsidiary of the Company and not incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary; (c) any
encumbrance or restriction existing under any agreement that extends, renews,
refinances or replaces the agreements containing the encumbrances or
restrictions in the foregoing clauses (a) and (b), or in this clause (c),
provided that the terms and conditions of any such encumbrances or restrictions
are no more restrictive in any material respect than those under or pursuant to
the agreement evidencing the Indebtedness so extended, renewed, refinanced or
replaced; (d) in the case of clause (iv) of this Section, (A) any encumbrance
or restriction that restricts in a customary manner the subletting, assignment
or transfer of any property or asset that is a lease, license, conveyance or
contract or similar property or asset, (B) existing by virtue of any transfer
of, agreement to transfer, option or right with respect to, or Lien on, any
property or assets of the Company or any Restricted Subsidiary not otherwise
prohibited by this Indenture or (C) arising or agreed to in the ordinary course
of business, not relating to any Indebtedness, and that do not, individually or
in the aggregate, detract from the value of property or assets of the Company
or any Restricted Subsidiary in any manner material to the Company or any
Restricted Subsidiary; or (e) any encumbrance or restriction with respect to a
Restricted Subsidiary and imposed pursuant to an agreement that has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock of, or property and assets of, such Restricted Subsidiary.
Section 1018. Limitations on Unrestricted Subsidiaries.
The Company will not make, and will not permit its Restricted Subsidiaries
to make, any Investment in Unrestricted Subsidiaries if, at the time thereof,
the aggregate
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amount of such Investments would exceed the amount of Restricted Payments then
permitted to be made pursuant to Section 1009. Any Investments in Unrestricted
Subsidiaries permitted to be made pursuant to this covenant (i) will be treated
as a Restricted Payment in calculating the amount of Restricted Payments made
by the Company and (ii) may be made in cash or property.
Section 1019. Provision of Financial Statements.
Whether or not the Company is subject to Section 13(a) or 15(d) of the
Exchange Act, the Company will, to the extent permitted under the Exchange Act,
file with the Commission the annual reports, quarterly reports and other
documents which the Company would have been required to file with the
Commission pursuant to Sections 13(a) or 15(d) if the Company were so subject,
such documents to be filed with the Commission on or prior to the date (the
"Required Filing Date") by which the Company would have been required so to
file such documents if the Company were so subject. The Company will also in
any event (x) within 15 days of each Required Filing Date (i) transmit by mail
to all holders, as their names and addresses appear in the security register,
without cost to such holders and (ii) file with the Trustee copies of the
annual reports, quarterly reports and other documents which the Company would
have been required to file with the Commission pursuant to Sections 13(a) or
15(d) of the Exchange Act if the Company were subject to either of such
Sections and (y) if filing such documents by the Company with the Commission is
not permitted under the Exchange Act, promptly upon written request and payment
of the reasonable cost of duplication and delivery, supply copies of such
documents to any prospective holder at the Company's cost. If any Guarantor's
financial statements would be required to be included in the financial
statements filed or delivered pursuant to this Indenture if the Company were
subject to Section 13(a) or 15(d) of the Exchange Act, the Company shall
include such Guarantor's financial statements in any filing or delivery
pursuant to this Indenture.
Section 1020. Statement by Officers as to Default.
(a) The Company will deliver to the Trustee, on or before a date not more
than 60 days after the end of each fiscal quarter and not more than 120 days
after the end of each fiscal year of the Company ending after the date hereof,
a written statement signed by two executive officers of the Company, one of
whom shall be the principal executive officer, principal financial officer or
principal accounting officer of the Company, as to compliance herewith,
including whether or not, after a review of the activities of the Company
during such year or such quarter and of the Company's and each Guarantor's
performance under this Indenture, to the best knowledge, based on such review,
of the signers thereof, the Company and each Guarantor have fulfilled all of
their respective obligations and are in compliance with all conditions and
covenants under this
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Indenture throughout such year or quarter, as the case may be, and, if there
has been a Default specifying each Default and the nature and status thereof
and any actions being taken by the Company with respect thereto.
(b) When any Default or Event of Default has occurred and is continuing,
or if the Trustee or any Holder or the trustee for or the holder of any other
evidence of Indebtedness of the Company or any Subsidiary gives any notice or
takes any other action with respect to a claimed default, the Company shall
deliver to the Trustee by registered or certified mail or facsimile
transmission followed by hard copy an Officers' Certificate specifying such
Default, Event of Default, notice or other action, the status thereof and what
actions the Company is taking or proposes to take with respect thereto, within
five Business Days of its occurrence.
Section 1021. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 1006 through 1011, 1013, 1014 and
1016 through 1020, if, before or after the time for such compliance, the
Holders of not less than a majority in aggregate principal amount of the
Securities at the time Outstanding shall, by Act of such Holders, waive such
compliance in such instance with such covenant or provision, but no such waiver
shall extend to or affect such covenant 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
covenant or condition shall remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Rights of Redemption.
The Securities are subject to redemption at any time on or after ,
2002, at the option of the Company, in whole or in part, 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
(subject to the right of Holders of record on relevant Regular Record Dates and
Special Record Dates to receive interest due on relevant Interest Payment Dates
and Special Payment Dates).
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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 Eleven.
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 Company Order and an Officers' Certificate. In
case of any redemption at the election of the Company, the Company shall, not
less than 45 nor more than 60 days prior to the Redemption Date fixed by the
Company (unless a shorter notice period shall be satisfactory to the Trustee),
notify the Trustee in writing of such Redemption Date and of the principal
amount of Securities to be redeemed.
Section 1104. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities or portions thereof to be redeemed shall be selected not more than
45 days prior to the Redemption Date. The Trustee shall select the Securities
or portions thereof to be redeemed pro rata, by lot or by any other method the
Trustee shall deem fair and reasonable. The amounts to be redeemed shall be
equal to $1,000 or any integral multiple thereof.
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.
Section 1105. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 days nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at its address appearing in
the Security Register.
All notices of redemption shall state:
(a) the Redemption Date;
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(b) the Redemption Price;
(c) if less than all Outstanding Securities are to be redeemed, the
identification of the particular Securities to be redeemed;
(d) in the case of a Security to be redeemed in part, the principal amount
of such Security to be redeemed and that after the Redemption Date upon
surrender of such Security, new Security or Securities in the aggregate
principal amount equal to the unredeemed portion thereof will be issued;
(e) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(f) that on the Redemption Date the Redemption Price will become due and
payable upon each such Security or portion thereof to be redeemed, and that
(unless the Company shall default in payment of the Redemption Price) interest
thereon shall cease to accrue on and after said date;
(g) the names and addresses of the Paying Agent and the offices or
agencies referred to in Section 1002 where such Securities are to be
surrendered for payment of the Redemption Price;
(h) the CUSIP number, if any, relating to such Securities; and
(i) the procedures that a Holder must follow to surrender the Securities
to be redeemed.
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 written request, by
the Trustee in the name and at the expense of the Company. If the Company
elects to give notice of redemption, it shall provide the Trustee with a
certificate stating that such notice has been given in compliance with the
requirements of this Section 1105.
The notice if mailed in the manner herein provided shall be conclusively
presumed to have been given, whether or not the Holder receives such notice.
In any case, failure to give such notice by mail or any defect in the notice to
the Holder of any Security designated for redemption as a whole or in part
shall not affect the validity of the proceedings for the redemption of any
other Security.
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 or any of its Affiliates is
acting as
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Paying Agent, segregate and hold in trust as provided in Section 1003) an
amount of money in same day funds sufficient to pay the Redemption Price of,
and (except if the Redemption Date shall be an Interest Payment Date or Special
Payment Date) accrued interest on, all the Securities or portions thereof which
are to be redeemed on that date. The Paying Agent shall promptly mail or
deliver to Holders of Securities so redeemed payment in an amount equal to the
Redemption Price of the Securities purchased from each such Holder. All money,
if any, earned on funds held in trust by the Trustee or any Paying Agent shall
be remitted to the Company. For purposes of this Section 1106, the Company
shall choose a Paying Agent which shall not be the Company.
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 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 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 on the relevant Regular Record Dates and Special
Record Dates according to the terms and the provisions of Section 308.
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 such Security.
Section 1108. Securities Redeemed or Purchased in Part.
Any Security which is to be redeemed or purchased only in part shall be
surrendered to the Paying Agent at the office or agency maintained for such
purpose pursuant to Section 1002 (with, if the Company, the Security Registrar
or the Trustee so requires, due endorsement by, or a written instrument of
transfer in form satisfactory to the Company, the Security Registrar or the
Trustee, as the case may be, 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 that is not redeemed or purchased.
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ARTICLE TWELVE
SATISFACTION AND DISCHARGE
Section 1201. Satisfaction and Discharge of Indenture.
This Indenture shall be discharged and shall cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
Securities as expressly provided for herein) as to all Outstanding Securities
hereunder, and the Trustee, upon Company Request and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(a) either
(1) all the Securities theretofore authenticated and delivered
(other than (i) lost, stolen or destroyed Securities which have been
replaced or paid as provided in Section 307 or (ii) all Securities for
whose payment United States dollars have 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 as provided in
Section 1003) have been delivered to the Trustee for cancellation; or
(2) all such Securities not theretofore delivered to the Trustee
for cancellation (i) have become due and payable, (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 or any Guarantor has irrevocably deposited or caused to be
deposited with the Trustee as trust funds in trust an amount in United
States dollars sufficient to pay and discharge the entire Indebtedness
on the Securities not theretofore delivered to the Trustee for
cancellation, including the principal of, premium, if any, and accrued
interest on, such Securities at such Maturity, Stated Maturity or
Redemption Date;
(b) the Company or any Guarantor has paid or caused to be paid all
other sums payable hereunder by the Company and any Guarantor; and
(c) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Independent Counsel, in form and substance reasonably
satisfactory to the Trustee, each stating that (i) all conditions precedent
herein relating to the satisfaction and discharge hereof have been complied with
and (ii) such satisfaction and discharge will not
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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,
any Guarantor or any Subsidiary is a party or by which the Company, any
Guarantor or any Subsidiary is bound.
Notwithstanding the satisfaction and discharge hereof, the obligations of
the Company to the Trustee under Section 606 and, if United States dollars
shall have been deposited with the Trustee pursuant to subclause (2) of
subsection (a) of this Section 1201, the obligations of the Trustee under
Section 1202 and the last paragraph of Section 1003 shall survive.
Section 1202. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
United States dollars deposited with the Trustee pursuant to Section 1201 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 its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal of,
premium, if any, and interest on, the Securities for whose payment such United
States dollars have been deposited with the Trustee.
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, 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, premium, if any, and
interest on, the Securities are hereby expressly made subordinate and subject
in right of payment as provided in this Article to the prior payment in full of
all Senior Indebtedness.
This Article Thirteen 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 provisions are made for the benefit of the
holders of Senior Indebtedness; and such holders are made obligees hereunder
and they or each of them may enforce such provisions.
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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, relative to the Company or its assets, or
(b) any liquidation, dissolution or other winding up of the Company, whether
voluntary or involuntary, or whether or not involving insolvency or bankruptcy,
or (c) any assignment for the benefit of creditors or any other marshaling of
assets or liabilities of the Company, then and in any such event:
(1) the holders of Senior Indebtedness shall be entitled to receive
payment in full of all amounts due on or in respect of Senior Indebtedness
before the Holders of the Securities are entitled to receive any payment or
distribution of any kind or character (excluding securities of the Company or
any other corporation that are equity securities or are subordinated in right
of payment to all Senior Indebtedness, that may be outstanding, to
substantially the same extent as, or to a greater extent than, the Securities
are so subordinated as provided in this Article ("Permitted Junior
Securities")) on account of the principal of, premium, if any, or interest on
the Securities or on account of the purchase, redemption, defeasance or other
acquisition of, or in respect of, the Securities (other than amounts previously
set aside with the Trustee, or payments previously made, in either case,
pursuant to the provisions of Sections 402 and 403 of this Indenture); and
(2) any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (excluding Permitted Junior
Securities), by set-off or otherwise, to which the Holders or the Trustee would
be entitled but for the provisions of this Article shall be paid by the
liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating
trustee or otherwise, directly to the holders of Senior Indebtedness or their
representative or representatives or to the trustee or trustees under any
indenture under which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness held or represented by
each, to the extent necessary to make payment in full in cash or Cash
Equivalents or, as acceptable to the holders of Senior Indebtedness, in any
other manner, of all Senior Indebtedness remaining unpaid, after giving effect
to any concurrent payment or distribution to the holders of such Senior
Indebtedness; and
(3) 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 the Company of any kind or character,
whether in cash, property or securities (excluding Permitted Junior
Securities), in respect of principal, premium, if any, and interest on the
Securities before all Senior Indebtedness is paid in full, then and in such
event such payment or distribution (excluding Permitted Junior Securities)
shall
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be paid over or delivered forthwith to the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee, agent or other Person making payments
or distributions 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 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 with
or into, another Person or the liquidation or dissolution of the Company
following the sale, assignment, conveyance, transfer, lease or other disposal
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 marshaling of assets and liabilities of the Company for
the purposes of this Section if the Person formed by such consolidation or the
surviving entity of such merger or the Person which acquires by sale,
assignment, conveyance, transfer, lease or other disposal of such properties
and assets substantially as an entirety, as the case may be, shall, as a part
of such consolidation, merger, sale, assignment, conveyance, transfer, lease or
other disposal, comply with the conditions set forth in Article Eight.
Section 1303. Suspension of Payment When Designated Senior Indebtedness in
Default.
(a) Unless Section 1302 shall be applicable, upon the occurrence and
during the continuance of any default in the payment of any Designated Senior
Indebtedness beyond any applicable grace period (a "Payment Default") and after
the receipt by the Trustee from a Senior Representative of any Designated
Senior Indebtedness of written notice of such default, no payment (other than
amounts previously set aside with the Trustee or payments previously made, in
either case, pursuant to Section 402 or 403 in this Indenture) or distribution
of any assets of the Company or any Subsidiary of any kind or character
(excluding Permitted Junior Securities) may be made by the Company on account
of the principal of, premium, if any, or interest on, the Securities, or on
account of the purchase, redemption, defeasance or other acquisition of or in
respect of, the Securities unless and until such Payment Default shall have
been cured or waived (in each case in accordance with the provisions of the
instrument or agreement under which such Designated Senior Indebtedness was
issued) or shall have ceased to exist or such Designated Senior Indebtedness
shall have been discharged or paid in full, after which the Company shall
(subject to the other provisions of this Article Thirteen) resume making any
and all required payments in respect of the Securities, including any missed
payments.
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(b) Unless Section 1302 shall be applicable, (1) upon the occurrence and
during the continuance of any non-payment default with respect to any
Designated Senior Indebtedness pursuant to which the maturity thereof may then
be accelerated immediately (a "Non-payment Default") and (2) after the receipt
by the Trustee and the Company from a Senior Representative of any Designated
Senior Indebtedness of written notice of such Non-payment Default, no payment
(other than any amounts previously set aside with the Trustee, or payments
previously made, in either case, pursuant to the provisions of Sections 402 or
403 in this Indenture) or distribution of any assets of the Company of any kind
or character (excluding Permitted Junior Securities) may be made by the Company
or any Subsidiary on account of the principal of, premium, if any, or interest
on, the Securities, or on account of the purchase, redemption, defeasance or
other acquisition of, or in respect of, the Securities for the period specified
below ("Payment Blockage Period").
(c) The Payment Blockage Period shall commence upon the receipt of notice
of the Non-payment Default by the Trustee and the Company from a Senior
Representative and shall end on the earliest of (i) the 179th day after such
commencement, (ii) the date on which such Non-payment Default (and all
Non-payment Defaults as to which notice is given after such Payment Blockage
Period is initiated) is cured, waived or ceases to exist or on which such
Designated Senior Indebtedness is discharged or paid in full, or (iii) the date
on which such Payment Blockage Period (and all Non-payment Defaults as to which
notice is given after such Payment Blockage Period is initiated) shall have
been terminated by written notice to the Company or the Trustee from the Senior
Representative initiating such Payment Blockage Period, after which, in the
case of clauses (i), (ii) and (iii), the Company shall promptly resume making
any and all required payments in respect of the Securities, including any
missed payments. In no event will a Payment Blockage Period extend beyond 179
days from the date of the receipt by the Company and the Trustee of the notice
initiating such Payment Blockage Period (such 179-day period referred to as the
"Initial Period"). Any number of notices of Non-payment Defaults may be given
during the Initial Period; provided that during any period of 365 consecutive
days only one Payment Blockage Period, during which payment of principal of,
premium, if any, or interest on, the Securities may not be made, may commence
and the duration of such period may not exceed 179 days. No Non-payment
Default with respect to any Designated Senior Indebtedness that existed or was
continuing on the date of the commencement of any Payment Blockage Period will
be, or can be, made the basis for the commencement of a second Payment Blockage
Period, whether or not within a period of 365 consecutive days, unless such
default has been cured or waived for a period of not less than 90 consecutive
days. The Company shall deliver a notice to the Trustee promptly after the
date on which any Non-payment Default is cured or waived or ceases to exist or
on which the Designated Senior Indebtedness
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related thereto is discharged or paid in full, and the Trustee is authorized to
act in reliance on such notice.
(d) In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, then and in such event such payment shall
be paid over and delivered forthwith to a Senior Representative of the holders
of the Designated Senior Indebtedness or as a court of competent jurisdiction
shall direct.
Section 1304. Payment Permitted if No Default.
Nothing contained in this Article, 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 marshaling 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,
premium, if any, or interest on the Securities.
Section 1305. Subrogation to Rights of Holders of Senior Indebtedness.
After the payment in full, 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 Indebtedness until the principal of, 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
over 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 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 among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of the Securities, the obligation of the
Company, which is absolute and unconditional, to pay to the Holders of the
Securities the principal of, premium, if any, and interest on, the Securities
as and when the same shall become due and payable in accordance with their
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<PAGE> 124
terms; or (b) affect the relative rights against the Company or 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 (1) in any case, proceeding, dissolution,
liquidation or other winding up, assignment for the benefit of creditors or
other marshaling of assets and liabilities of the Company referred to in
Section 1302, to receive, pursuant to and in accordance with such Section,
cash, property and securities otherwise payable or deliverable to the Trustee
or such Holder, or (2) under the conditions specified in Section 1303, to
prevent any payment prohibited by such Section or enforce their rights pursuant
to Section 1303(d).
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,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of the Company whether in bankruptcy, insolvency, receivership
proceedings, or otherwise, the timely filing of a claim for the unpaid balance
of the indebtedness of the Company owing to such Holder in the form required in
such proceedings and the causing of such claim to be approved.
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 limiting the generality of subsection (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,
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
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otherwise deal with any property pledged, mortgaged or otherwise securing
Senior Indebtedness; (3) release any Person liable in any manner for the
collection or payment 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 of this Indenture 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 Article.
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 a Senior Representative or
any trustee, fiduciary or agent therefor; and, prior to the receipt of any such
written notice, the Trustee 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 by Noon, Eastern Time, on the
Business Day 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, premium, if any, or interest on any Security), then, anything
herein contained to the contrary notwithstanding but without limiting the
rights and remedies of the holders of Senior Indebtedness, a Senior
Representative or any trustee, fiduciary or agent thereof, 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 after such date; nor shall
the Trustee be charged with knowledge of the curing of any such default or the
elimination of the act or condition preventing any such payment unless and
until the Trustee shall have received an Officers' Certificate to such effect.
(b) The Trustee shall be entitled to rely on the delivery to it of a
written notice to the Trustee and the Company by a Person representing himself
to be a Senior Representative or a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor) to establish that such notice has been given by a
Senior Representative or a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor); provided, however, that failure to give such
notice to the Company shall not affect in any way the ability of the Trustee to
rely on such notice. In the event that the Trustee determines in
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<PAGE> 126
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 Orders or Certificates.
Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee 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, or a certificate of a Senior
Representative, 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, provided that the foregoing shall apply only if such court has been
fully apprised of the provisions of this Article.
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 607.
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 under this Indenture, 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
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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 of this Indenture or to pursue any rights
or remedies hereunder or under applicable law, subject to the rights, if any,
under this Article of the holders, from time to time, of Senior Indebtedness to
receive the cash, property or securities receivable upon the exercise of such
rights or remedies.
Section 1314. Trustee's Relation to Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee undertakes
to perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article, and no implied covenants or obligations
with respect to the holders of Senior Indebtedness shall be read into this
Article against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness and the Trustee shall not
be liable to any holder of Senior Indebtedness if it shall in good faith
mistakenly (absent negligence or willful misconduct) pay over or deliver to
Holders, the Company or any other Person moneys or assets to which any holder
of Senior Indebtedness shall be entitled by virtue of this Article or
otherwise.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
TITAN WHEEL INTERNATIONAL, INC.
By: _________________________________
Name:
Title:
Attest:__________________________
Name:
Title:
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<PAGE> 129
THE FIRST NATIONAL BANK OF CHICAGO
By: _________________________________
Name:
Title:
Attest: __________________________
Name:
Title:
119
<PAGE> 130
STATE OF ________________________ )
) ss.:
COUNTY OF _______________________ )
On the _____ day of ____________, 1997, before me personally came
_________________, to me known, who, being by me duly sworn, did depose and say
that he resides at _________________________; that he is __________________ of
Titan Wheel International, Inc., a corporation described in and which executed
the foregoing instrument; and that he signed his name thereto pursuant to
authority of the Board of Directors of such corporation.
(NOTARIAL
SEAL)
______________
<PAGE> 131
STATE OF __________________ )
) ss.:
COUNTY ____________________ )
On the _____ day of ________________, 1997, before me personally came
___________, to me known, who, being by me duly sworn, did depose and say that
he resides at _____________________________________; that he is
_________________ of The First National Bank of Chicago, a national
banking association described in and which executed the foregoing instrument;
and that he signed his name thereto pursuant to authority of the Board of
Directors of such banking corporation.
(NOTARIAL
SEAL)
________________
<PAGE> 132
SCHEDULE I
Existing Indebtedness
<PAGE> 133
SCHEDULE II
Existing Dividend Restrictions
<PAGE> 134
EXHIBIT A
INTERCOMPANY NOTE
___________, 19___
Evidences of all loans or advances ("Loans") made hereunder shall be
reflected on the grid attached hereto. FOR VALUE RECEIVED, _________________,
a ___________ corporation (the "Maker"), HEREBY PROMISES TO PAY ON DEMAND to
the order of ______________ (the "Holder") the principal sum of the aggregate
unpaid principal amount of all Loans (plus accrued interest thereon) at any
time and from time to time made hereunder which has not been previously paid.
All capitalized terms used herein that are defined in, or by reference in,
the Indenture between Titan Wheel International, Inc., an Illinois corporation
(the "Company"), and The First National Bank of Chicago, as trustee, dated as
of ____________, 1997 (the "Indenture"), have the meanings assigned to such
terms therein, or by reference therein, unless otherwise defined.
ARTICLE I
TERMS OF INTERCOMPANY NOTE
Section 1.01 Note Not Forgivable. Unless the Maker of the Loan hereunder
is the Company or any Guarantor, the Holder may not forgive any amounts owing
under this intercompany note.
Section 1.02 Interest: Prepayment. (a) The interest rate ("Interest
Rate") on the Loans shall be a rate per annum reflected on the grid attached
hereto.
(b) The interest, if any, payable on each of the Loans shall accrue from
the date such Loan is made and, subject to Section 2.01, shall be payable upon
demand of the Holder.
(c) To the extent permitted by law, if the principal or accrued interest,
if any, of the Loans is not paid on the date demand is made, interest on the
unpaid principal and interest will accrue at a rate equal to the Interest Rate,
if any, plus 100 basis points per annum from maturity until the principal and
interest on such Loans are fully paid.
(d) Subject to Section 2.01, any amounts hereunder may be repaid at any
time by the Maker.
Section 1.02 Subordination. All Loans hereunder shall be subordinated in
right of payment to the payment and performance of the obligations of the
Company and any
<PAGE> 135
Subsidiary (which Subsidiary is also an obligor under the Indenture, the
Securities, a Guarantee or other Senior Indebtedness or Pari Passu
Indebtedness, as the case may be, whether as a borrower or guarantor) under the
Indenture, the Securities, the Guarantees or any other Indebtedness ranking
senior to or pari passu with the Securities; provided, that this provision
shall not prohibit the repayment by any Subsidiary of any Loans of which the
Company is the Holder.
ARTICLE II
EVENTS OF DEFAULT
Section 2.01 Events of Default. If after the date of issuance of this
Loan (i) an Event of Default has occurred under the Indenture, (ii) an Event of
Default (as defined) has occurred under the Credit Facility or (iii) an "event
of default" (as defined) has occurred under any other Indebtedness of the
Company or any Subsidiary, then (x) in the event the Maker is (A) a Subsidiary
which is not a Guarantor or (B) a Guarantor in the case where the Holder is the
Company, all amounts owing under the Loans hereunder shall be immediately due
and payable to the Holder, (y) in the event the Maker is the Company, the
amounts owing under the Loans hereunder shall not be due and payable at any
time and shall not be paid and (z) in the event the Maker is a Guarantor and
the Holder is not the Company or any Guarantor, the amounts owing under the
Loans hereunder shall not be due and payable at any time and shall not be paid;
provided, however, that if such Event of Default or event of default has been
waived, cured or rescinded, such amounts shall no longer be due and payable in
the case of clause (x), and such amounts may be paid in the case of clauses (y)
and (z). If the Holder is a Subsidiary, then the Holder hereby agrees that if
it receives any payments or distributions on any Loan from the Company or a
Guarantor which is not payable pursuant to clause (y) or (z) of the prior
sentence after any Event of Default described in clauses (i) or (ii) or any
event of default described in clause (iii) above has occurred, is continuing
and has not been waived, cured or rescinded, it will pay over and deliver
forthwith to the Company or such Guarantor, as the case may be, all such
payments and distributions.
ARTICLE III
MISCELLANEOUS
Section 3.01 Amendments, Etc. No amendment or waiver of any provision of
this intercompany note, or consent to depart herefrom is permitted at any time
for any reason, except with the consent of the Holders of not less than a
majority in aggregate principal amount of the Outstanding Securities.
I-2
<PAGE> 136
Section 3.02 Assignment. No party to this Agreement may assign, in whole
or in part, any of its rights and obligations under this intercompany note,
except to its legal successor in interest.
Section 3.03 Third Party Beneficiaries. The holders of the Securities or
any other Indebtedness ranking pari passu with or senior to, the Securities or
any Guarantees, including without limitation, any Indebtedness incurred under
the Credit Facility, shall be third party beneficiaries to this intercompany
note and upon an Event of Default shall have the right to enforce this
intercompany note against the Company or any of its Subsidiaries.
Section 3.04 Headings. Article and Section headings in this intercompany
note are included for convenience of reference only and shall not constitute a
part of this intercompany note for any other purpose.
Section 3.05 Entire Agreement. This intercompany note sets forth the
entire agreement of the parties with respect to its subject matter and
supersedes all previous understandings, written or oral, in respect thereof.
Section 3.06 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF).
I-3
<PAGE> 137
Section 3.07 Waivers. The Maker hereby waives presentment, demand for
payment, notice of protest and all other demands and notices in connection with
the delivery, acceptance, performance or enforcement hereof.
By: _______________
I-4
<PAGE> 138
BORROWINGS, MATURITIES, AND PAYMENTS OF PRINCIPAL
Amount of Maturity of Amount
Borrowing/ Borrowing/ Principal Paid Unpaid Principal Notation
Date Principal Principal or Prepaid Balance Made by
- ---- --------- ---------- -------------- --------------- --------
I-5
<PAGE> 1
EXHIBIT 5
[ARMSTRONG, TEASDALE, SCHLAFLY & DAVIS LETTERHEAD]
March 4, 1997
Board of Directors
Titan Wheel International, Inc.
2701 Spruce Street
Quincy, IL 62301
Gentlemen:
In our capacity as counsel for Titan Wheel International, Inc., an
Illinois corporation ("Titan"), we have examined the Registration Statement on
Form S-1 (the "Registration Statement") in the form proposed by Titan to be
filed with the Securities and Exchange Commission under the provisions of the
Securities Act of 1933, as amended, and the Trust Indenture Act of 1939, as
amended, relating to Titan's issuance of senior subordinated notes due 2007 (the
"Notes") in a maximum aggregate offering price of $150,000,000 to be offered by
Titan to the public pursuant to the Registration Statement. In this connection,
we have examined such records, documents and proceedings as we have deemed
relevant and necessary as a basis for the opinions expressed herein.
Based upon the foregoing, we are of the opinion that:
(i) The Notes referred to above, to the extent actually issued
pursuant to the purchase agreement the form of which is included as Exhibit 1
to the Registration Statement, will have been duly and validly authorized and
issued; and
(ii) The Notes will constitute valid and legally binding obligations of
Titan, entitled to the benefits provided by the indenture the form of which is
included as Exhibit 4(b) to the Registration Statement, and will be enforceable
in accordance with their terms (except insofar as enforcement may be limited by
applicable bankruptcy, reorganization, insolvency or other laws affecting
creditors' rights and remedies generally, as may from time to time be in
effect, and by the availability of specific performance or of other equitable
relief which is subject to the discretion of the court before which any
proceeding may be brought).
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission with the Registration Statement. In addition, we hereby
consent to the inclusion of the statements made in reference to our firm under
the caption "Legal Matters" in the Prospectus which is part of the Registration
Statement.
Yours very truly,
ARMSTRONG, TEASDALE, SCHLAFLY
& DAVIS
Armstrong, Teasdale,
Schlafly & Davis
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF TITAN WHEEL INTERNATIONAL, INC.
<TABLE>
<CAPTION>
NAME JURISDICTION OF PERCENTAGE OWNERSHIP
INCORPORATION
<S> <C> <C>
Automotive Wheels, Inc. California 100%
Dico Inc. Delaware 100% (by Dyneer)
Dico Tire, Inc. Delaware 100% (by Dyneer)
Dyneer Corporation Delaware 100%
Grasdorf Titan GmbH Germany 100%
Nieman's Ltd. Iowa 100%
Siria Officine Meccaniche Italy 100%
SpA
Sirmac Officine Meccaniche Italy 100%
SpA
Steel Wheels, Ltd. United Kingdom 100%
T.D. Wheels of Virginia, Inc. Virginia 100%
Titan Distribution, Inc. Illinois 100%
Titan France SA France 100%
Titan Tire Corporation Illinois 100%
Titan Wheel and Tire Foreign
Sales Corporation Barbados 100%
Titan Wheel International, United Kingdom 100%
Limited
</TABLE>
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Amendment No. 1 to Form S-1 of our report dated
February 13, 1996, relating to the financial statements of Titan Wheel
International, Inc., which appears in such Prospectus. We also consent to the
application of such report to the Financial Statement Schedule for the three
years ended December 31, 1995 listed under Item 16(b) of this Registration
Statement when such schedule is read in conjunction with the financial
statements referred to in our report. The audits referred to in such report
also included this schedule. We also consent to the references to us under the
headings "Experts" and "Selected Financial Data" in such Prospectus. However,
it should be noted that Price Waterhouse LLP has not prepared or certified such
"Selected Financial Data."
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
St. Louis, Missouri
March 4, 1997
